Ok, your small business has ended and you have to get a job, how do you do that?

Its called invent your position. Do not just  take what is available and apply as if the job

Consider all your unique and valuable skills, they are enormously rare, focused and appropriate to a handful of business you either competed with, bought from and represented, or sold to. That is your target.Where ever they may be located. Even if you must relocate or travel.

You know strategies and information that few can duplicate that some of your buyers, clients and competitors would value quite highly.

Even if it is clear that your tenure would not be what we consider long term, even if it is unlikely you will be on a career path within the company, although it is quite possible. But you could create such significant value that there may be a place for you designing and implementing a  new developmental department only you could accomplish which you may want to stay with indefinitely. Senior sales manager, long term planning and growth,  vertical or horizontal expansion, mergers and acquisitions, whatever and wherever your skills allow you to add intrinsic value to your targets position, that is what you sell  and that is where you may work.

Its called turning your perceived disadvantages into a real advantage. Creating an entrepreneurial opportunity within a target company satisfying both you and your employer. You can create a compensation package based on the success of your program and be prepared to enter into non competes, non circumvention and non disclosure agreements, after all you are an entrepreneur.

What does this look like? Determine what your target company wants or needs, and then see how your skills and experience can deliver that objective. If you find a match, want to do it, and agree on terms and conditions that are favorable…sell the entire package. If not move on to another ‘buyer’.

Value added job creation, based on keenly developed skills and capabilities. Agree to a base pay and significant rewards for successful implementation. However be certain you clearly describe the results you intend to deliver, make them measurable, and the rewards you will receive based on success…make these measurable also. Put it into writing, have a thirty day ending clause, canceling all obligations not yet earned and off you go.

It is difficult to get a job in the normal meaning of the word,  as competition is younger, highly educated and cheaper…a tough package to compete with if you are an entreprenmeur. You come with too much baggage. But if you create a new situation to plug into,  one no one could possibly compete with because of your unique experience and skills, you may just create the job you want designed by you just for you.

Think about it, and then try it out by doing it. Target your focus and land a relationship.

 

You must take risk to succeed.

It is unavoidable. A small businessman must accept risk as part of his life. There are no alternatives, no choices, no options. Risk is part of the very fiber of owning a small business and being a small business operator.

Some of you would like to be conservative, and being conservative is an acceptable philosophical position to maintain as your guideline for decision making. But lets be realistic, the very basic decision to be a small business owner and operator is the riskiest decision one could ever make, thus to make this basic commitment and then to hold tenaciously onto a conservative, no risk attitude is self defeating, unrealistic and basically unworkable.

Things happen every day in the world of small business operations which at its base require one to accept risk. Launching a new product is risky, hiring a new employee is risky, providing credit to customers is risky, signing leases and taking out loans with personal guaranty’s is risky, allowing your wife to sign a guaranty is insanely risky.

Being a small business owner is all about risk.

So what happens when things go wrong, cash flow declines and  debt service becomes impossible to service, and you want to get conservative and make bad decisions because you are afraid of risky strategies. You crash and burn.

You do not have the cash to make credit card payments, or service loans but are afraid to take the risk of default, so you prefer to tank your company by bleeding out the cash to service a note that you may only be able to support for a few more months before the end appears, the end of cash flow adequate to service your business needs. Then what? Then what happens to Mr. Conservative who was either afraid to pull the plug and shut down, or afraid to enter into a pre-emptive workout before the disaster destroys your business? What happens then?

Crash and burn is what. Nice decision Mr. Conservative. Fear won out, and risk took a back seat to logic.

TAKE THE RISK, MAKE A WORKOUT DECISION, AS SOON AS POSSIBLE. There will not be a clear path to follow, you may not know what will happen in the end or what your business and life will look like. But one thing is certain, if you do not take the risk of the unknown and enter into a workout scenario, your business will die a painful death. This is certain, but Mr. Conservative did not want to take the chance of walking head first into the unknown world of the workout and preferred to simply bleed to death knowingly and willingly, afraid to make the risky bu correct decision.

Makes no sense, but I hear it all the time, “I can’t default on purpose, I can’t reduce my payroll any further, I can’t do….it is too risky, I do not know the conclusion and cannot embark on a plan with no assurance of what will happen. I guess you would prefer to fail.

There are no guaranties in business. .. or in life for that mater, so why all of a sudden do the biggest risk takers of all, the small business owners,  in the face of obvious bone crushing debt, get conservative and not want to respond to the situation in a meaningful way, because there is risk and uncertainty and thus is above your  comfort level?

Apparently failure is preferable then risky salvation.

Let me break your bubble, you are all risk takers,  you cannot not change your context just because you are uncomfortable with the process. You must accept the reality that none of us are responsible  for nor could we have predicted the economic downturn we are confronting, but we are capable of dealing with the fallout and working out our debt so we can balance our new revenue projections and survive. Not to do this is an irresponsible act of self delusion and will result in self destruction…yet many of you are in the starting blocks  trapped by fear of the unknown.

You must take risk to succeed…have you forgotten this basic reality? Many of you  have.

 

The fox, your banker, is in the hen house… again and you opened the gate and invited him.

I can’t believe it, or actually I can believe it, as it happens every day, despite my many warnings, even a few of my own clients are occasionally guilty of abandoning the plan and becoming a disciple of the bank.

Here is what I see, and while I have warned you all before, until this self destructive practice stops  I must continue to warn you as ignoring this can be fatal to your business workout.

1. The bank workout department is a liquidation department. Its goals are to extract as much capital  as they can, until they have sucked the lifeblood out and then they foreclose and mop up the mess, liquidating  whatever remains, leaving you the borrower ‘on the street’ without anything left.

That’s their thank you for being a good customer and working with their workout department…the liquidators.

2. Along the way they may extract more cash then you can afford,  killing any chance of a turnaround, obtain additional collateral, and additional guaranties, all in the name of the workout aka the liquidation process.

3. You hear them say they believe you are worth saving and they want to do business with you, that you are their kind of business man, and if we all work together we will get out of this mess…together!

AND YOU BELIEVE THEM?

Yes you do, because for the most part we are all wanting to cooperate, you all feel very responsible for the mess you are in and you all want to honor your word and pay back the loan even if the circumstances have changed dramatically and you  cannot afford it, do not have the resources to accomplish the workout and are throwing yourselves on the banks sword so they can extract more cash.  You  believe you have embarked on the honorable and correct path, despite the self destruction.

Are you nuts?

It’s a war. The banks against the borrowers and their job is to intimidate you into cooperating with their liquidation plan.

Your job is to run as fast as you can from therm, in the other direction and batten down the hatches as you fight for a workout that works for you, not just the bank.

The only answer is debt reduction, not modification which is another word for financial  death.

You may modify it any way you want,  but in  the end it is the debt that will kill you, not the reduction of revenues, but the debt that will eat you and your organization.

Will the bank give you more working capital? No.

Will the bank reduce your principle? No.

They will reduce interest and defer payments till later, oh boy, keeping you barely alive while they collect more from you now.

What a deal.

Until we become emotionally self sufficient, and therefore capable and prepared to thwart the banks insistence that ‘we work it out with their workout department’, until we understand that this is the fox inviting himself into your hen house  to eat your chickens, until you understand this and gain the strength to stand on your own feet, look the banker in the eyes and tell him thank you but unless you are willing to work towards solving the problem then no thank you start the foreclosure process now.   Then  call me for help.

413-584-2581. Norm will arrange a no obligation tele-conference for us to discuss your options.

 

A more effective way to organize your office plan…try it!

Michael Bloomberg is an incredibly successful businessman. He has created businesses that have made him a billionaire. Thus perhaps his methods are worthy of review and consideration as his success is unquestionable.

In fact, I personally have long ago reached the same conclusion Bloomberg has  reached and have utilized this concept over and over to my total satisfaction, thus both Bloomberg and I highly endorse this simple but effective approach to office organization.

Here it is: We call it ‘ the bullpen’ approach to office organization.

An open floor plan without closed door private offices. I use office partitions, some call them cubicles however mine are large and well designed, attractive and inviting open for direct communication. Some are small and designed to dense pack the office population. Both work.

No doors and with 5 foot high partitions, it provides a combination of both adequate privacy and open visibility. Some use lower walls so everyone can see everyone, I prefer the 5 footers.

People can have enough privacy to satisfy this need and as well as adequate visibility and audio clarity to allow an open free flow of communication. Yes talking to each other without necessarily  leaving your desk, or having to penetrate a closed door office. It is more inviting, everyone is more accessible.

I find there is less of a need for meetings, as information and direct communication occurs naturally and frequently. There is a higher energy in the office as everyone is working more together then separately.

It is cost efficient to build out, and easily changed when necessary. But the real advantage is the flow of communication.

From a management point of view I have always had a similar office structure as everyone, for myself, no different then the others, making me more accessible as well as more aware of what’s going on during the day. I like it very much. It  gives me an opportunity to be more involved.

