A Successful Growth And Development Plan You Can All Learn From… And Do!

Here we are, deeply entrenched in the most severe recession we have ever experienced. That’s a fact, it’s undeniable. Revenues are down and overhead is up. Debt is choking the lifeblood out of your business. Businesses are closing everywhere.

What a terrific time to plan and implement a growth plan.

Look around… some of your competitors have gone out of business. Most, if not all, of those remaining are responding in the same knee-jerk manner they’ve used in the past when revenues dip—they reduce advertising and marketing. The market is down, they observe. People aren’t buying, they think, so they advertise less, telling themselves this will save money. Since the market is soft it will not work anyway so why waste the cash? Their plan is to “wait it out” and when everything returns to normal, resume their regular marketing.

What a classic mistake.

I recently spoke to a small business owner who operates a general printing company. He bought the company a few years ago just as the recession began. Revenues were $450,000 when he acquired it. Despite the recession, he correctly figured he could gain a larger share of the market by  reinventing his mission and aggressively advertising and marketing his services, taking business away from his competitors who were hiding out.

He created an expansive strategy, marketing his capabilities to increase businesses revenue through direct mail campaigns and by utilizing other printed marketing tools. He stopped selling printing and began selling the promise of success, revenue, and additional profit to business owners all over his region. He invested significantly in printing, mailing and promoting his new direction and it paid off. The business came to him. He drove his revenue up to over one million dollars in two years and made a profit the entire time. He grew his business in a down market by taking business away from his competitors, aggressively reinventing his business and marketing his message successfully. His investment paid off.

Follow the leader, it works. Learn and act. Indecision, inaction and doubt kills the warrior.

Downsize, reinvent yourself, do your debt workouts and promote your new business. This is the path to take. Call us for help. We will gladly show you the way. Call 413-584-2581 and Norm will arrange a no-obligation teleconference for us to discuss your options.

Believe Me, Equipment Leases Can Be Worked Out!

When discussing business debt workouts with small business owners, we frequently find that they overlook their equipment leases when we discuss their debt. For some reason, small business owners tend to believe a lease can’t be worked out and they are often surprised when I tell them that the exact opposite is true. The workout, however, requires a cash payoff, as the lessor is usually willing to negotiate a short sale but not a short finance arrangement. We have done this with medical equipment for many doctors (including chiropractors, dentists, optometrists, general practitioners), as well as printers, restaurant equipment and any other imaginable business asset.

Leasing is simply a slightly different form of financing. It is true that when you lease, you do not hold title to the item until the end of the lease when you often have an option to purchase the equipment for an agreed upon amount. However, this does not change the reality that the equipment is worth decidedly less than the lease payments indicate, and the lessor does not want the equipment back for reasons similar to those of the banks that will engage in a workout. The cost of liquidating the collateral and the resulting revenues are usually much less than the amount owed, thus there is a basis for a workout. It is usually a tougher workout, sometimes not quite as reduced as with a bank, but it’s still a terrific deal for the lessee.

If you are laden with leased equipment and choking on the payments, call us. We can negotiate a workout that will reduce your monthly overhead significantly as well as add value to your bottom line. Do your debt workouts, even with leases.

Call us. Norm will arrange a no-obligation  teleconference for us to discuss your options: 413-584-2581.

Your 401k: Should You Disclose Its Existence And Value In A Workout?

Congress passed a bill creating a 401k retirement plan that any individual can contribute into for the purpose of developing a personal retirement fund with valuable tax advantages and protection from creditor attack. It cannot be attached, invaded in any way or liquidated by creditors.

I believe that this supports the decision to omit such information from a financial statement used for any external purpose such as loans or workouts. Since it is unavailable to the creditors, there is no reason to include it in one’s balance sheet or financial statement.

If you have a large retirement fund in a 401k and are simultaneously defaulting on a loan, it colors the minds and decision-making attitudes in a workout evaluation. This is only natural and thus the mere existence of a 401k affects the outcome of a workout—this is not what Congress intended. In fact, if this is allowed to occur, if the mere existence of one’s 401k causes a different conclusion in a workout scenario, then it has, in fact, been materially invaded and partially liquidated as the resulting implication is that it should be used to increase the workout payoff. This is wrong.

In conclusion, I believe it is inappropriate to include your 401k on your financial statements when presented for a debt workout and when asking for debt forgiveness.

Tell Us Your Story–Your Family And Employees Are At Risk. We Are Listening And We Care.

We have a mission: Saving families, one business at a time. We understand the plight of the very small business owner. Revenues are down, costs are up and the competition is fierce. Margins are being pinched and debt remains what it was when things were much, much better… and it’s choking the life out of your business. This is personal. It results in the destruction of not only business enterprise, but also of families.

The banks consider it just a matter of numbers. They are not concerned about the effect foreclosure will have on you, your family and the families of your employees. It is of no importance, or even relevance, to them and thus they are not listening or paying attention at all to the plight you all find yourselves trapped in.

