The answer is clear, when you work with troubled companies.  Of course, some make it and others don’t.  The chances for success are pretty slim.  Ninty-five percent don’t make it past five years and, five years on, the same percentage applies.  And my main observation is that the survivors are owned and managed by resilient, resourceful people.  Simply put, they have a positive business mindset.  If it’s not there, there’s not much hope.

Absolutely no other factor is as important as this mental drive and toughness.  Without it, people lose heart and fail to do what it takes to ensure that their financially challenged businesses endure.  This resilience is the factor common to all successful business people.

The right mindset will equip the owner to seek solutions to set the business up properly at the outset.  Or at least, will make the necessary adjustments as he or she becomes established.  And if trouble hits, as it almost always does, to make smart decisions as to how to get back on track.  Lesser people throw in the towel too quickly, after times get tough and creditors get nasty.

“But how can a business owner change their mindset for the better?”, the author asked.  I’m no psychologist, but I do observe people closely.  And here are the positive steps that I recommend, having seen people take them to fundamentally improve their ability to work through very tough business problems:

• Surround yourself with positive and intelligent business people.  Stay away from negative influences.  There’s a “conspiracy of the unmotivated”, as Dan Kennedy would say, that can drag you down.  Heed the advice of the great Jim Rohn, who claimed that you become the average of the five people with whom you associate the most.
• Read and absorb as much good marketing and business development information as possible.
• Join a mastermind group, or start one of your own.
• Seek ongoing assistance from a paid-by-results business development specialist, who sees your business from a different perspective than yourself.

I’ve seen dejected, beaten business people turn themselves around, before taking the first steps to save their companies.  It often starts with the realization that they are not alone and that untold thousands of other businesses face similar challenges.  The biggest obstacle to recovery is not declining cash flow, or creditors calling, or the banker’s request for a meeting.  It’s a defeatist mentality and outlook.

A business debt workout and turnaround is not always easy to get through, for any business owner.  But there’s an end to it.  And it is a much easier process for specialists like me to implement and execute if the business owner has the right, positive mindset.

Balance sheet ratios and cash flow projections?  Important, of course.  But in my experience with challenged businesses, the owner’s mindset is the best predictor of success or failure.

The frustration for us and others in our business turnaround specialty is that this leads to pessimism and a resistance to change.  The net result is that we are often called in very late, after more damage than necessary has been done to a client’s business.

As with your own health, if you wait too long before going for a checkup, it might be too late to save yourself from real damage.  I’ve been thinking about this a lot lately, since learning that a highly-respected mentor is struggling with late-stage bowel cancer.  His specialty is business development.

He has long taught business owners and consultants to find effective ways to ramp up revenues and bottom-line profits.  His cancer was discovered at a late stage.  My concern is that this beloved guy’s illness could have been resolved at an earlier, more treatable stage.  I don’t want to ask, but did he not have an annual check-up, which should have exposed the problem when it was more easily treatable?

This brings me to think about our businesses in general, which have many similarities to our living, breathing bodies.  We need to keep an eye on progress by checking vital signs.  If not, we can end up in intensive care.  Far better to live and operate under a healthy diet and exercise regimen and to take steps early enough to be able to make timely changes.

This is one of the fundamental issues we face when confronting client concerns.  All too often the business patient is dying in front of our eyes.  It cannot keep current with creditor needs.  Revenues are down, so cash flow is inadequate.  The late-stage prescription is generally to communicate effectively with creditors and their agents, to work out a sixty-day payment hiatus.  This provides time to recoup, adjust and take steps to ramp up revenues.

It is far better to recognize the problem at an earlier stage, sometimes defined as mid-decline.  At that point the company still has some maneuverability.  Management is not yet preoccupied with creditor calls and lawsuits and the need for business debt relief.  It still has time and resources to do what it takes to recover.  It can likely pay its creditors in full, albeit on revised payment terms.

As with our personal health, it can take real courage to ask for a business analysis and prescription for the right medicine.  But unless we do so, before the business starts to keel over, it can be much harder to keep it afloat.

I’m rooting for my friend and mentor.  He has the positive outlook and the best professional help to beat this.  And as with the owners and managers of troubled companies who are trying to plot the right course, mindset trumps everything else.

At the same time, I’m looking forward to working with more business owners in the New Year who look for business turnaround help when they still have lots of options.  It is highly satisfying to bring a business back from near death.  But it makes far better sense for the owner to ask us for help before they have to call the ambulance.

This particular show featured a small group of crafts people from Britain.  These folks had all been specifically invited.  They had crossed the ocean with their creative output.  Surely the intent was to burnish their reputations and to sell as much as possible, at the show and to buyers here in the future.

We happily bought several items from various vendors, mainly for holiday gifts.  But the experience, in each case, was troubling.  At the point of sale, we were never asked for contact details.  In other words, these people were content to make each sale without attempting to forge a continuing relationship with their customers.