I do it. Bloomberg does it. Try it, It works

 

There are some industries and businesses that will not recover from this economic meltdown, if you are in one of these, escape now.

We are not in a recession, let us get that clear. A recession implies that it  is temporary, will soon be over and we will return to were we were.

Dream on. It ain’t happening.

What is happening is a huge change in our economy. Many changes that are occurring will have long term impact. We may lose our auto industry, or better said it will exist but it will look quite a bit different then it does today. Same with the financial industry, the housing and building industry and on it goes. This wil be a 5-10 year cycle not ending with were we were, but evolving into a different reality. What one must understand is the same jobs will nor be available on the rebound and many older experienced workers will not regain their previous position or one comparable…ever.

Another aspect of this extreme change, is entire industries will be altered beyond recognition. The office furniture market, including new and used furniture, is in deep trouble. New office openings are rare at the moment, and closings are too numerous to mention. The ongoing prognosis or business survival  is very serious with millions of businesses likely to fold in the next few years, with significant downsizing in many many others that survive. Clearly there will be warehouses filled with office equipment and furniture, and it will take a decade to absorb this inventory.

The furniture industry is experiencing severe pain, as the purchase of new furniture is frequently associated with acquiring a new home and that practise has come to a standstill  eliminating this bedrock demand for new furniture. Lay-offs and cuts in bonuses and pay additionally drive the demand for this discretionary purchase to be postponed for a while, a long while, maybe indefinitely.

Car dealers are hemorrhaging, as no one wants to buy cars, those that do cannot get credit, and so many are losing their jobs , or fear they may and thus more will make do with their current auto for another year or so.

On it goes, some industries simply slow down like the restaurant industry, others dry up completely. Its one thing to adapt to a slow down, its another thing to try and adapt to a drought. Endure the slow down and redesign your business equation. Get out of a drought, alive? Doubtful.

If you are in a drought industry, you must plan your exit with broad based exit workouts, preventing further harm to come to you personally. It is crucial to exit safely, or re-emergence become extremely difficult.

Plan your exit, especially the cash requirements and make certain you can bridge the gap.

We are living through a huge transition, those that recognize it will make the correct decisions, be it adapt or cut and run, self liquidation…think clearly and then plan  and implement effectively.

 

Are you invincible? No? We must take care of ourselves and our families.

Wow that sounds ominous…are your affairs in order?  Are you in order? What does this really mean? Let me put it to you very simply.

A client and very good friend, as many of my clients become my friends, its a natural outcome of fighting the wars we fight shoulder to shoulder in the same fox hole, defending our turf and taking victories when we can, deflecting disaster all the time, recently unexpectedly had a massive heart attack and did not survive. He was 48 years old, yes young, too young, he had an infant approximately 6 months old, an older son approximately 7 years old, and two older college level boys from previous marriages, and of course his wife.

He was a great man and I will miss him but the message I want to share is two fold.

1. We, as small business owners,  must take care of ourselves. We live under great stress, we work horrendously long hours and we take terrible care of ourselves, and that includes most of us.

My friend drank too heavily and too often, smoked too much, was overweight  and did little to take carer of his physical being. No wonder his heart gave out. It is not a surprise to any who knew him.

But to him he was still invincible, capable of super human feats, capable of running all the time and fully expecting his body to support his mental state of his mind…full speed ahead, damn the torpedoes. Well one torpedo got him….

Simply stated, I will remind you all of what we already know. We must take care of our body if we are to survive the pressure and intensity of small business ownership.

2. Did we prepare ourselves so that our families can survive in the style we would want should this event occur before we anticipate it happening?  Clearly we never anticipate early death as we all live as if we are invincible, but as we get older mortality begins to creep into our thoughts and we may begin to subtly prepare ourselves and make provisions for our families should this happen, however allow me to remind you what  the operative issues are:

1. Do you have enough insurance and the right kind.

2. Have you prepared your finances, your home ownership, your investments, your business so it will provide for your families, if we exit early?

3. Do we have a retirement plan. a plan to educate your children, a plan for your survivors to be able to carry on successfully without your being                        here to support them all?

4. Do you have a plan for your business to continue and to pay your family? Or is it a buy out plan that you have in place?

5. Do you have a will and an estate plan of some sort?

My friend had little of the above…so we will now have to figure it out for him and do the best we can.

Do not make the same mistakes. Granted you will not be around to feel the pain of your own death and the loss to your family, but they will, and you owe it to them to prepare so they can navigate life a little easier as the loss, while irreplaceable, can be made easier or can be very difficult…its your call. This is your territory, your family your responsibility.

Yes, live life at full speed, and damn the torpedoes, but what if one gets through?

 

How to introduce technology to your employees…successfully!

It’s a problem.

People do not like change.

The are comfortable with the way they do things, always have, always will be and anything new, complicated and high tech can be immediately rejected, costing the company a small fortune of wasted equipment, cause a major setback in the development of the company and worse if not done carefully it can destroy good will with your employee base as well as cause a fierce reduction of moral… and the company does not get the advances in productivity it is looking for.

Key employees will quit over this issue. Rebellion will be the tone of the day.

If possible it is advisable to identify and discuss cooperation with at least one employee in each employee group to vocally support the program and let the others know they are on board. Others will follow and this will help break down the barriers.

Many business owners simply will not go down this path for fear of the potential of rejection..

Here is how you do it…successfully.
1.    Give your employees lots of advanced knowledge. Let them get used to the idea. Have meetings about it. Allow and support opposition, encourage their complaining, support their feelings, however always let them know that it is going to happen.

2.    Start from the bottom up. Have meetings with groups of employees first for discussion and then for training. Bring in outside specialists to train the employees on how to operate and use the new technology. Start from the bottom up as that is where you will find the most resistance. Gain support there and the rest is easier.

3.    It is important, critical, that they see how it will work for them, how it will
eventually make their job easier for them to perform. This is very important and goes back to the training and the discussions. This must be the theme. It being good for the company does not carry enormous weight if they do not see that it will benefit them as well.

4.    Create incentives, so the employees are rewarded for successfully utilizing
the technology to accomplish the stated goals of the program. This is a huge opportunity to turn this into a win win for everyone.

Follow this plan and you will achieve your goals. Don’t and you risk utter failure and a major setback in many areas. Do not do what so many business owners do, buy the program and hardware and toss it into the crowd to let them teach each other and figure it out. That’s a disaster guaranteed and this is what so many do. Follow the plan as outlined it will work wonderfully.

Discuss, train, provide incentives…. this works.

 

How long will this ‘recession’ last?

There are many conflicting opinions regarding the length, depth and difficulty this ‘recession’ will cause us all, and after reading what the experts say I report to you as follows:

The academia, the economists, hedge, suggesting that this recession will last at least through 2009-2010, but they say this also depends upon what actions our government takes to shorten it and now the huge impact the world financial markets will have on our recovery, as they too have a tremendous impact on what happens in our financial markets in the states and they are crashing along with us. These factors will influence the length and harshness of the recession.

It is said that if our government continues to make the investment in supporting our economic engines we will be out of this in a few years.

Unfortunately I disagree for the following reasons. Unemployment will continue to rise as more and more jobs will be eliminated. This year alone we lost over 750,000 jobs so far with much more shrinkage coming.

Once gone, rebuilding the workforce to reflect the previous economy will either take a long time to accomplish or in all likelihood will never happen.  Once gone, gone forever. Different people will be filling different jobs during the recovery and this will take time to develop. Thus I believe the financial down spin can be reversed in a few years, but it will take 5-10 years to rebuild back to where we were at the first point of decline.

Further, the second influence which will help determine the duration of the ‘recession’ is the enormous impact and influence the condition of the world’s financial markets has on the USA. It is very substantial, in both directions, our influence on the world and the worlds collective influence on us. This is more unpredictable, and there is likely to be mixed results amongst the countries with the most impact. Some will be more successful then others. Some will do allot worse. Thus, the overall impact will be an accumulation and average of all the various degrees of success and failure and thus will overall stretch the recovery period for the world, including the USA, out further then the two years we all would like.

If every country succeeded in stemming their economic decline as fast as possible we could be out in 2 years but this will not happen. This will slow the USA recovery down for many more years.

Of course there is also the question of what our government actually does to reverse our economic down spin. If it implements the correct strategies we all win and  this will end the decline sooner. If they guess wrong, and it is a guess so it seems, we stay in recessionary economics for many more years to come.

Given that wager, I will bet our government leaders will not make the best moves all the time and this will extend the economic downturn and slow the recovery period for a long while.

Fixing some of the other major issues in our economy will also be required to successfully exit this recession and will take  time and effort as well as a huge investment, as well as political leadership and success. This includes defining and implementing  a viable energy policy. Defining  and implementing a workable health care strategy and overcoming the political issues preventing its resolution to date.

