Small Business Insights:
Never Let a Good Crisis Go to Waste
Love em or not, former Chicago Mayor Rahm Emanuel is famous for using the phrase, "never let a good crisis go to waste". In fact, some claim it was Winston Churchill who coined the phrase. Regardless, as small business owners, I do believe now is the opportune time to to heed such advice 😁.
Recently, the PRG team has been fielding a lot of questions related to, what we refer to as "problematic payables". Many small business owners are literally fighting for survival right now. Compounding a fight for survival with aggressive collection demands greatly magnifies anxiety and stress.

It's easy for talking heads on TV to say we should stay indoors and social distance, but they aren't the ones whose lives depend on managing crews in the hot sun, delivering the load on time, caring for the sick & elderly, or the many, many, many other things we do to keep America running. Small Business owners have the hardest job in the world, and often there is no glory at the end of a long and stressful journey. However... WE... TOGETHER... ARE GOING TO TURN THAT AROUND!!!

If you are a small business owner fighting for survival and a handful of creditors are circling you wagon, we have compiled a list of 5 things you can do to outline your "Covid-19 Corporate Turnaround" strategy.

Time to dust off the gloves...

...our lives depend on it. So we fight!!!
1.) Get real about your future cash-flow:

  • How strong is your earnings pipeline now with Covid-19 impacting so many?
  • Are clients asking you to tackle projects?
  • Are you already working?
  • Is cash-flow declining, improving, staying the same, falling off a cliff?
  • Get real with your forecast. Settling a problematic payable is all defense, however you can have the best defense in the world, but still won't win the game if you can't at least put a field goal on the board.


2.) Create a list of each "problematic payable":  

  • Take inventory of every “problematic payable” your company is facing. 
  • Define a problematic payable as any obligation you feel is unsustainable given today’s level of operations. 
  • It’s either past due, due now, or will come due soon. 
  • Include various attributes on your list, such as total due, # days past due, dispute anything (Yes / No). 

3.) Identify if each one is critical to operations or not:  

  • Determine which vendors are essential to sustaining your business vs. ones that are not and anything in between. 
  • Perhaps you develop a simple scoring mechanism (1 to 5) where 5 = “cannot survive without", and 1 = “Who's that again".
  • PRG has many stories where a client's first instinct is that the vendor or creditor didn't truly matter to sustainable operations, but come to find out later they really did.
  • Maybe the vendor has preferred pricing, sells a unique product, or whatever the case may be. 
  • Think hard about this question and use your best judgment because this question matters when allocating scarce resources. 

4.) How much leverage do they have:

  • The answer to this question is a little more involved and sometimes a bit tricky.
  • This exercise will help you foster better discussion and conduct better research when the answer isn't immediately clear.
  • For all you construction owners out there, here's a few questions to ask yourself:

  • Is there a mechanic’s lien? 
  • Was lien paperwork properly filed? 
  • Did they hit or miss statutory filing deadlines? 
  • Can they impact your CSLB License?
  • Can they file a bond claim?

  • Here's a few more general questions to ask yourself:

  • Is there a personal guarantee? 
  • Did they hire an attorney?   
  • Is it a Government agency with the power to levy without having to go to court? 
  • Does the creditor have deep pockets?
  • Does the creditor have limited resources?
  • Are they acting aggressive toward you or being respectful?
  • Do they have a security interest (i.e. secured receivables, merchant accounts, vehicles, equipment, real estate, etc).
  • Does mounting a legal defense now make economic sense in terms of your overall restructuring / turnaround objectives?   

5.) Establish a Budget:  

  • What sort of budget do you have to tackle the list?
  • Can you develop a “lump-sum” either through savings, borrowing, or liquidating an asset? 
  • Can you start a savings plan now with automatic transfers in order to begin building settlement funds?
  • How about your monthly settlement budget? 
  • What is the maximum you can allocate to this list of payables on a monthly basis? 
   
Conclusion:

Once you evaluate your position through this complete framework, you will have a more clear path on what you need to do. It may take some time to complete the entire process, but if you attack it systematically and continually refine your strategy by referring back to these 5 elements you will win the game.

Finally, I was told the other day that a significant percentage of folks who elect bankruptcy do so because simply from the pressure imposed by the harassing collection calls. Don't elect bankruptcy just because some jabroni in a call center is yelling at you over the phone. Understand he is just doing his job, hang-up the phone, make peace with it, and then do the 5 steps. It will help you make a financial decision and not an emotional decision.

You may decide after your analysis that bankruptcy is actually the right thing to do. Maybe you decide it's absolutely not the right thing to do. Maybe you decide it's not the right thing to do right now, but it's something you'll consider if conditions don't improve and you'll be highly prepared if it becomes necessary.

An "informal" bankruptcy is really nothing more than a strategic negotiation of your obligations, i.e. a series of debt settlements to put it bluntly. With Covid-19 and the economy facing a highly probable depression... I refer back to... Don't let a good crisis go to waste...

Think hard before handing your life's work over to the BK courts. This 5-step framework will help you get the right wheels turning. If you want the support of PRG and our referring attorney network, feel free to reach out anytime.

Good luck out there and stay tough, smart and focused!!!

Virtual CFO

Virtual Accountant

Corporate Debt Settlements

Complex Negotiations

Corporate Restructuring
WE ❤️ SMALL BUSINESS
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