If your net revenues start to decline and you are typical, you are unlikely to act quickly and forcefully enough to stop the slide.
You might blame the economy, increased competition, or your sales staff.
But this may not lead you to make adequate adjustments to your business.
We are creatures of habit and many of us to deny the adverse situation we are in, until an outside event gets our attention.
The bank might refuse to extend more credit, or even threaten to call its loan.
Or a major supplier may start complaining that it's not getting paid on time.
A collection law suit might be served.
The real problem in today's economic environment is that creditors of all types are under financial pressures themselves.
They see it to be in their own best interests to stay on top of their accounts receivable and do everything necessary to get paid as agreed.
And your firm may be in their sights.
If your small to medium-sized business is facing real challenges, remember that problems tend to escalate and spiral out of control.
Before you know it, you are inundated with collection activity.
And your key people start polishing their resumes, if they are not already walking out the door.
It's basic, of course, that you have to think through ways to cost-effectively bring in new business and maximize the benefit from those on your customer list.
But what do you do to protect your company and your personal interests against downside possibilities? A few of the more important things that you may not have considered, but which may be of crucial importance, are as follows: 1.
Limit your personal exposure All too many business owners sign personally for goods and services.
While a certain amount of this is unavoidable in the first couple of years, don't make a habit of it.
Most business credit cards are personally guaranteed.
In the short term, do everything you can to wean yourself off, or pay off, accounts that are personal liabilities.
If you don't, you could lose everything if your company goes down the tubes.
2.
Bullet-proof your business If you have free and clear business assets, they can be used to secure additional financing.
This may, or may not, be a wise thing to do in the circumstances.
But it would certainly tie up your assets in a way in which your business would be "bullet-proofed" against any judgments.
Your assets can also be protected by having a supplier file a "friendly" lien on all of your free and clear corporate assets.
The intent is to protect them from seizure, should any unpaid bills result in a judgment.
The services of a good business attorney is highly recommended for the required documentation and filing.
3.
Protect the cash in your bank account If your firm is unfortunate enough to sustain a judgment, one of your creditor's attorney's options may be to attach (freeze and remove the claimed cash from) your company's bank account.
But it is a little known fact that Delaware law prohibits bank accounts from being attached in this way.
Banks have their own policies, but it can be easy to set up a business account in Delaware if your business is located in another state.
You have to find a bank that has branches both in Delaware and near to your company's place of business.
After you set up your new account, about the only difference you will notice is that you receive your monthly statements from the office in which your account was established.
4.
Keep clear channels of communication with suppliers By all means ask for more time to pay, or a payment schedule.
But be honest in your request.
Your reputation as a business owner would be compromised if you were to make false statements to put your supplier in jeopardy.
You might even end up on the wrong end of a law suit for doing so.
5.
Remind yourself that bankruptcy is not the only answer In most cases it's not the only option, either for your firm or for your unsecured creditors.
But it may not be in others' vested best interests to tell you so.
Consider the source of your advice.
6.
Consider a debt management workout Let creditors know that you need their help and consideration for your firm to stay in business.
This benefits them by: a.
) at least getting something out of the deal, rather than seeing your firm close its doors and pay nothing, and b.
) receive payment, in the amount and timing that is feasible for your firm, and c.
) retain the benefit of your firm's lifetime customer value, once it gets back on track.
But how do you arrange for this to take place? This brings us to our final point.
7.
Get professional help Good business debt management and turnaround people can be retained on a contingent payment-for-results basis.
Find someone with whom you feel comfortable.
Let them know what you're going through and what you want to achieve.
Get their feedback.
Then get busy with your company's turnaround.
A job thought through is a job half done.
Chances are, you'll be back on track in no time.