Additionally required will be the repair of our social security program so our elderly will enjoy a respectful contribution to their retirement. Just to name three major issues we are facing which require repair for the economy to rebound as soon as possible, or it will stall for as long as necessary until these issues are resolved. My guess is this will take allot longer then two years to accomplish all this irrespective of who wins the White House.

Thus I say  you must prepare for a five to ten year cycle. Long enough so we cannot look back. We must look at today’s condition and understand that this is what we will be working with for the next five to ten years as we slowly pull out and rebuild to get back to where we left off, with different economic engines, a different work force, a different energy policy, a different health care system. Five to ten years folks, so start today.

Begin adjusting to the next era. It started  a while ago, it is in control now. Get on the path and survive.The times demand change… or perish.

We must recognize this as a huge change of direction and everyone must use this define a new way or they will be lost forever. Yes this is not just a speed bump we can wait for it to pass, its an absolute change in the way we will be doing business for a very long time.

My best advice for small business owners is to re-evaluate your core business equations and  force profitability immediately making whatever changes are required,  under toady’s circumstances whatever they may be and focus on long term permanent changes that will reinvent yourself.

Call me,  you will need help working through this. 413-584-2581. Norm will arrange a no obligation teleconference for us to discuss your options.

 

Get over your fears, ‘work at home’ employees are a terrific way to go.

I know, we all have this vision of our work at home employee’s sitting around in their pajamas watching soaps and talking on the phone to their friends and maybe doing an hour or so of work. Few small business owners feel secure in this relationship believing they will not get value for the effort and thus most often will not even consider this as a possible alternative.

Change your thinking…it’s not so. It works.

In this case the large corps are way ahead of small business owners as they have been experimenting for years with this alternative work program and here is what they have found.

1. They first offer this program to experienced reliable employees in small doses to see what would happen. Then once deemed successful they offered it as a benefit awarded to succcesful deserving employees, a little at a time.

They would start with one day a week and slowly expand it to two, three four and then five.

2. The results have been stunning. The studies indicate a significant increase in productivity for the worker. In short they get more done then what they had been doing in the office. Productivity was measured and compared and went up with work at home employees.

3. Important to the success of the program was determining exactly how productivity would be measured, and once this was determined the stay at home worker would know exactly what was expected and could assess his or her success independently and would know how well he or she was doing. This gave the employee the guidelines needed to increase productivity more then previously attained in the traditional work environment. This was successful mostly because the work at home employee appreciated this benefit and wanted more of it and wanted to keep it thus performance improved.

4. Finally, to keep the office culture going and to maintain the social network, which is also important, the work at home employee would have a scheduled morning in the office weekly for face to face meetings and to stay in touch with her work mates who were still in the office.

I believe this model will work in the small business environment as well. There are fewer reasons then ever with the advent of cell phone, fax machines, e-mail, computers etc, for all the employees to sit in the same office. Everything required can be accomplished without being able to touch the person your doing business with. In fact with video conferencing and conference calls, this work at home organization is practical, valuable and satisfying to all involved, and the employer gets more productivity in the bargain.

Try it, start slowly and follow this basic model, select an excellent employee and start with one day at home followed by more as it develops and works out to everyone satisfaction. It will expand. It works. Make certain you design a measuring process to determine productivity, its crucial for successful implementation.

Call Norm at my office if you would like some help, he will set you up wth a no obligation teleconference with me, as soon as possible. 413-4-2581

 

Accounts receivable collections…part three. If you missed parts one and two read this one…now!

Now more then ever you must follow a better path in collecting your accounts receivables…effectively. That means actually getting your money.

I have written before about the most effective system to use to support your internal collection efforts. If followed this system will yield great results, ( see the post called: Successfully collecting accounts receivables requires a system.)

I have further revealed to you the name and telephone number of the best collection agency currently in business as they ‘get it’ and they ‘do it’, International Recovery Services Inc. …  call Jared Schultz at 1-800-868-9298. See the post in this blog called ‘An incredibly effective collection agency that actually collects’…)

Since then we have experienced a banking industry meltdown, our economy is well chilled, and revenues for most businesses are declining rapidly as everyone is scared….and that means less spending.

It also means some of your customers are on the financial ropes, even if they have been paying well for years, now they are faced with severe unprecedented problems.

Collecting your receivables in a declining market is far more important then collecting in an up market. Your revenues are probably down, thus you need the cash, and more of your clients are about to slow pay or not pay at all, so you will need help.

Now more then ever, fast action is required. You need to utilize an effective accounts receivable collection program as soon as possible, (see previous entry that instructs you exactly how to do this.)

You must also engage an effective commercial collection agency if you are a business to business supplier to get you your cash as soon as possible and as completely as possible.

I can only restate what I have stated before regarding this matter. After years of working in the turnaround and workout industry, solving difficult business problems and building profitable business organizations, I have found a unique and valuable resource, a collection agency that actually collects, achieving 70% recapture of lost receivables, yes that 70%. (of course this applies to current receivables) Hard to believe but true.

Call this man and give this company your uncollected receivables as soon as possible. I recommend that when the receivable goes 30 days old, fifteen days later, after you have billed, attempted to collect and failed. Waiting longer results in a lower recapture percentage.

Either you have an agency and should replace it as this one is better, or you do not use one and should as the times are different then ever before.

Call Jared Schultz at 1-800-868-9298…..now.

 

Its time to buy a business.

We all know that timing is a significant part of winning. Playing the right card at the right time. Being in the right place at the right time. Being able to take advantage of an opportunity because you were well positioned is one key to success. This we all know to be true.

The question and challenge is to be able to identify when the right time may be.

Many say now….I say anytime you can buy a bargain is the right time, I also say it is not necessary to buy at the absolute bottom extracting every ounce of benefit possible, its ok if it gets cheaper and you bought a little above the bottom as long as you get a great deal.

So what am I referring to?

No, not the stock market, although this may be the right time to buy, I cannot say, nor hazard a guess, as to whether or not the market has reached bottom or has another thousand points to go. It is clear however that even if there is another thousand points to go, buying now is not a bad idea as the level of decline is so significant that good companies will eventually climb back out to previous values and thus purchasing now is still a great deal. I think the point is it is not necessary to get the lowest possible price to experience a terrific opportunity, near bottom is good enough.

Many great companies are trading very low although they are still great companies. For the moment it seems clear that fear is driving the market so value is out the window and great deals can be had on solid companies that are trading lower then they should be because of the hostile environment we are experiencing.

However this entry is not about buying stock at a bargain price. It is about  buying entire businesses at a bargain. Businesses are more predictable then the stock market and what a great opportunity to buy up a competitor or an altogether different business then you are involved in to diversify your exposure and bring it back to life.

Everything is a cycle. A good business suffering from temporary decline because of usual market conditions is still a good business only now available at a bargain price.

Many good business owners are going to have to close up shop, shut the doors and liquidate assets because they can not withstand the negative cash drain. The opportunity for turn around is clear and the likelihood for emergence again is also clear but getting from here to there may be too difficult for current ownership.

Thus I say forget the stock market unless you are knowledgeable. Look for a good  business and  buy its assets…cheaply. This may be the opportunity of a life time.

 

Co-signing a guaranty to the SBA or any note. What does it mean?

There is much misunderstanding about a very important subject, co-signing a guaranty for a note to the SBA or any secured lender, here is what you need to know. (This is not a legal analysis and should not be relied upon as such but is merely a general description of legal concepts for your education and better understanding. Seek legal counsel for specific analysis if you are in this situation or have specific questions.)

Unless the guaranty is limited, which means its limited reach is spelled out in the guaranty, for example “limited to include the undersigned real estate but not a general guaranty for the entire debt”, this would mean the signor, guarantor has granted a collateralized position to the lender  only against your ownership interst in real estate. FREQUENTLY ASKED OF WIVES.

If not limited by the language in the guaranty, you can consider yourself a guarantor of the entire debt and the lender can reach into any of your assets to perfect its position and liquidate your assets to get paid out, including your home. That’s what a guaranty means.(please seek specific assistance from your attorney)

One danger is in thinking that if you are a co-guarantor with someone else that somehow this means you are responsible for only half the debt…NOT SO! A co-guarantor, or every co-guarantor agrees to be individually liable for the entire debt owed, not just a portion. The lender can look to one individual and collect the entire debt and not even pursue the others if they are less liquid and this is ok.

Another significant misunderstanding that frequently occurs is when a guarantor who may leave the business and receives an agreement from the other guarantors that  agrees to hold the leaving guarantor harmless from the liability of the debt, in other words agrees to make the payments in behalf of the leaving guarantor letting the leaving guarantor believe he is off the hook… when in all reality  he is not off the hook, as this agreement is between the two guarantors and not the bank and thus the bank has no obligation what so ever to honor this agreement and can still collect agains the exiting guarantor and his assets as if the agreement did not exist between the two borrower guarantors.

