A Survivor's Guide to Succeeding in a Troubled Economy
The Commonwealth Insitute and Posternak Blanstein & Lund presented a program highlighting the must-have advice to drive your business. For a program overview, please click "Learn More".
Succeeding in a Troubled Economy
January 8, 2009 * 5:45 – 8:00 PM
Sponsored by Posternak Blankstein & Lund LLP
The Prudential Tower, 33rd Floor,
Panelists:
- Lauren Jennings, partner at Posternak and TCI member.
- Deb DiVerdi Carlson, partner at Posternak and TCI Corporate Advisory Board member.
- Jim O’Connor, founder and president of The O’Connor Group.
- Miriam Regan-Fiore, Field Credit Officer at Citizens Bank.
Lauren Jennings focused on strategies for dealing with customers, lenders, landlords and vendors in tough times. First, she addressed dealing with customers and the threats to your business of customer financial distress. The risks generally include nonpayment of invoices and the status of unsecured creditor in customer bankruptcy. The most important thing that business owners can do is to constantly be vigilant when it comes to dealing with customers. Make sure to get as much financial information you can and to take payments as early and often as possible. Second, Lauren talked about the risks and opportunities when dealing with suppliers. Like in the case of customers, there is risk involved, particularly in the case of lost goods and services from a single-source vendor. Seeking out multiple-source suppliers is a preventive measure, as well as reviewing and monitoring contracts. Finally, Lauren discussed issues with landlords. The most important takeaway is to read your lease carefully, particularly during renewal time. As it is a buyer’s market right now, there are opportunities to renegotiate lease terms to your advantage.
Jim O’Connor serves as a C-level advisor providing strategic and operational expertise in finance, operations, legal, business planning, refinancing, and acquisitions and divestitures. The biggest issue that Jim deals with in his business is the question of what to do when your business is in trouble. The most important thing is to reach out for help, namely to a “distress company” if the situation warrants it. These companies with be on your side and speak for you during these times. It is crucial to be honest with vendors but also realize that you can’t pay down debt all at once. If you have so much debt that you are in danger of losing your company, it is helpful to seek advice from a specialist. The bottom line is this: when you run out of cash, you run out of options.
Deb DiVerdi Carlson focused on the pitfalls to avoid with employees. The first point that Deb tackled was tax payment obligations. Employees are obligated to pay both federal and state taxes. Businesses find it helpful to have a payroll service to ensure that withholdings get to the right place. Deb also talked about employee classification issues, specifically looking at employees vs. independent contractors. The Massachusetts Independent Contractor Test clearly defines independent contractors using a three-pronged test: 1) Worker is free from employer’s control; 2) Services are outside employer’s usual course of business; and 3) Services are available to the general public. Finally, Deb discussed wage payment obligations. The Wage Act, which covers frequency of pay and accrued but unused vacation, applies to all individuals designated as employees. It’s important to note that individuals can be personally liable for violation of the Wage Act, including the company’s management team.
Miriam Regan-Fiore provided commentary on what it takes to get, and to lose, credit in today’s banking environment. Right now, credit is tight but not completely frozen. Lending from banks is much more responsible and careful than it has been in the past. There are five “C’s” of credit. Capital (equity) – how much you have retained and how much is liquid. This becomes the bank’s safety net, so building a strong balance sheet is critical. Character – how much trust does the lender have in you? A business owner’s personal credit score can affect one’s business. Demonstrate your capability by maintaining your own credit but also by surrounding yourself with the right people with the right experience. An advisory board can help. Cash flow – a bank will not lend to cover loses and start new ventures. A line of credit should be used for new inventory. Given the current economy, having flat sales is good right now. Collateral – funds should match assets. Banks need a safety net and often need a personal guarantee for small businesses. This is where personal credit can come into play. Control – you can control your reaction to this type of environment. Be honest with your bankers and don’t give them any surprises.