As it turned out, we wanted to keep in touch with each of them.  We want to know what else they will produce, even though they will not necessarily be back in the US.  So what do you do?  You twist their arms.  You give them your business card, while you wonder if it is to be lost or discarded when the booth gets pulled down.

I have to say that each crafts person seemed to appreciate unsolicited feedback on the need to build a growing customer list.  A community is a better word for it.  The immortal Dan Kennedy calls it a ”herd.”  In other words, a group of people who are likely willing to buy more of your output and to tell their friends and relatives.

My comments were based on an attempt to help the individuals concerned.  After all, I had purchased something of beauty and value from each of them.  That first sale was so much more difficult and costly for them than any subsequent transaction.  But that likelihood of future business is bleak indeed, unless they take steps to stay in touch with me.

I wonder why this comes as a surprise to these interesting and intelligent folk.  Their lives depend on satisfying as many customers as possible at the greatest possible margin.  In that respect, they’re like all other business people.  So why didn’t the individuals I dealt with yesterday take simple positive steps to build a customer list?  Is it because arts and crafts people think differently than the rest of us?  Is marketing a dirty word to them?

It’s an established fact that the longer a company has to wait for a B-to-B receivable, the more likely it is to go unpaid.  This applies in general, but in this economy, formerly strong customer firms are dropping like flies.

Smart owners and controllers understand this risk, when looking at delinquent B-to-B receivables.  They recognize the differences in the situations faced by debtor customers.  If your firm is genuinely in need of business debt relief, a clear and concise business debt settlement proposal can go far to bring about a solution to help both sides.

Companies that attempt to collect every dime owed from every business customer can end up with a lot less than expected. It pays for them to be flexible and to heed what’s happening to them.  You likely have the same situation with receivables of your own.  You understand that creditors need further information before coming to any decision on how to proceed.

A proverbial bird in the hand is worth two in the bush.  A creditor firm will have to wait for months, after retaining an
attorney to file suit, to find out if a lawsuit is productive.  In other words, to actually be awarded a judgment.  And then, for management to hope and pray that full restitution will be transferred from the debtor’s bank account to theirs.

It often ends up as a piece of paper to stash in the “uncollected judgment” file.  It’s far better, in many cases, for a
creditor to carefully consider a negotiated debt settlement.  The outcome can be more positive and less
stressful to each party.

This is the time of year for you to consider making business debt settlement offers to your creditors, if you need these to survive.  A complete debt management workout may be called for, as a better option to Chapter 11 bankruptcy.  Deals can be as varied as circumstances warrant, be they drop-dead cash settlements or long-term payment plans, or a combination of both.

In following through with your plan, your creditors will minimize their immediate losses.  You will figuratively shake hands after deals that meet each party’s needs.  You get the opportunity to manage a strong business turnaround, while giving your creditors your future customer value.  And what could be better than that?

If he holds this course, without being able to immediately boost his declining top line, he’s likely to go down like the Titanic.  And that’s bad news for unsecured creditors, his employees and his family, who would all lose out, big time.

Most business owners are honest and ethical.  If they run into serious cash flow issues, they naturally still want to pay everyone everything owed.  We all expect to get paid, as well as to honor our commitments to others.  But our clients and customers don’t help us by closing their doors without notice, before we know they’re in trouble.

Companies that extend business credit see both sides of this picture.  If a debtor firm disappears without a trace, it can cause real grief and anger, depending on the size of the account and the lost future business.  But there’s the remorseful feeling that they could have been helped, had they been open about their situation and discussed a potential solution at an appropriate time, earlier on.

If your receivable is late it makes sense, particularly in this economic environment, to keep close to your customer, especially if the sum is significant.  By the same token, if your payables have unexpectedly outstripped your ability to service debt with available revenues, you are duty bound to communicate this fact to creditors.  Not only that, you need to try to reconcile their needs with your firm’s abilities.

In the final analysis, our best interests are served by looking after our own welfare, and that of our families and employees.  Management of large companies in trouble know that, which is why they are so ready to file for Chapter 11 bankruptcy protection, to try to restructure and save themselves, irrespective of the impact on creditors.

The best outcome for financially troubled small to medium-sized businesses can be to engage a paid-by-results business debt workout and turnaround specialist.  If your firm is in real trouble, divest yourself of the notion that you have to pay all your creditors one hundred percent of that owed.  They are likely to settle for much less if a professional presents them, or their agents, with a true and forthright written account of your company’s situation and what is likely to happen if you can not gain concessions from your creditors in general.