Thirdly, beware of the demand for your wife’s signature, its sole intent is to make certain the lender can reach the equity in your home. Make every effort to not have her sign the note to protect the home from future collection efforts should they occur, even at the cost of not getting the loan. Small business loans are far too risky to put your home up as collateral.

Yes they can take your home and even if your wife has not signed they may in some instances liquidate the home and give over to the wife her share of the equity if she was not a guarantor. This of course reduces the value if the liquidation and thus it may not happen at all, but be aware of the possibilities.

There are many instances when a guarantor does not know he actually personally guaranteed a loan because the guaranty is buried in some paragraph that is very difficult to discern or recognize as a personal guaranty. This may be successfully challenged and requires a lawyers specific analysis to determine your rights hereunder. 

A personal guaranty requires a personal signature thus when signing any guaranty language or documents be certain to sign as your titled position, be it president, general manager, vice president, etc indicating you are signing on behalf of the business entity not on behalf of yourself  personally.

When there is a second signature line and a request for you to sign both as a business entity officer and personally, beware you are accepting the risk personally and you need to understand what that means and what that could cost you. If you sign personally you may be held personally responsible. IF YOU SIGN CORPORATELY AS AN OFFICER YOU MAY NOT BE HELD RESPONSIBLE PERSONALLY. This is a huge difference.

Simply stated, you should always have legal documentation reviewed by a lawyer who works for you or do not sign it until you do. You will be held responsible for what you sign.

 

Don’t listen to what they say, there is definately mortgage money available even if your score is not perfect.

Yes I know, the $700 billion bank bail out, the credit market shut down, banks closing, merging, and being shut down, the horrific drop in the stock market, world wide recession, I know…but there is still a private market for mortgage lending and it is available to most everyone.

It has always been there, and I have been talking about it for over a year (see other posts in this blog)…they are competitive, although maybe a touch higher and close much faster with less paperwork and with reasonable demands.

I know they are telling us that there are no mortgages, no lending, no refinancing, its baloney. Maybe no brick and mortar banking, but there is a large, robust, active private mortgage market ready willing and able to do business with you…today.

What you need is a good mortgage broker, of which there are many in your local areas, he or she will evaluate your predicament and then figure out which few lenders out of many would be interested and then the broker makes application to them and you select the best deal. There may even be some negotiation or fine tuning, adjusting the terms and conditions a bit, possible. Call me if you need help, I am associated with a terrific broker who can work anywhere in the USA/

Then do whatever workouts may be required to right side up your upside down mortgage (reduce the principle), and maybe get rid of some other ugly debt you may have. 

After that, why not rehabilitate your credit score elevating it considerably and then go to the private mortgage market and get a terrific loan with excellent terms and conditions. The entire process takes a less time then you would imagine.

You will be paying the least possible amount for your mortgage every month, conserving your capital as conditions are going to be economicaly challenging for a long while.

Workouts….credit card rehab….private mortgage market… call me for all three services, I will turn you over to the best people in each business, hand selected, personally inspected, established, experienced and well known. 413-549-2966. Norm will set up a no-fee tele-conference.

Amen.

 

Attorneys, Accountants and Business Consultants, who must perform debt workouts for your clients, help is on the way…!

I got a call from a lawyer who had it right. He said ” I am an expert in chapter 11, commercial law, and many other related subjects. I have these excellent clients who were doing extremely well, but because of this  current economic upheaval are crashing and burning. I need to do a large workout on significant debt and want to give these clients the best I can, I do not want to take them through a bankruptcy and I think I want to do a workout with the banks but I am not clear on how to approach it, and what the process should look like and how to implement it most successfully.

I read your blog and clearly you have a leading voice in this subject matter. Will you help me?”  He asked.

Of course I said “yes”, and spent an hour walking him through the process.

We all have our own expertise.  We can all learn from each other.

Here is what I have to offer…

Many of our clients are either already, or soon will be, in financial trouble. There is much that can be done…if you know how to do it.

The world of debt workouts and business turnarrounds uses terms like underwater, upside down, tanked, dead, shortfall and others.

The words, the concepts, the unwritten rules, what works and what doesn’t work, in a business workout  world where debt rules, is definitely not a place to ‘practice’.

The hidden trap is, doing what you believe is correct and effective and what you think will benefit your client the most, based on your years of  successful business experience …until you find out that normal business experience simply won’t work in this debt workout arena and a whole new set of rules and regulations apply, a whole new set of skills are required… to succeed.

Call me, I will help you resolve your clients workout issues. We can work as a team. Call 413-549-2966 and Norm will set you up with a teleconferecne with me.

 

Bank failures, mergers and takeovers and the new government backed workout plan creates opportunity for defaulting loans.

While the current list of bank failures, forced mergers, and take overs is bad news for our financial markets and borrowers in trouble, it may have a silver lining for those with defaulted loans.

First of all the Government has passed a government backed mortgage workout plan which will allow a borrower in default , with lousy credit scores and a poor history to recast or modify his mortgage based on a current appraisal, thus reducing the mortgage to current values and effectively reducing the monthly payments as well.

This is a huge opportunity for people in trouble with bad credit history and unable to afford their mortgage or refinance. One issue however with this government plan. Within the first five years, if the house is sold the government shares the profit in a declining percentage from 100% if sold in the first year and then reducing the government share by 10% per year until five years out when it freezes the governments participation at 50% of then profit from then on.

Thus while the government plan saves your house and backs off your loan amount and monthly payments, it will cost you half your profit at least.

If one does not choose to participate in this -program, you can always engage in a more traditional short sale and achieve similar results without having to share profits in the future. It is my belief that under the current `circumstances and conditions the banks will be very willing to make short sale deals.

There remains the issue of being able to acquire another mortgage as the mortgage market is tight but that’s another problem which can also be resolved.

Unfortunately this program will provide no relief for people with SBA loan defaults or IRS liens on their home.

These are tricky times and much analysis and thinking must be considered before you leap into a program, the good news is help is on the way.

Call if you want to discuss this matter and explore the various options.

413-549-2966

 

The lawyers were preparing for battle to the death, until I talked business sense to the banker.

When a potential client called me recently, he was desperate for some logical help. The banks lawyers had filed a motion for the court to appoint a receiver. If and when done this will be the end of the  clients hotel business, as receivership is a liquidation effort that would yield very few dollars and after a few days the doors would be closed. All that would be remaining to do would be the final auction the empty non-operating building for pennies on the dollar. What a disaster for everyone, the bank and the borrower.

The client called me in desperation just having discovered my web site and blog and after reading about my experience with SBA workouts, he called and explained his sorry plight.

He had hired a bankruptcy lawyer who was now fighting with the Banks lawyers, each positioning themselves for the likely battle and bickering about every reasonable request each side had. The clients bankruptcy lawyer was refusing to produce documents and provide information that would be required if either filed suit and pursued legal action but with both getting ready for the showdown, there was no cooperation, which served to propel them faster and faster into the courts.

The banks lawyers were ready to pounce, expecting the receivership motion would be granted. The bankruptcy lawyer was waiting for a sizable retainer and would file preventing the receivership from occuring for the time being.  The client knew any legal action at this point would result in disaster but what choice did he have… so he thought, until he called me.

No one was talking to the lender, as once it goes to council it is lawyer to lawyer and the banker does not get involved anymore. How silly, There is no basis for resolution, no meaningful discussion.

Just lawyers doing what they do best, spending their clients money and squaring off for a fist fight. That’s what they get paid to do…fight, not settle.

Since I am not council I have every right to call the banker and talk, which I did. On my first call we had agreed to pull back the lawyers, put the legal action on hold and work this problem out along the lines I proposed without squandering excessive cash on a meaningless legal battle while destroying the business potential of the asset, and reducing the potential return to the bank.

I agreed to send over all the pertinent financial information they had requested that our lawyer refused to deliver. Everything was working very well.

We agreed on my plan, and it will work out very well for my client. I anticipate reducing the loan from $1.7 million to $600,000. and keeping the business running.

I will then submit an offer in settlement for the remainder of the personally guaranteed debt and walk my client out of harms way for a few thousand dollars.

That’s a happy ending to a story that was on the brink of disaster.

Lawyers do what they are supposed to do…litigate. Business men should do what they are supposed to do, negotiate, settle and work things out, compromise and conclude safely and sanely for every ones best interest.

The moral of this story is obvious.

Call me if your in trouble…

Call me, 413-549 2966, Norm will arrange a no obligation tleconference.

 

Debt workouts for boat owners.

Boat owners have a slightly different situation then many others caught in this declining economy. The boat is typically not an income producer, nor a necessity like a home or a car. It is an expensive toy.

The high cost of gasoline required to run a boat as well as increased insurance, docking and other operational expenses combined with lost jobs and reduced revenues, are resulting in many previously highly paid executives and profitable business owners now being without their above average income and expense accounts and are holding an expensive toy unable to satisfy the debt service and operational requirements.

Seemingly stuck with it, as current fair market value liquidation values are well bellow current debt on many boats.

