NFIB

Fighting Off the Wolves at Your Door
04/ 04/ 2002

by Vicki Gerson

The recession and Sept. 11 have pushed many small business owners into bankruptcy. Even if you were able to hang on and avoid closing your business, you may feel like one of the "Three Little Pigs," fearful of the wolves circling your doors.

How can business owners facing serious financial problems get the wolves away from their doors and get their businesses back on the right track?

First, face reality. Recognize you have such serious financial problems that your business could fail. Next, develop an action plan for saving your company and turning it back into a viable business.

Here are a few places to start:

Talk to your landlord.

If you have been a good tenant and are now going through difficult times, your landlord may be willing to lower the cost of your rent. This is especially true today, because of the number of vacant stores and offices. They may rather help you out than see you leave forever. Before you talk to your landlord, have the facts. Check out your neighborhood and know the vacancy rate around your business. See if there are other empty offices in your building.

Evaluate operating expenses.

Really scrutinize expenses like business insurance and long distance phone service. Don't automatically renew your business insurance. Talk to other agents to see what they have to offer. Be sure that you are paying the lowest rate for what you actually need. In addition, determine if you have the least expensive phone service to fill your needs. Phone costs vary greatly, and everyone has a "deal." Now is the time to find the best "deal" for you.

Be sure to examine other operating expenses such as delivery services, bulk mailing services, printers, advertising costs and other utility options.

Talk to the professionals.

Don't keep your economic problems a secret from your accountant or lawyer. Both of these individuals should be able to provide you with excellent advice and may present options you haven't even considered.

In addition, if you have an informal board of directors composed of other professionals, don't hide your financial troubles from them. They may have faced similar difficulties in the past and may have some valuable advice for you as well.

Inform your creditors.

Although your first instinct may be to try to hide your financial predicament from your creditors, you won't be able to hide it for long. It is much better to talk to them and find out if they are willing to wait for payments, willing to take partial payments or if they won't cooperate at all.

If you have borrowed money from the bank, talk to your loan officer. Your bank has the power to put a padlock on the door since it probably has a lien on your assets. However, the bank's goal is not to put you out of business, and it should be willing to work with you to get your business over this rough patch. In fact, your bank may be willing to renegotiate the terms of your loan by extending the length of time, which results in lower payments.

Re-evaluate your staff.

Although you don't want to send anyone to the unemployment line, you may have no other alternative. If business is slow, do you really need as many salespeople as you have? Do you need all your office workers or can you terminate one person and combine their jobs? Can you cut some employees to part-time? Ask yourself these questions and then implement a plan. Tell your employees this is a six-month plan, and you will re-evaluate the situation at that time.

And make sure you eliminate all overtime compensation. This is money you can ill afford to spend in a precarious economic situation.

Cut personal expenses.

Cutting your own salary may be a bitter pill to swallow, but it must be done. Try to reduce your own salary by 5, 10, 15 or even 20 percent. If it means dining out less, fewer movies, dropping membership at a private golf or health club--do it. Those few extra dollars could make a difference and save your business.

Trying any or all of these suggestions may help turn your business around and send those wolves packing for good.

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