My wakeup call to this fact of life was delayed a little bit because I had a year of post-graduate education that was supposed to prepare me for my first job as a submarine junior officer. But the wakeup call came quick, as two weeks after reporting to my new submarine, we left port for 6 months. This was non-stop shiftwork, learning how to operate all the submarine systems, punctuated by terror inducing drills and alerts. College life was nothing compared to the bone-depth weariness I felt in between extended frenzied activity sessions.

A few years back I was talking to my brother who was in his last semester of college. He was on track to graduate, and was working hard on finishing classes and labs. I had called in some favors and helped him get an interview at a high tech firm in Silicon Valley doing exactly what he wanted to do. He initially demurred, saying he needed to get a good grade on his project lab. Grades??? The whole purpose of going to college is to prepare you for getting a good job. If you have the chance to land a good job, take it! Fortunately he took the trip, aced the interview, and got the job. He still loves living out there. He works his butt off, and is fortunate to be doing something he enjoys.

The business world is non-stop. The harder you work, the better you can do. The problem is that college gives you a good foundation, but just about no job skills. So the first few years of working is all about gaining skills. After two years of learning skills, you will be hitting your stride and actually be useful. During those two years, your employer is going to want to see you work really hard to be as effective as possible as quickly as possible.

Fortunately, the real world provides the proper motivation to get you to work hard, because as soon as you graduate the bills start piling up. Unless you are one of the fortunate few who can move back in with your parents and leech off them for a while, you are going to need to make enough money to have a place to live. Plan on living in a low end apartment with some roommates to save money for a while, and don’t worry about having too much stuff, because you will be working.

Author: Rolf Versluis

Posted at PriorityCue

Think back to the reasons you started the business in the first place. Was it for glory? Was it to get rich? Was it to something that no one else was doing? Did you see the market opportunity and decide it was time to seize it? Was it to secure a strong financial future for your family? It was probably some combination of those reasons.

Through the entire process, you have learned a lot about starting, running, and building a business. That is a set of valuable and transferable skills very few people have. Wouldn’t it be great to be able to put those to use again? It would be a heck of a lot easier to start over if you have a strong and stable base of support on which to build.

So don’t let the failure of your company suck you into a personal financial and relationship vortex. Keep your personal assets protected from the business assets, so creditors can’t touch them, and don’t succumb to the temptation to dip into personal funds to try to rescue the company.

• Don’t borrow money from family or friends at this point.
• Don’t dip into your retirement funds.
• Don’t borrow against your home or other property.
• Don’t do anything that is morally questionable.

Do everything you can do to keep your company going, but set bright and clear boundaries on what is acceptable behavior. If you can keep your industry reputation strong, you would be able to immediately go work for another company and put all your hard-earned skills to work. Conversely, if you get a reputation for being dishonest, you will find it much harder to find a job. Because that is probably what you are going to have to do at this point, go get a job.

And if your spouse and kids still love you, you still have a house, money in the bank, and relatives that are proud that you are part of the family, you have true wealth that no business failure can take away from you.

This is part of a series - Five Things to Do When You Are Failing

1. Grow the Top Line With Quick Sales
2. Aggressively Triage and Cut to Focus on the Core Business
3. Don’t Fail Alone – Ask for Help
4. Think About the Worst Case Situation and Prepare for It
5. Keep Your Personal Core Protected So You Can Do It Again

Author: Rolf Versluis

Published at Priority Cue

Think about what the absolute worst that can happen, and figure out how to counter that. Then do the same with the other potential situations. At the end of the exercise, you will have a complete list of possible steps that can be taken, many of which can be done in parallel.

What is the worst case – will you die? Probably not. Go to jail? Doubtful. OK, how about business and personal bankruptcy? Maybe. Credit destroyed for seven years? Sure. Divorce? Maybe, but if your spouse leaves you because you have to sell your house and move into a double-wide, you may have other issues in your marriage. Loss of professional reputation? Probably not, unless you do things that are morally objectionable. Run your business in a respectable fashion, and even if you fail, you should be able to go work for one of your current competitors and rebuild your life. So, if you can handle the worst case, set that aside and concentrate on getting your business back on track.

And if you are feeling squeamish about laying off people, reducing salaries, and publicly looking like you have hit a bump in the road, get over it. Focus on priorities. Providing for your family comes first, keeping the company in business so you can continue to operate comes second, providing jobs and paychecks for the remaining employees comes third, keeping customers satisfied and happy is next, and looking out for your vendors and suppliers comes last. There is a strict order of priority, and if you have trouble doing what you have to do, think about the families of the people that depend on the paychecks from the company. After that it is easy.

On the bright side, there are many intermediate steps that can be taken before making cuts. It is best to lay the groundwork for these steps while the business is still doing well, and to stay in touch periodically in case you need to bring them into play.

While the business is still chugging along, find out about outside investments. There are many groups of people that would like to be able to invest in an established business, and would be able to provide cash for a piece of the company. The money will of course come with supervision and conditions, but that is only fair. It is best to take on outside investment while the company is doing well, and use the additional capital for expansion with a good prospect for a decent and quick return. But an established businesses that is going through a rough spot still has value, and maybe some outside advice from new backers with more experience than you is exactly what you need to succeed at this point in time.