Its a luxury item and tends to be amongst the first to go…if possible

The same principles apply to this upside down situation as to other similar upside down debt we find on homes and business debt revolving around declining asset value.

A short sale is the answer, with the bank taking the ultimate hit, as they do in other workout situations.

The issue is that people in this situation are not used to thinking a workout is their answer as months before they were economically in much higher income and revenue brackets and flush with cash and expense accounts and very used to paying their bills…on time and completely.

Now many of these executive positions and businesses are being eliminated, and revenue has come to a stop, unexpectedly and abruptly. Yet the boat payments remain a monthly fixture.

Sell it short and workout the shortfall debt. It may also be impossible to sell short at a “reasonable” price as there may not be a market for it at all, even at depressed values, thus the situation is even more grim.

Yet the rule is everything goes at some price, so how short is short? That’s a factor for each boat owner to determine and each lender to absorb. The strategy remains the same even if the number changes.There is a liquidation price for every boat, one must merely determine what that price may be.

Thus for slightly different reasons, expensive boats, typically not an area known for workouts are now ripe for this procedure.

Chances are if you are in this situation, there are many other problems looming in the background and this may be the moment to complete a review and create a strategy that resolves all the issues at once…giving you control over your debt and protection over your assets.

Things happen,this we all know, it is important to understand the options available to you.

Call me at 413-549-2966 I can help. Don

 

Tax planning and asset protection…run your business out of two organizations.

As if one organization is not enough? Now I want you to have two. Why, you ask? Its complicated enough as it is why make it more complex?

Enhancing the bottom line is one answer, it can provide additional opportunities for saving significant tax money.

Protecting your assets and business from liability is another answer and generally  creating opportunity for additional strategies as events occur, a third benefit if not a reason.

Here is what I am talking about.

If you are a manufacturer, it may be beneficial to hold all the expensive, depreciating, equipment in one LLC and put the operational side into another LLC. This way the employee base, were most liability exposure exists, is separated from the asset base, were most of the valuable assets will be held. This provides a few opportunities.

First as we all know this is a very litigious country. You are bound to be sued for something somewhere along the way. You may owe someone money or one of your employees may commit some breach, even an auto accident or a breach of contract, and since the operation is what will be out in front whom your employees work for, it will be sued and the equipment held by a separate entity and leased to the operation entity is out of harms way and not exposed to the law suit.

The operation can probably be run at break even since you can control the lease fee for the use of the equipment and other inter corporate exchanges and thus the operational entity is for all practical purposes judgement proof. By keeping your valuable assets out  of harms way in a separate LLC so you can fend off law suits with less concern and worry and expense, as there is little to gain in suing an entity with no real value. Its your operation that will cause law suits not your equipment, separate the two with two legal entities and you will protect them both.

Further we can reduce payroll taxes for the owners by having them receive rental fees from the operational entity which are not taxed as payroll and thus more valuable. Since the rental fees are associated with a depreciating asset which may also have a note and thus incur interest deductions, we are also sheltering the revenue received for rental by the deduction of the depreciation and interest expenses,  insurance, and maintenance and repair and thus the revenue remains at a much lower tax base and may even be tax free depending on the circumstances and numbers.

Furthermore, based on the profitability of the operation we can move the revenue to the entity were the greatest expense may be by increasing or decreasing management draws by the owners, withdrawing profits were they do us the most good and cost the least amount of tax. It allows us to move expenses to which ever entity they will work the best for us.

Another area of strategic opportunity is in the area of sale, merger, partnerships, stock, etc. By having two entities and a split of operations from equipment (or real estate), we can omit partnership involvement in one entity or the other, we can sell one operation and retain the other, we can refinance the equipment without being concerned about the operational effect on a loan application as we can store losses in one and assets and revenue in the other. This is a good way to handle investors by placing them in ownership were the assets are.

By creating two entities that you control, we can increase your tax advantages, we can protect the valuable assets from exposure to operational liability, we gain strategic advantages and flexibility in partnering, sales and mergers, financing and other strategic opportunities.

It costs a bit more to administer two entities but in the long run it is probably well worth the expense as the gains, opportunities and protection are very much worth the effort and additional expense.

Talk to your accountant about this, if he balks, get another accountant.

If your accountant has not already recommended this organizational format get another accountant.

Call fo help 413-549-2966

 

Eleven misconceptions and requirements regarding the IRS, you must understand to succesully work with them to resolve your unpaid tax debt.

First please understand what the IRS does and hears every day. They  often have to deal with cheaters,liars,  scoffers, procrastinators, and then there are the “professional tax guys”, lawyers and accountants.

No wonder their attitude is frequently unfriendly, or even aggressively attacking.

There are probably far more people that want to do the right thing,  and would pay their taxes, if they could and just want to pay the debt off, but can’t, and these people expect a reasonable degree of cooperation in support of their working this issue out… but often fail to get it

The owing tax payer most always break promises. This is unfortunately a near-universal truth.

What happens, I believe, is that the agents are so beaten up by the bad or tough attacking behavior of many, and so infrequently are promises kept, that a jaded, defensive, non-trusting, argumentative and  uncompromising attitude and position can prevail.

Frequently the service will require a payback program that is impossible to agree to because the tax payer will most certainly default on it, it is far too aggressive.

There are of course some very decent, fair, honorable agents, and then there are some tough agents who are very difficult to work with as their objective is immediate performance or immediate liquidation. Immediate performance is typically impossible and liquidation appears extremely harsh under any circumstances, but this is frequently the situation.

So here are some realities you must understand before you state your case to the IRS agent if you want to avoid the ugly side of the IRS, if at all possible.

1.Most taxpayers believe they are being unjustly charged for the penalties and interest.

The service believes the penalties and interest hold the same importance as the tax itself and must be paid.

There are some statutory provisions for removal of the interest or penalties, however in most instances the service will not tell you about this or how to do it. They want to collect it all.

2. People simply want to negotiate a deal.

It doesn’t work like that. Everything is controlled by equations, applications with an acceptance or rejection process with separation between agent operatives and workout decision makers and with staged levels of authority.

3. People believe that the following argument is compelling and will yield results:

“let me stay in business and I will earn the money to pay you. Shut me down and I will not be able to pay.”

The service would rather shut you down in the first place as you have abused the tax code and will likely do it again, so the sooner they stop you the better of they are. They are definitely not interested by this argument unless it is clear you are making money and CAN actually demonstrate an ability to pay the debt off, both of which is unlikely.

Another version of this is the argument about all the jobs that will be lost. They are not moved by this at all.

4. People believe they can negotiate a payback plan that makes sense and is affordable while staying in  business. Doubtful. Frequently the agent will require a payback program that is impossible to agree to  because the tax payer will most certainly default on it, it is far too aggressive.

It is frequently not only too expensive but  since you must also stay current on current 941 payroll tax obligations as well as pay back the arrears…it is very unlikely that you will succeed for long.

5. People expect forgiveness and a second chance after bouncing a check in a payment plan. They  will stop the plan and demand payment, not allowing you back into a payment plan.

6. The argument that they will get pennies on the dollar at an auction is worthless as the amount collected is unimportant, it’s the process that counts and the finality of the liquidation auction that matters.

7. They will put you out of your home if there is enough equity and if you do nothing else to prevent such action.

8. They will garnish paychecks including pension and social security checks.

9. They frequently make errors and it is sometimes all most impossible to correct and the agents will follow the computer no matter were it takes them and what it says, even if they know its wrong.

10. You must be current for two quarters to enter into a discussion and either workout a payment plan or make an Offer in Compromise. Failure to be current for two quarters will prevent any cooperation and will result in seizure. Do not walk into this trap.

11. Anyone who signed a check, or satisfies other general requirements can be held totally and individually responsible for unpaid payroll taxes. Be aware of your rights and do not allow them to attach everyone in sight as responsible parties. This can be appealed and won if they become overly aggressive and broad reaching.

Between interest and penalties and the lien, borrowing money from the government (by not paying the taxes ) and then paying them back over time including penalties and interest is the worst deal you can ever make. It will not work out well for you. Do not use the IRS as a bank.

Do anything you can to pay them off and get yourself out of harms way as most delinquent commercial tax payers do not survive. There are many strategies and options which will allow or dramatic reductions in the amount owed or what has to be paid, if only you or your representatives knew what they were and could implement such strategies.

These are eleven important concepts you must understand, gleaned from years of practice. If you are either professionally represented by tax experts or do it yourself or have council or an accountant not used to ths arena but helping out and representing you, you must know these facts so you or your representative to not waste time, blunder and cause harm.

Better yet find someone who knows how to navigate these tricky waters and hire competent, experienced tax workout representation, but still you must know these basic do’s and dont’s, as in the end, its your debt.

Call me if you need help 413-549-2966

 

Thank you and goodbye Manny Ramirez, and what the Red Sox can teach business owners about “team”?

