How To Survive The Credit Crunch

How To Survive The Credit Crunch
With all the talk of the credit crunch and recession in the
news, it's easy to start to feel nervous about the future.
Here are a few tips to make sure your business can ride out
any rough waves.

1. Watch your cash closely

Make cash and cashflow the priority in all your deals. You
might be about to win the deal of your lifetime but if it
means committing serious cash and relying on income streams
from the future you may not be around to enjoy it. Think
about how you maximise cash in, and minimise cash out in
everything you do.

2. Create reliable cashflow forecasts.

Make sure you know if things are going to get tough in the
next few months so that you can prepare for them.

3. Look at where you're spending and consider the value.

Many companies gather a lot of little recurring costs and
expenses along the way and they're forgotten about. You
can save a lot just by reviewing where your cash is going
in the business.

4. Look closely at your working capital.

In tough times, your customers will try and stretch out
their payment terms and your suppliers will push for early
payment. Keep to the contract terms and try and negotiate
for improvements.

5. Credit check your customers.

You don't want to be caught out by a customer going bust
while still owing you a chunk of money. Keep close tabs on
any poor payers.

6. Review your marketing.

Are you still using marketing messages designed for a fast
growth boom market? Perhaps you need to reconsider the
current economic climate and take a leaf out of the recent
M&S "a meal for 2 for under £10" campaign.

7. Watch your fixed costs.

The hardest thing in a recession is to manage your
unavoidable fixed costs. The longer you're tied in, the
less flexibility you have. Look at where you can improve
flexibility in your expenditure.

8. Watch out for fraud.

With rising fuel and living costs the temptation for staff
to take a little extra increases. It certainly won't be
everyone but internal fraud is still one of the most common
factors impacting business. You need to have strong
controls and robust procedures to prevent losses.

9. Broaden your customer base.

With the potential for companies to go under or reduce
their spending, reliance on one or two large customers
could be fatal for you if one of them fails or cuts back
their purchases.

10. Look at your financing.

As the market contracts, you need to be careful about
breaching your banking covenants or finding that the
facilities you were relying upon are no longer there. You
cannot wait until you need the money to arrange new
facilities and you must make sure that you have a Plan B in
the event that your current lines of credit are squeezed.

It's not the first time things have been rough in the
economy and it won't be the last. There are many companies
that thrive and survive in these kinds of markets whilst
others go to the wall, so just make sure you're in the
right crowd by following these tips.

----------------------------------------------------
Andy Warren is the Managing Director of Marshall Keen Ltd.
He is a chartered accountant and successful CFO, FD and
entrepreneur with extensive experience in M&A, Corporate
Finance, Business Growth and Exit Strategies. Marshall
Keen http://www.marshallkeen.com specialises in providing a
Flexible Finance Function and part time FD services to
early and mid stage businesses, particularly in the tech &
telecom sector.

The Not So Independent Contractor

The Not So Independent Contractor
No Workers Comp? Go to Jail! Go Directly to Jail! - Part 2

In the first installment of this series I talked about the
legal obligation employers have to carry workers
compensation insurance on their employees. I explored the
severe consequences meted out on those employers that
don't. Namely, employers who willfully choose not to carry
workers comp on their employees are subject to both
criminal and civil penalties. The employer also loses its
immunity from employee initiated lawsuits. All in all, the
downside of non-compliance is generally unpleasant enough
to get most organizations to comply.

An Inncocent Mistake?
But what about this situation? Paul the painter needs
another painter to keep pace with all the work he's lined
up. But Paul needs to keep his costs down to remain
competitively priced. He's afraid that if he hires Pedro
the painter the additional workers comp and employee
benefits he'll have to pay will cause his costs to
skyrocket. Paul tells Pedro that he just can't afford to
hire him. "No problem," says Pedro. Just hire me as an
independent contractor. I'll even sign a form stating
unequivocally that I'm not your employee. "Great idea!"
says Paul. "You're hired."

Several months go by and business is really booming. Pedro
has proven to be a valuable asset. Each morning Paul and
Pedro meet. Paul gives Pedro explicit instructions as to
what hours to work, where to work, and how he should do the
job. Paul also supplies Pedro with the paint, spray guns,
and other equipment he'll need. With the amount of work
Paul gives him, Pedro is now working only for Paul. The
situation works so well that Paul does the same thing with
26 other "independent contractors."

Trouble in Paradise
One day Pedro is working away high on some scaffolding.
His foot slips on some spilled paint and before he can
regain his balance, he goes hurtling towards the ground
below. Fortunately, Pedro only landed on his back and not
his head. And although his injuries are not life
threatening, they are certainly life altering.