Instead of selling off a chunk of the business, you could sell the whole thing. There are so many mergers and acquisitions going on, I am sure you could find someone that would see value in your company. Personally, I like the idea of growing our company into something that is fully self-sustaining and provides a regular stream of profits into the far off future, but everyone has different goals. Some people build companies for the express purpose of selling them in a few years – they take their profits, take a well deserved vacation for a few months or a year, then start another company. What you learn and the experience you get in building, growing, and selling a company is valuable and transferable to other businesses. It is experience everyone who gets an MBA would trade their eye-teeth for, and you have to make the most of it

Another friend of mine does just that – he helps start and build companies with the exit strategy defined at inception. He has extensive experience in the medical device industry, has an extensive nationwide contact list of doctors, and is on a steady three to five year cycle. He works with a new company as a minority owner, helps get them launched, successful, and profitable, then moves on when the company is acquired or the owners buy him out. He is able to do this because his doctor contacts know that when they are working with him, he will bring them a good product, it will be supported well, and he will help them be successful. The only problem is that he has so many opportunities with new companies, and he can’t work through the whole cycle fast enough, so he has to pass on a few here or there. That is a good problem to have.

But if you are not ready to exit your business just yet, there are intermediate steps you can take to keep cash flowing:

• Factor your receivables. All the money that customers owe you? Sell those receivables off for immediate cash at a discount. I would not like doing this, but it is an option.
• Ask for extensions from all your creditors. They would rather help you stay in business and get slow paid than help force you into bankruptcy and get nothing. The conversation goes better if you lay out on the table the situation you are in and what your plan is to turn it around.
• Ask your professional consulting team for ideas. At this point, you should have a good law firm, accounting firm, and group of bankers that have worked with you for years. They have probably seen this type of situation more often than they like. Tell them what is going on and ask for advice on what to do.

But above all, don’t get paralyzed by worrying about things that are outside your control. Think about the worst possible realistic things that can happen, and take steps to minimize their impact. Work like crazy on influencing the things you can control, put all options on the table, and step through your get well plan.

This is part of a series - Five Things to Do When You Are Failing

1. Grow the Top Line With Quick Sales
2. Aggressively Triage and Cut to Focus on the Core Business
3. Don’t Fail Alone – Ask for Help
4. Think About the Worst Case Situation and Prepare for It
5. Keep Your Personal Core Protected So You Can Do It Again

Author: Rolf Versluis

Published at Priority Cue

Just about everyone that is working at a company enjoys their job and wants to see it continue. Many times they don’t know that there is a potential problem on the horizon.  The owners may not want to tell the senior managers about their concerns, because it could be perceived as a sign of weakness, and because of the possibility that rumors could start spreading and key employees would start to leave like rats deserting a sinking ship. The thing is, most employees are savvy and are able to discern how things are going through the many clues provided by owners and senior managers actions. When it starts to get really bad, it is time to rally everyone around and all pull together.

It is better to acknowledge the issue and show that there is a strong plan for getting back on track. It is important to share this information with senior managers and your bankers. People are much more willing to stand by someone that has a plan and is taking positive and aggressive action to deal with the situation than with someone that just keeps on doing business as usual and hoping that things turn around for the better. All the stakeholders in the success of the organization, which includes every employee and all the suppliers and vendors that the company works with, want to see the company succeed, and in many cases would love to be able to help get things back on track. But you have to ask them for help, and asking them for specific help that is part of an overall turnaround plan is the best thing to do.

But don’t show weakness! Show concern, take action, ask people to take a pay cut, ask for an extension of credit, ask for everyone to try to help get new customers, but don’t act weak and out of control. If you do that, then competitors will start going after your employees like sharks in a feeding frenzy, bankers and suppliers will cut your credit, and you will have to exercise one of your fallback plans to protect what you have.

One of the saddest sights that I see is a restaurant that opens, limps along for 6 months to a year, then closes. When my kids and I are driving around and we see a place like that, I point it out to them. My son, who has been part of this exercise too many times, always says, “They ran out of cash, didn’t they, Daddy?” He is right, of course, because when you run out of cash you are done.

This is part of a series - Five Things to Do When You Are Failing

1. Grow the Top Line With Quick Sales
2. Aggressively Triage and Cut to Focus on the Core Business
3. Don’t Fail Alone – Ask for Help
4. Think About the Worst Case Situation and Prepare for It
5. Keep Your Personal Core Protected So You Can Do It Again

Author: Rolf Versluis

Published at Priority Cue

A friend of mine was put in charge of a venture capital funded Internet based business that had a breathtaking cash burn rate that gave them about 5 months to live. He took immediate yet measured action to identify what parts of the operation were profitable and which were just speculative. Furthermore, he identified which people were a fundamental part of the success for the things that were working.

After the assessment, he laid off 100 of his friends and co-workers to get the business down to 50 people, dropped the unlimited free plans that were sucking up bandwidth and processing power, and rallied everyone remaining into servicing the profitable customers properly and introducing much needed features. He got the company back on the right track quickly, although I am sure it was a very difficult and stressful time for him. A year later the owners sold the company for a great price.