The bankruptcy courts are full of cases where business people wanted to pay everyone in full.  It makes sense to recognize, early enough to make a difference, that you have to communicate clearly and effectively with creditors and to do deals based on reality.  We do this for clients on a regular basis.  It’s called a “debt workout.”  There’s no shame to it.  You’ll likely be thanked for your honesty.  You’ll save everyone a great deal of grief, given the alternatives, while providing suppliers with your future customer value.  Your business will be given a second chance to survive and ramp up revenues.  And what could be better than that?

This came home when a client was trying to sell his business.  John was an artistic and savvy producer of niche business software.  He had brought his small company back from the brink of disaster to a highly functioning and profitable enterprise.

We were sitting in a business broker’s office.  Several buyers were interested in the products, potential and financials, but it became clear that John could not show how the company would thrive without him.  There were no systems in place to potentially replicate his success.  He wanted to move on to other endeavors and was unwilling to stay with the new firm, under different management.  Essentially, his company was him.  He had nothing to sell, except himself.  In the end, he kept his business.

Most of us realize that you cannot run a company in the absence of effective processes.  A systematic approach to marketing, financial controls and every other aspect of management is crucial.  But how do you produce innovation and creativity on demand?

That’s the dilemma recognized by potential buyers, when turning down the opportunity to buy John’s firm, if in fact he couldn’t come with the package.  And it’s the question many of us pose about Steve Jobs and Apple.

I still mourn the loss of John Lennon, cut down in his prime, for the music that he would have produced had he lived.  In the same way, after Steve Jobs’ untimely death, we will forever ask ourselves what unforseen value we have lost.  No business process can give us new Lennon songs.  By the same token, how can anything be expected to reproduce Jobs’ genius?

In my line of work, I do everything in my power to reduce business debt and increase revenues.  But sometimes – not too often in my experience - the owner just has to let go and file for a business divorce.  I was thinking about this the other day after hearing from an old client.

I’ll call him Mark.  His original clothing manufacturing business just hadn’t made it.  He had been at a significant competitive disadvantage with Asian manufacturers.  He then focused on garment design for the childrens’ market in the 1990′s.  When I got to know him, that wasn’t working, either.

Truth be told, Mark was a poor marketer and sales person.  He liked clothes design, but just didn’t like dealing with people.  And that was a huge problem.

Mark’s company’s growing debt load was way too high for its revenues to handle.  Even if deeply discount payment plan settlements could have been worked out, it wouldn’t have helped.  The writing had been on the wall for years.  But he had to be told by an imparitial, friendly source that he had to get out.  He needed to divorce this turkey in a way in which he wouldn’t lose his shirt.

In his case, he was able to get out with his equity intact.  He had gotten good legal advice at the outset and had a pre-nuptual agreement with the business.  There were no liabilities in Mark’s name.  If the business had to go, it was asset-poor and wouldn’t take his stuff with it.  And this meant that hostile creditors would not be able to claim monthly alimony payments.

I had suggested to Mark that he get a job for the time being, until he found another entrepreneurial niche.  He promptly found a high paying marketing position, in a rapidly growing, publicly traded Internet startup.  This was before the dot-com bubble burst in March, 2000, when just about any new web-based venture could find enthusiastic investors.

Mark was unlucky in one sense, but lucky in another.   He was as hapless at his job as he had been in his business, perhaps predictably so.  And he was fired after several years.

But luck was on his side.  He had gotten large sums of company stock, partially in lieu of pay.  This had rocketed in value from day one.  But he cashed in his shares, determined to completely sever his association from the firm and to invest his funds elsewhere.  Happily so, because the following month the company stock tanked.  Fortunately for him, his equity was protected and not immediately reinvested in another dot-com.

Mark bought a mansion on a large piece of land outside of Philadelphia.  He tells me that he never needs to work another day of his life.  And it’s all because he decided to file for that business divorce, after protecting his personal assets.  He landed on a feather bed, rather than with a thud on the sidewalk.

This was an arrangement that worked out beautifully, if in an unusual way.  Lady Luck was very much involved.  But the moral is to protect your personal assets from the outset and, if things look truly bleak, get out when the going’s good.

You are not your company.  It is a separate entity, but even so, you are not necessarily married to it for ever.  If  real game-over trouble hits the business, it’s not the end for you.  Other opportunities lie around the corner.

If you wait too long, after you have exhausted all reasonable alternatives, that beloved business might just rise up and smack you, then run off with every penny you’ve got.  And what could be worse that that?

This situation affects all of us and it is clear that government has to become truly accountable for the precious funds that it squeezes from taxpayers.  And one of the problems is that politicians have a short-term, bring-in-the-pork and win-the-next-election mindset, while the nation needs long-term thinking.

Analogies can be made with businesses in financial trouble.  If your company’s revenues are insuficient and you are up to your proverbial ass in alligators – so beset with payables issues that you’re spending way too much time and energy responding to creditors – there comes a time where you have to consider a default.  In other words, you may have to intentionally not pay your company’s debts as originally contracted, just as it is feared that the US government may decide that it cannot make good on all of its debt promises.