Is it important? Does anyone care? Is anyone interested in what is happening to small business owners trapped in this recession? Not the banks, that’s for certain, but we are listening, we care and to us, it is important, very important. We understand that this is not just about numbers, it is about jobs and your family’s survival. Your family, and the families of the employees who are counting on you to provide them with a job to survive this difficult time. Everyone knows that when one loses a job in this economy replacing it can take a year or more, or forever, as many, many jobs will not return, ever.

Why do we care? Why are we interested? What good does it do for us to understand the situation if it is not relevant to the bankers or SBA?

A few reasons:

1) We are all people working our hardest, doing our best and fighting the same battles, mostly alone. We understand how lonely that gets and it is important for everyone to have an opportunity to explain what is happening to them and to get some inside advice. Frequently, the issues are far more complex than simply dealing with debt. Frequently, it is also about downsizing, reinventing yourself, figuring out how to not only survive, but also to prosper in this down economy.

We have a deep understanding about how to accomplish this and when we listen to our prospects or clients we are always listening with an inclination to help the small business owner overcome adversity, make right decisions and successfully navigate the turmoil they are confronting. It is not just about debt, it is about helping them overcome the issues causing them difficulty, helping them to restructure, adjust, downsize, and emerge, in addition to doing the debt workouts. Why do we do this? Because we understand what is at risk and what the real cost of failure is to everyone involved in your business and their families. We understand it’s not solved by debt workouts alone—it is about making systemic business changes to meet the needs of the transition.

2) We also understand that a small business owner in distress needs to vent and let it out. You need to talk to someone who listens, pays attention and supports. It is important—we all need this and we provide this whenever possible.

3) If we know what has happened to you we can include the important issues in our presentation to the bank. It may not be relevant to the workout but it is relevant to the listener as we are all mostly the same. We all have feelings and most have families. In conversation, without whining or complaining, if we can make the workout more personal and more about the individual, we can get some additional traction in the workout. It’s human nature to care and understand if information is appropriately presented. We can do this, the borrower in default cannot. It is important to make the workout personal to the banker in charge as when we succeed at doing this the results are better, often much better.

Thus, we listen very carefully and want to hear what has happened and what is at risk so that we can help direct you more effectively. We can give you the opportunity to safely vent and explain, and we can support your workout with the banker by making it more personal.

This works, we do it. Call us at 413-584-2581 and tell us your story. Let us help you succeed. Norm will arrange a no-obligation teleconference for us to discuss your issues and provide you with solutions… and listen to your story. It is important and relevant.

Stop Making Partial Payments On Your Loans. Default Is Default. Do The Workout.

I hear it all too often. Small business owners are in default, making voluntary partial payments thinking that this somehow helps them stay in honor and that it will satisfy the bank and that it is “the right thing” to do. They are paying what they can even if it is less than what is owed, wanting to “do their best” by demonstrating that they are trying and believing that this will somehow serve their best interests with the bank and support a more gentle approach to their default and ensuing workout. At least,that’s what they hope. They believe that if they are at least making an attempt to perform as promised then partial payment satisfies their word and commitment, if not to the penny at least to the point of honor.

Not so. If this sounds familiar, then you need a dose of reality. You are wasting cash and gaining little advantage.

First, a basic concept: Default is default. Partial payments without a written agreement authorizing such are a waste of cash. They do nothing to improve your predicament nor the outcome. “Default” is a term controlled by your loan agreement; either you pay in full as agreed or you are in default. Partial payments outside of a written modification do nothing to alleviate or change this  situation other than to needlessly waste precious money better used for other purposes.

The underlying issue, however, is the need borrowers feel to act honorably and do what they believe is the “right” thing to do.

Stop this silliness. A business contract is not affected by acting honorably while you’re defaulting on the terms agreed upon. Despite your hope that it does count, it does not. As stated, default is default. There is no such thing as honorable default, it is simply default. A defaulting borrower will suffer the same consequences as a partial payment-making, honorable, defaulting borrower, so what is the point of making partial payments? There’s no point, whatsoever. It is not more honorable to make partial payments than to not pay at all. Remember, default is default. (If it makes you feel better, donate the money to charity; it will have the same effect on your loan workout as partial payments.)

The only way honor enters the equation is when you communicate appropriately, explaining to the bank you cannot make full payment. Cooperating with their requirements and not avoiding the issue—in other words, entering into a workout scenario—as soon as you are aware that you cannot comply with your agreement, that is the honorable thing to do. Partial payments are meaningless and represent avoidance of the real issue: acceptance of the responsibility to either pay or suffer the consequences, honorably.

Your remaining cash should be used for personal preservation and other appropriate necessary expenditures, not thrown at the feet of the bank with a request for leniency because you are “doing your best.” It’s not enough and requesting leniency will not have the desired result.

It is irresponsible to throw money away in a time of great need. To act honorably is to confront the issue as soon—and as honestly—as you can. This, you should do. Cease making partial payments immediately. Do the workout; that is what is most honorable.