Wow! Arguably Manny Ramirez is one of the greatest hitters in the game. Certainly a future Hall of Famer. Absolutely one of the reasons the Red Sox won two Word Series in four years. Currently hitting better or at least as well as ever……and the Red Sox traded him away while in contention for another pennant and possible world series run this year!

How could this be?

I was listening to Adam Lipkowitz’s radio sports talk show on 1550 AM WNTN  7:00 PM to 8:00 PM Thursdays, and agree with him completely, “I would have traded Manny for a bag of baseballs” said Adam. Adam gets it.

Theo Epstein, General Manager of the Red Sox, made an extremely difficult but absolutely correct decision and I applaud him for not only being a brilliant baseball strategist, but also an excellent business manager. He made the exact right decision at a very difficult moment and he has done this before. He is the man.

The title of this entry could have been, Theo Epstein, manager of the decade.

Theo gets it. Bill Belechek manager of the Superbowl Champions New England Patriots gets it. Doc Rivers, manager of the World Champion Boston Celtics gets it…..and we as small business owners can learn allot from these brilliant and successful managers as they all understand the most important element in attaining victory. Long term victory, not a splash in the pan but all the way victory, the best there is victory, World Championship victory.

In a word they all understand that to be a world class champion, “team” is more important then individual performance. Its about the team winning and individual participants, even superstars, must be willing to sacrifice their own “needs” FOR THE BENEFIT OF THE TEAMS SUCCESS.

Any individual on a team, no matter how great a star he may be, who thinks he and his performance is more important then the team and who will not accept selflessness and personal sacrifice for the benefit of the team in support of team victory is a detriment to the team and will prevent victory rather then help make it happen.

Theo made the same heart wrenching decision with Nomar Garciapara and upon trading him away, the Red Sox won the World series in 2004.

Theo may have accomplished the same goal with this blockbuster trade.

It was extremely clear that Manny was all about Manny, not the team. He played for Manny when he wanted to, if he wanted to, and as he wanted to. He never hustled down the first base line trying to beat out every throw…as he should. He occasionally did not feel like playing so he did not. He always talked trade every year as if he was more important then the team. He fought with other players and staff on the Red Sox, He would show up late and leave early on occasion. It was all about Manny being Manny.

With this attitude it was impossible for the Red Sox to come together this year and play and win as a team, thus even with great individual performers, the Red Sox were not recently playing as a successful team and were losing games they should have and could have won.The team was nonfunctional as a cohesive unit.

Manny said during the past few days, the Red Sox did not deserve him…Well once again Manny revealed what he was all about. Manny got it wrong and Theo got it right. It was Manny who did not deserve the Red Sox and now he will play for another team who will soon learn how much more important team is over individual success and self importance.

Let him go to the Hall Fame wearing another team jersey, He was never really on the Red Sox…he merely wore their uniform and used them as a place for his brilliant but individual performance.

Phil Jackson, past manager of the Chicago Bulls when Michael Jordan played for them explained how he would not have won a championship even with the greatest player the game has ever seen and a tremendous cast of exceptional supporters until Michael Jordan understood that they could only win with a team effort not individual performance, even his, and once Michael understood that, explains Phil, the team pulled together and was unstoppable. Michael learned to sacrifice himself for the benefit of the teams performance and to thus achieve the goal…winning. It required his personal sacrifice for team success but that was the goal, team success.

Thank you Theo, for being the exceptional manager that you are and making the difficult decision when required.

Goodbye Manny, hello team. Now maybe we can think hello world series 2008!

Yes Adam, I agree, even for a bag of balls, I too would have traded one of the greatest hitters the game has seen.

What does all this mean to a small business owner?

Is your business run as a team or is it based on individual performance?

Is your all star running the team or is he part of a team effort?

Theo, Bill, Doc, Phil, Adam all get it, do you?

Call me if you need help. 413-549-2966

 

When to hire and fire… expansion and contraction. Simple rules.

Don’t “hire” until you see the whites of their eyes…The take off from the famous quote uttered at the battle of Bunker Hill, when the revolutionaries where greatly out numbered, had little ammunition, no training and few experienced leaders, yet looked into the eyes of the enemy without fear.

This exemplifies the exact attitude one must have when considering hiring additional employees.

The actual quote was of course, “Don’t fire until you see the whites of their eyes,” exclaimed to make certain every bullet counted and none were wasted. It was a bold, dangerous yet effective strategy which led to an unexpected victory.

We can take a lesson from this situation and save ourselves allot of money while making certain we install the correct attitudes necessary for effective management.

The tendency is to hire sooner then necessary, or allow overtime which is very expensive. Managers and business owners tend to ramp up before they absolutely need too, and thus incur excess overhead and build in low productivity as a benchmark.

My advice is to never hire until you are forced to, “…until you see the whites of their eyes.” or until you are simply unable to process the work load in a reasonable time period, then, when it seems as though everyone will burst from overwork …hire.

Along the way, find ways to increase productivity so the same number of employees put out more work…that’s efficiency, ( see incentive based reward system, in this blog) that’s building profit, and that’s controlling overhead while maintaining growing production.

This is a better plan, develop an increase in productivity rather then simply hiring either in anticipation of need or even after the need is clearly evidenced. Wait till you see the whites of the enemies eyes: late delivery, backed up orders, paperwork not being processed in time, a bottle neck somewhere, and after extracting the most productivity you can out of the existing situation and current work team, then and only then, when it feels like you are unable to absorb one more order…then  start looking for additional help.

Only when you have exhausted yourself and your people with training and incentives creating greater productivity bringing it to its maximum potential, then…hire.

Excess payroll, and the resulting payroll taxes and employee benefits, coupled with accepting low productivity from the existing employee team, is a major cause of lost profitability, too high overhead and an early demise. Lean and mean coupled with high productivity is the best path to go and needs to be a fanatical commitment for one to succeed at the level desired.

The opposite is even more true, to much payroll, too many employees and is the cause of many failures. When revenues are declining, reduce the payroll as soon as the trend is identified. Yes, you may want to overlook small declines or momentary reductions in demand, but once it is noted for a period of time adequate to be identified as a trend, cut the payroll, keep everyone working to their maximum potential while maintaining the highest productivity.

Reduce the employee base as soon as the trend is identified and do not increase it again until the existing group is producing at the highest efficiency.

Its a tricky balancing act, balancing the employee base with productivity and always working towards maximising the outflow with the least possible number of employees.

Hiring too soon or holding on to employees too long are the two most costly errors of good management judgement that are frequently made.

Wait till you see the whites of their eyes before you hire, and fire as soon as you see the trend.

I know, every manager is reluctant to ever fire, families, etc, but remember if you do not control costs and increase productivity and hold the payroll down as low as possible, you may be shutting down all together in a few months costing everyone their job.

Do not hire until you see the whites of the enemies eyes and fire excess employees as soon as a downward trend is recognized, that’s a hallmark of success. call for help 413-549-2966

 

We cannot do our best…alone.

I see examples of this most important principle every day, self determined limitations. I see it in myself, I see it in my clients.

We all listen to our own mental chatter, setting personal achievement limits, boundaries, personal expectations, goals, objectives, when we are solving problems or simply implementing our strategies, in anything we do. We all work up to our own self-perceived limits and expectations. These may be very high but our objectives are all supported by our own vision of what is possible.

If we are fortunate enough to have someone else involved with us in any of these situations, a person who has an outside more objective view, and thus a different opinion unhindered by the limitations we all set upon ourselves, he or she will be able to push us, excite us, and get us to elevate the bar on just about anything we may be involved in merely by having a less hindered view.

The result is we can always do more then we think we can. We can always reach higher and achieve more then we would if allowed to be our own manager.

This is not because we are all lazy, inept, and slackers, always looking for an easy way out, not so and actually quite the opposite is true we, business owners, are for the most part huge overachievers. But there is something magical about someone else saying ” you can achieve more here”…. and therefore we do.

Its not just about pushing higher for no particular reason other then pushing higher, its about the ability of an outside person to see more clearly then you, as we all have our own barriers and establishing a higher vision.

We are all not inept, its simply a natural condition. Frequently others outside the immediate issue can see clearer and challenge our own self implemented limitations.

It also has to do with trust. If we trust the man we are being inspected by and thus believe in his ability to see, then we will accept his vision and replace our own and with the trust extended and do our best to accomplish the higher hurdle. Its like a breakthrough, if we only believe in our own goals, we are limited to it. If someone else sees a different result, it all of a sudden becomes possible and we can expand our vision to the new goal.

Its not just the competitive “I can do better then you”, although this comes from a similar  place, a challenge. We have all seen this occur, when we step it up a notch to beat someone else who we are competing with…and magically accomplishing more then if we were competing against ourselves. This is not about a competitive urge to win. Its more about improving or expanding the vision to goals we did not believe we could achieve yet others do believe. We can always adopt a greater standard and thus elevate our own bar with this support.

If someone else believes we can accomplish more… perhaps we can.