You have to be honest and up-front with yourself, your team and your creditors.  If you are to stay in business, you will likely reach a point where you need time – free from the need to meet urgent creditor demands – to ramp up the top line.  As with government, you will need to cut costs and increase revenues.  And you may need to default on some or all of your creditor agreements, including those with your bank.

You may need to reach agreement with each and every creditor on the most effective way to move forward.  This can affect all suppliers, but unsecured creditors especially know that when considered rationally, they stand to lose everything if they force you out of business.

Your company does not have the management structure of the federal government.  You will not likely have conflicting opinions, or short-term elected thinkers using other people’s money to meet fuzzy objectives.   You can get back on track, with the right mindset and the will to succeed.  Turnaround management professionals are here to get you there.  We are paid only by results.  And what could be better than that?

Business collectors deal with debt as their bread and butter.  They have to be objective and know something about the company being hounded.  And they should take time to read the comprehensive settlement proposal that we send them.  But some of them use the emotional card as a first step, if they think it helps get them paid.

This is why it can be so difficult for business owners and their accounting staff to deal with late payables issues.  They can be too close to the problem to be truly rational about it, especially when dealing with someone bent on using emotion for their own benefit.

The net result can be a shouting match.  And the collector, who is feigning having been disrespected or abused in some way, is the one who tends to do the insulting.  In reality, it achieves nothing if the business has no other alternative than to press on with the same debt settlement proposal.

I recognized the collector’s ploy for what it was and asked him if he had read and understood the proposal we had sent him.  It had been pointless to bark at me when I recognized the tactic for what it was.  It may have made him feel good, but it achieved nothing.

It’s a major issue in companies we deal with.  Most owners and controllers tell me they hate to have to deal with collectors and the collection staff of law firms.  There is so much emotion involved, manufactured by collectors but so real to them.  And this is one reason why they need professional help in putting their case to the other side in the most rational, understandable way.

They have to cover all the bases, in writing, as to why they cannot pay everything demanded, today.  And why, if they doled out “good faith”  payments to every single deserving creditor, this may very well suck up every drop of cash needed to generate future revenues and meet payroll.  Possibly why they need a 60-day payment respite, to give time to re-group and work on their top line revenue strategy.

It’s so true that when you’re up to your ass in alligators it’s hard to drain the swamp.  You have to either kill them, or keep them at bay.  Figuratively, you either have to settle with them in terms you can afford, or get them fenced off for a while, to get the time needed to generate a new revenue stream.  The two things go hand in hand.

The outcome of an effective debt reduction and top line improvement strategy is happiness all round.  This goes for you and your staff as well as for the suppliers, who stand to benefit from your lifetime customer value.  That’s an emotion we all welcome.  And what could be better than that?

You have to set the scene and tell an honest, effective story.  You know that there’s  a reason why you just cannot pay the full balance, or you need time and payments to satisfy the bill.  The thing is, the creditor knows nothing of this.  He just knows that his receivable remains unpaid.  And he has likely come to conclusions of his own as to why this has happened, which don’t reflect the true picture.

The need for a written proposal is especially important when dealing with an attorney, or a collector.  You want to say nothing to them that can be misrepresented, then relayed to the creditor in the form of a leading question.  You can imagine them saying something like, “Hey, Mr. Smith.  John Jones just called to offer to settle this account for thirty-five cents on the dollar.  We’re not taking it, are we?”  And why should he accept it?  He has no framework of reference to balance his preconceived notions.  He wants it all, yesterday.  So you can expect to be told to get lost.

So many factors come into play when making a proposal.  You have to consider your creditor’s position.  He likely wants your lifetime customer value, if in fact he can be shown that you can get through this rough period.  And he needs to know the likelihood of collecting cold, hard cash after he is through paying his attorney fees and court costs.  So often, it is all but impossible to do so.

It’s important to keep your proposal rational and focused.   You cannot always achieve this by calling someone, especially as you likely feel bad about your firm being the cause of their problem.  It just takes the other side to react emotionally to your offer to set off an unproductive sequence of events.  And if they take a stand during that first phone call, it can be very hard for them to ”step down” later and accept your offer.

If you need business debt relief, you absolutely need to comunicate well with your potential adversaries.  They want paid, as you do for your firm’s receivables.   But put yourself in their position.  Would you accept much less that owed for a job well done, just on the strength of a phone call?  I don’t think so.   But you might consider it if presented with a comprehensive proposal that told you the whole story.

Want help to stay in business by working out cents-on-the-dollar settlements with creditors and their agents?  Get in touch.  We’ll get results for you, while treating your creditors with courtesy and consideration.  And what could be better than that?