If this is done quickly, almost even ruthlessly, then the business can be turned around while there is still cash and credit lines available. It is much better to make this change in one fell swoop, like my friend did, instead of making changes in dribs and drabs. If the changes are piecemealed out over a period of time, bad things will happen. The good people will start looking for jobs and depart. The people that are unsure they can do well at other places will hunker down scared, and be a heck of a lot less productive. And everyone will be waiting for the ax to fall again. Far better to make the changes, announce a new day, and move forward again.

It can be difficult to figure out when aggressive action needs to be taken. But at some point the owners and managers have to recognize when to shift into crisis mode and put all options on the table for getting things stabilized.

This is part of a series - Five Things to Do When You Are Failing

1. Grow the Top Line With Quick Sales
2. Aggressively Triage and Cut to Focus on the Core Business
3. Don’t Fail Alone – Ask for Help
4. Think About the Worst Case Situation and Prepare for It
5. Keep Your Personal Core Protected So You Can Do It Again

Author: Rolf Versluis

Published at Priority Cue

There should be a decent pipeline of new business that you can focus on bringing in and closing. And there is usually business that you can get quickly – it might not be very profitable, the work might be tough, and it could be risky, but at this point those are niceties that have to go by the wayside.

For any opportunities that you currently have in the pipeline, treat them like the proverbial Golden Goose. Watch them close and nurture them, because they are very valuable. I use the maxim of “Don’t Fail Alone” with my salespeople. When they are working on a big deal, there are a lot of things that have to happen to win it, and many specific milestones that have to be reached to be successful.

There has to be someone at the customer who champions it, there has to be a good reason for the purchase, we usually have to have a financial conversation with someone who has budget and the authority to spend it, and there has to be an impending event. At any stage during this process, a competitor could step in and take the opportunity away, or someone at the customer can torpedo it. When the customer stops communicating and goes quiet, my salesperson has to take immediate action and ask for help to get things back on track. Any decent size opportunity in the pipeline I go visit the customer myself. Having the owner of the company give his or her personal commitment to doing an exceptional job for the customer can make the difference between winning or losing a deal. You need to be winning deals at this point.

The beginning of the calendar year is always a slow time for us, but one year we had taken on additional investment and set some big goals. In the first calendar quarter I wanted more sales and I wanted them right away. In looking at everything that was available to us, we decided to take action to get more business as quickly as possible by answering bids that we would normally have ignored because we thought the margin was too low for the effort required.

Our normal mode of operation had been to work with customers to develop solutions, then either avoid a bid process or give them information that would assist them in writing bids that would favor our solution. In addition to working our time proven methodology, we also started working nights and weekend to answer all the bids that were out there. If we won the business at low margin or breakeven, it would still keep all our employees working and keep the flow of receivables in our flooring lines and lines of credit active.

That worked. The upsurge in business more than made up for lower margins, and even though the technical staff had to work hard to deliver everything that was promised over the next year, it bought us some breathing room that allowed us to turn the corner and become profitable again.

This is part of a series - Five Things to Do When You Are Failing

1. Grow the Top Line With Quick Sales
2. Aggressively Triage and Cut to Focus on the Core Business
3. Don’t Fail Alone – Ask for Help
4. Think About the Worst Case Situation and Prepare for It
5. Keep Your Personal Core Protected So You Can Do It Again

Author: Rolf Versluis

Published at Priority Cue

What do you do when you are running low on cash, business is not coming in quick enough, or there is too much overhead and no matter how hard you work, things just are not going well enough? When your competitors are beating you, customers are not buying, and your workforce is not getting it done?

First you have to recognize, or have someone tell you, that you are in a crisis. Then take action! Tackle the issues head on with a fierce focus that will give you a fighting chance to pull out of the downward spiral while you can still do something about it.

While you are going through these steps on the road to recovery, stay optimistic and work hard. A negative attitude will be noticeable and could infect your workforce and scare off your customers. Instead, be confident that you are taking the right steps to turn things around. Besides, the worst case of business failure is not all that bad if you have put in place the things you need to do to prevent personal bankruptcy. Many successful people had one or more companies that failed while they were were on the path to greatness. Treat it as a learning experience and move on. But don’t give up yet – fight for giving your company a future while you still can!

Here are five things you can do when you recognize that your company is “In Extremis” and you need to change what you are doing fast.

1. Grow the Top Line With Quick Sales
2. Aggressively Triage and Cut to Focus on the Core Business
3. Don’t Fail Alone – Ask for Help
4. Think About the Worst Case Situation and Prepare for It
5. Keep Your Personal Core Protected So You Can Do It Again

I think I am an optimistic person and in many cases look at the positive part of a situation. But one of the things that I do to make sure things are always going well is think about what the threats are that are facing my company. There are many families who depend on the paychecks that my company provides, and if a little bit of paranoia helps keep things profitable and on track, then I am all for being paranoid!

Author: Rolf Versluis

Published at Priority Cue