In essence we are always limited by our own personal sense of what we can accomplish, however others outside of our head are not limited by what we all think we can accomplish and a person outside of our own self can evaluate the situation with less personal limitation involved and thus raise the bar and bring you along to achieve greater results.

We cannot do our best…on our own, we can achieve more and do our best  with the  help of others. Get help. Call for help 413-549-2966.

 

What ever happened to personal standards and how does this affect your business?

What ever happened to our personal standards, you know the value of our word, for example? It seems that we all remember that there was the” good old days” when a mans word was rock solid. In other words you could depend upon his performance on time and well done because he said he would do something and thus could be relied upon to do it.  In those days everyone also did their best and delivered exceptional service and product. What happened?

Why is this a story from the “good old days” and not a story about today’s standards and way of life?

For example:

1. Being late for an appointment is deemed acceptable and almost expected. Broken word.

2. Not calling back when you said you would is normal. Broken word.

3. The biggest laugh of all and a joke everyone understands is the check is in the mail…even though it isn’t, but this practise while annoying is absolutely expected. Broken word.

4. Late payments for rent or anything for that matter is apparently built into our culture as we now have late charges and grace periods honoring ones lack of commitment and saying its ok as long as you pay an additional amount. Broken word.

5. How about vendor deliveries, never ever on time. Broken word.

6. What about trades people. “I will definitely be there on Monday” and they show up on Thursday and we consider ourselves fortunate that he showed up at all! Broken word.

7. Even in our own offices, dead lines are never met, and  it seems acceptable to everyone involved. Broken word.

8. Bosses have a habit of never being on time, but he is the boss we say, so its ok!!!! Broken word.

9. Meetings never start on time and never end on time and this too I suggest is a breach of a commitment. Broken word.

10. Accountants never deliver their work product on time nor do lawyers.  Broken word.

11. Then there is the quality of performance, it seems that taking pride in a quality performance is rare. People expect inferior work effort and are surprised when someone does a good job or delivers as promised, as if its ok to deliver less then your best and less then paid for or expected. Low work standards.

12. We expect shoddy product and guaranties that have more loopholes then substance, insurance companies that do not pay on claims they have insured. Low standards.

13. Tips are no longer earned but are expected even for inferior service. Low standards.

…and on and on it goes.

Yet we try and teach our children that your word is important, that timeliness is important, that doing your best and delivering on time is important, yet as they grow up they see the opposite is true.

What does this mean to a business person?

We have a choice, we can either continue to contribute to the demise of our standards, or you can make an individual statement and make a commitment to your word being unbreakable and demonstrate to everyone you are involved with that you are a man of your word and do what you say you will do.

What would this mean? You would rapidly earn a valuable reputation as a dependable man. This will create and support huge respect, tremendous loyalty and more business then otherwise, as people are attracted to people with high standards in a world were standards are disappearing. People so appreciate a man who keeps his word, they will admire him and talk well of him and will want to do business with him. They will deem him responsible, predictable, dependable, reliable and therefore worthy of trust, wow!!! All starting with keeping your word.

They will accept his word on other issues that are important, they will give him work without competitive biding, they will make him the preferred business associate, the “go to guy” because he delivers what he promises.

So here is the interesting fact. Because when one demonstrates a commitment to keeping ones word on the small issues, it transfers to larger more important issues where it really counts. If a man commits to honoring his word, it is typically an across the board commitment, applying to all aspects of his life, thus if all we need to do is return a call on time and reap the benefits of being a trustworthy man who delivers as promised and this applies to all aspects of his life, then its probably a worthy effort to return ones calls on time.

It is sad that our society has reduced itself to such a low common denominator were everyone expects everyone else to NOT perform as they say they will and not keep their word. But its not to late to change this, one person at a time. The benefits are huge.

It is an advantage in every aspect of our lives, thus I say why not try it out. Keep your word on the simple things and see what happens to your life. Practice keeping your word on small thing and soon you will be keeping your word on the large issues as well.

Who knows maybe you will soon be known as someone who has high standards, keeps his word and does what he says he will do. This will transfer to all aspects of your life, home and community. Its how we are supposed to be living, do it, it works, its good for you and it is setting an excellent example for others who will follow.

 

#200: Business owners must lead, follow or get out of the way. Holding the course does not work.

Ownership requires leadership. Making no decisions when a decision is required is self destructive, the wrong decision is even better, but of course the right decision is best of all. The important principle to recognize is the fact that in small business you can make a correction today and see the results tomorrow. Thus when the plan is not working, or the revenue is inadequate, or the capital insufficient, or the employee base is controlling you, productivity is too low, competition is beating you, there is always a way to overcome the obstacle. Action, is necessary, decisions must be made.

Thus a small business owner, who has his cash invested has shouldered debt and personal guaranties to support the business, and thus has an absolute obligation, a responsibility to protect his investment and make it work.

This requires leadership responsibility and recognition that success starts and ends with the owner. Thus lead, follow or step aside. Since you cannot follow, there is no one to follow, you cannot step aside that would be abandoning your responsibility, all you can do is take a leadership position and make the best decisions you can while accepting full responsibility for victory or failure. Making no decision, or holding the course is unacceptable and irresponsible and will result in failure.

Having stated the obvious, what we all know to be true, we still find ourselves in ownership positions afraid to do the right things and thus we make excuses for failure and continue to do the same things that have brought us to this point of failure… again and again, refusing to lead and thus change the path to a successful one.

The good news is, that just as there is a right and successful way to accomplish any business task or strategy be it making your product, providing your service, financing your business or implementing a successful sales and marketing strategy, there are many correct ways to implement a successful business plan. Thus steadfastly pursuing the wrong path which yields loss instead of gain is foolhardy and unnecessary.

In a word if lost, get help, find a guide, get a map. There are plenty of competent people ready, willing and able to help you find your way. Whether it be it  one of the basic parts of your business that may require work or an entire reconsidered business plan that may have to be written, or a specific problem you have not figured out how to resolve. Get help, lead, follow or get out of the way. Owners must lead, there are no options.

In the end the analysis may suggest you either do not have the capital, the cash flow, the asset base, the physical plant, the employee requirements to make the turnaround occur within your investment capabilities and thus the best answer may be liquidation, of the business or perhaps the assets and if that decision is made, act rapidly as capital is eroding every day.

You must get over blindly waiting for something different to happen if you have not done something to cause change. You must cease feeling any sense of responsibility to stay in business or not make changes because you want to protect the jobs. You must stop blaming other circumstances beyond your personal control and accept the responsibility for appropriate leadership under fire and make the decisions and moves necessary to improve your business and truly protect the jobs and turn a profit.

Thats what I have learned after consulting with hundreds of business owners many who have succeeded and many who were committed to failure, its still all about accepting the responsibility to achieve success that goes along with opening up a business. The responsibility to do your job, the job is to make certain the business runs profitably so everyone relying on you, your vendors, your customers, your family, yourself is secure and successful.

Lead, follow or get out of the way… success or failure begins and ends at the top. If you choose to lead, and opening up a business and being a business owner/operator is a major leadership decision, then accept your responsibility and do it right, or ask for help, both work.

If you choose to follow, do not open a business, you should work for someone.

If your just slow to get it, trust others to guide you, but do not stop progress. Forward motion is magical. Call for help 413-549-2966.

 

What to do if you get an IRS agent who is overly aggresive.

It happens, allot. They may seem nice, and appear to understand your predicament, and sound like they want to help you …but it isn’t true. They have a job to do and they will do it. So lets set the stage and dispel a few myths.

1. IRS agents are not there to help you. Do not believe for one second that they have you interests at heart. They do not. I believe in fact their goal is to collect all that is owed, quickly, or liquidate the offending tax payers business so he will not abuse the tax code any further.

2. While they are interested in collecting as much as possible, they are usually not committed to keeping your business open just to collect more, so keeping you in business is not their objective.

3. They will not inform you about options or a better way or plan. They will not help you achieve your goals.

4. Working with them means you will pay the maximum and more then likely go out of business still owing a lot of money, which debt will follow you unless you do something about it.

5. They will attempt to make as many people as possible responsible persons to broaden the personal liability and collection potential.

6. They will go after your home and everything you own and your business assets.

7. There are many agents who simply go for the jugular vein immediately. Cutting you no slack, making what you consider unreasonable demands and basically putting you out of business in a heart beat.

Aside from the best advice I can give you, which is hire an experienced tax professional who works with such issues and knows the IRS, the code, and what to do in your situation, aside from this obvious good advice, you do have an avenue for relief from an oppressive agent.

Its called a Collection Due Process hearing (a CDP). It’s a beautiful thing and devised to help the taxpayer get a fair hearing and a reasonable shot at working their problems out without losing their business and everything they have worked their lives to build. Even with a professional on board you may need a CDP to level the playing field and undo the damage already done or being threatened by the agent.

When you begin to get the lien and levy notices, you will also get a series of pamphlets describing your rights to appeal and have an independent party from a different office who has fairness at heart, take over the situation and provide you with a fresh review.

If in fact your agent has been heavy handed, offensive or simply overbearing and you feel as though you have not been given a fair chance or a fair hearing, or your rights have been violated in some way, and you want an opportunity to work it out and your agent has not been willing to consider such options you may file for a CDP and get the hearing you want as well as having your case moved to another agent and an other office altogether.

It’s a real avenue for help. The review agents must follow the statute, but there is usually a way to resolve an issue without putting you out of business and liquidating your assets.

In fact the best answer is hire a professional and have him file for a CDP and represent your interests before them, assuring you not only a fair hearing but a representative that knows what is possible and what can be done.

It is a real review, and one which should not be overlooked. It works better for the tax payer and should be utilized when appropriate. Call for help. 413-549-2966.

 

941 tax workouts and responsible person payments…the “source of funds” issue.

Unfortunately there are subtleties associated with paying off the 100% civil penalty from the responsible party tax obligations for unpaid 941 tax payments. This highly stressful situation must be understood or you may find yourself in a more difficult situation then you thought.

The issue is the source of funds used for your payment to the IRS. If the funds can be tracked back to the corporation that originally owed the 941 taxes, and you draw the payment directly from the corporate account, you may not be credited for the payment as a responsible party payment.

It may be credited directly to the now defunct corporation leaving you, the responsible person, still indebted for the same amount owed before you made the payment.

This is a very important distinction and can be overcome if you are aware of the issue.

The answer is to make certain the cash comes from the responsible party or an outside party which you can document or from a loan or dividend distribution or unpaid payroll from your corporation or payback from a loan to the corporation, so in some way the money is a valid distribution from you personally and not a corporate distribution from the defaulting company paid on your behalf.

Pass the cash through your personal account first and then to the IRS but there must also be some viable reason for the distribution. Failure to do this could cancel the credit to you and will be credited to the defunct corporation. This is a very common trap unwary responsible party tax payers can fall into if they are unaware of this requirement.

Be very careful about this matter it can be overcome if you understand the issue and plan accordingly. Call for help 413-549-2966.

 

Put it in writing, handshake or oral agreements do not work.

I recently visited a business with twenty years of successful history, doing much of the business on a “handshake” with an occasional contract typically provided by the other party. This worked for years he said and now as we attempt to collect over a half million dollars from a hand full of different contractors, he reluctantly admits it does not work anymore.

So what is it that’s going on, are people becoming crooks? Are they purposely taking unfair advantage of sub contractors who do the work and rely on a mans word and handshake, who then refuses or fails to pay them for some trumped up reason? Is there a trend for “misunderstandings”, “broken communications”, “changing intervening circumstances”, which somehow makes it ok to break ones word and change the deal after the fact?

I believe the reasons for this happening are probably irrelevant, what is important is the fact that this frequently occurs and its possible to reduce and control this problem, although far more difficult to eliminate it all together, although possible.

Here is something we all know, that works well in protecting ones interests, reduce every agreement to a written contract. It does not have to be an expensive and lengthy proposition involving lawyers every time. Probably your work relationships are similar in nature thus having a lawyer draft an all purpose contract which you can use over and over changing the facts but not the format will work well enough. Even a simple self serving memo outlining who does what for what compensation and what terms is adequate to work from and protect our rights, even if it is unsigned by the other party. Its still a memo outlining what you believe the agreement to be at the time it was made.

This clarifies forgotten details, unstated terms and conditions, price, etc. etc. Its a simple but important act of business preparation and irrespective of why the problem exists, the best way to prevent many issues from arising is to have a written contract or at least a memo of understanding signed by both parties or as a final strategy, a self serving memo drafted by you, (see other blog entry here on the subject) to state the critical details of the deal. It amazed me how much business is done without a contract or written agreement or any written document that outlines commitments and terms. No wonder people end up with different perceptions of what was agreed on.

This may have worked in the past but it is no longer a viable way to do business, it just does not work now. Everything should be reduced to a writen document, everything by contract, especially change orders and adjustments to the original deal.

Stop work and create a written document. Do not proceed until all the details are agreed on, especially price and terms and specific obligations, in a written document and signed by both parties.

There can be no exceptions as once made that will be the business deal you do not get paid on. Contract first, change order first, terms and conditions and specific obligations in detail.

That’s the only way to do business, it keeps honest mistakes from occurring, it prevents simple mis communications , it clarifies issues, it makes certain there are no misunderstandings for any reason. It makes certain both parties are in agreement of basic  facts.

Unfortunately a dishonest business man will not be controlled by a written agreement as he will find a way to dispute something indisputable. How to protect against this? A written agreement removed wiggle room and allows for more aggressive collection and possible recovery, without it your case is lost before you start.

Be careful with whom you do business with, check history and references, limit your risk to affordable losses if all goes bad, and do not let the debt grow uncomfortably and unaffordably large.

Then when confronting default jump on it as quickly as possible with counsel, not a collection agency and not many months later. Respect your terms and if its net thirty on the thirty first day you need to be in contact and determining if its a collection problem, and if so go directly to your lawyer and resolve it. This does not mean you cannot work it out with your client as long as you are attending to the issue. Hopefully you have added costs of collection to your invoicing and contracts so your contractor will be paying for the lawyers not you.

The sooner you act the safer your receivable and the most likely you will be paid.

If your business requires such exposure then internal organizational strategies should be considered. In NY City each cab is separately incorporated because of the high risk and likelihood of an accident and ensuing law suit thus only one cab and its medallion is exposed to risk, as an example, although one owner may own a thousand cabs and a thousand medallions. Extreme but realistic.

This may not be the best strategy for you but some attention must be paid to limiting, controlling and absorbing exposure and potential losses.

Put it in writing, and then collect aggressively and promptly, know who you are doing business with and limit or control your losses. Call for help 413-549-2966.

 

Horizontal or vertical expansion, which is best for you?

There are a number of alternative strategies supporting profitable growth and development. Two alternatives are vertical or horizontal expansion. Both are viable, it depends entirely upon your goals and resources, both work.

Vertical development is following the natural chain of value added commerce as follows: importing or manufacturing, wholesale distribution, retail sales, direct sales to the consumer. Down the line of development. The natural flow of product from the original source to the end user through all the appropriate channels. Each channel is a vertical step.

Horizontal development, is more about growth by expanding more of what you are currently doing, such as expanding manufacturing in other locations, creating more distribution outlets or expanding the territory, adding more stores, geographically expand or internal expansion creating greater and more diverse capacity, and capability, more machines more product more locations, more warehousing capacity, more product. etc.

With the invent of the Internet, the direct market, as well as the wholesale market and the business to business market is completely open and accessible affording manufacturers, wholesale distributors and even retailers the opportunity to sell direct to anyone who has access to the internet. Almost no cost of marketing just an effective web site and you can expand horizontally.

Thus a manufacturer can begin distribution and even retail and direct sales to the market. A retail store can sell direct through the internet, open more stores and if it has enough margin, it may even create a wholesale distribution network, horizontal and vertical expansion as one feeds of the other. Both are natural development paths, both can be successful, as opportunities are available to expand in either direction, horizontal or vertical.

Clearly another important and limiting factor is the amount of capital and other necessary resources required to support your expansion plans. Do the cash flow pro-forma and plan the expansion effectively based on the cash required and what is available.

In vertical expansion situations, clear separation between the stages are sometimes necessary, as competing with your own customers and suppliers can be tricky as you expand vertically. However it can be very successful if each layer of vertical development is operating independently and separate from each other.

The old adage, that in real estate the three most important factors are location, location, and location apply to both vertical and horizontal expansion, as location can determine the likelihood of success in any level of expansion. It is not that there are specific winning factors that defines success when determining what location is best, it depends upon your marketing program. Discount Flooring Inc. made their mark by being in remote low rent ares with no frills other then low price, that works as an entire marketing program and strategy which supported horizontal expansion.

Factory outlets bring factory cost to retail pricing, an opportunity for deep discounts and sizable profits.
Locating in a discount mall which attracts a huge population, is expensive overhead, yet with large traffic the location creates significant revenue potential, and is another successful strategy.

Locating distribution channels were competition is not doing a great job or were there is a large client opportunity. Most any growth plan can work if it is integrated with the location and supported by a marketing plan that takes everything into consideration. Many good business’s languish because of inappropriate location.

The first important decision is how you want to expand, the second important decision is were you site your new location and then what your marketing strategy may be. If its all tied together and well thought out and implemented, you will succeed, either way you choose to go.

Look at your industry, your competition, your client base and your available capital and then determine what path for expansion will work best for you, then match your resources to the plan, over time, and design your expansion accordingly.

Horizontal or vertical? Both work, its a matter of preference,strategy and opportunity, market dynamics and availability  of capital to support the growth requirements.

Analyze and then choose. Call for help 413-584 2581