Upon admission to the hospital, Pedro is questioned as to
how his injury occurred. He responds that he was injured
on the job. Pedro's hospital bills add up quickly. He has
no heath insurance. In addition to being in constant pain,
he fears that he will also face financial ruin. He is very
concerned about the well being of his wife and 3 children.

Meanwhile, Pedro's wife Jill contacts Paul. Paul is very
sympathetic to Pedro's situation but explains to Jill that
there is no workers compensation policy in force because
Pedro is an independent contractor. He even offers to fax
Jill the form Pedro signed.

Jill is absolutely outraged at Paul's attitude towards her
husband. After seeing Larry the Litigator's splashy
television commercial, she decides that she means business
and calls him. After hearing of Pedro's plight, Larry goes
on a 10 minute tirade full of righteous indignation. Jill
now feels that not only does she have a case against Paul,
she has a moral obligation to sue so as to protect the
world from the other "Pauls" that are out there lurking.

Rough Justice
So what do you think happens next? Well, given the facts
of the case, here's what could end up being posted under
"Failure to Insure" Prosecutions on the Pennsylvania
Department of Labor and Industry's website:
Paul the Painter, owner of Paul's Painting in Harrisburg,
pled guilty to 27 misdemeanor counts of the third degree on
June 1, 2008, in the Dauphin County Court of Common Pleas
for failing to insure its workers' compensation liability.
The judge sentenced Paul to pay the costs of prosecution
and placed him on probation for a period of 27 years. Judge
also ordered Paul to make restitution to the injured
employee in the amount of $173,370. The Bureau's
Compliance Unit reports that Paul's Painting is no longer
in business.

So where did Paul go wrong? Pennsylvania case law is clear
that whether an employee / employer relationship exists is
a matter of law and is determined by the facts of each
case. The perceptions of the parties involved (ie. Paul
and Pedro) are completely irrelevant.

Although many factors have to be considered to determine
the true nature of an employment relationship, the amount
of control exercised by the employer is generally given a
lot of weight. The facts here show that Paul closely
monitored and controlled what Pedro did and how he did it.
Therefore, Pedro was an employee and Paul was not in
compliance with Pennsylvania law.

----------------------------------------------------
Eric D. Patrick is an attorney and Chief Operating Officer
of Consumers Insurance Agency Inc.
http://www.consumers-insurance.com . He also engages in
insurance consulting and legal work through The RiskAssure
Consulting Group. Please contact him for further
information.

WARNING: Are you treating your clients like a cheap date?

WARNING: Are you treating your clients like a cheap date?
This sounds really silly at first glance, but if you
compared the relationships most companies have with their
clients to the relationships of everyday life that don't
involve money, it's hard not to cringe.

Seriously, think about it. Most companies don't communicate
with their clients for months on end, then, when the
company really needs to "boost the bottom-line" they send
out some bogus direct mail piece that essentially says,
"Hey, how are ya? Why don't you come see us so you can
spend some money?" Is that the way you like to be treated?

Well, it's certainly not the way we like to be treated, and
this foul treatment can be avoided altogether if you just
take a few simple steps.

1. Try to reach out to your customers, at minimum, on a
monthly basis.

Whether it's a newsletter, a phone call or any other means
of communication, keep the lines of communication open with
your clients.

2. Don't just call or write when you have a self-serving
agenda.

We all have that one friend that only calls when he needs
to borrow the sugar or needs a favor. Don't be the business
that your clients feel the same way about. Only
communicating when it benefits you is not the way to build
trust. Continue to reach out to them even when you don't
have something to sell, remember, we're trying to build a
relationship here.

3. Communicate with your clients and treat them like real
people no matter what advertising medium you are using.

This if my favorite. Do you yell the following to your best
friend, "COME OVER TO MY HOUSE TODAY JIM, WE'VE GOT
ROCK-BOTTOM PRICES!" Well, if you do, I'm glad we don't
speak on a regular basis, but realistically, this is no way
to communicate. If you can communicate with your clients
across mediums (television, radio, sales letters, direct
mail, etc) using the same wording you would use when
talking to an old friend, then it will likely connect with
those who read it. When you take the time to communicate in
this fashion, it shows that you have some personality, and
people can instantly connect with you personally rather
than the droves of other faceless radio announcers yelling
at them to buy used cars. Just remember to take out the
4-letter-words and inside jokes!

There you have it; just a few simple steps that will help
you create a longer-lasting and more profitable
relationship with your clients. Hey, who knows, after a
while you may even get invited to "meet the parents."

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To republish include: JW Dicks & Nick Nanton, Dicks +
Nanton Agency LLC, represent Entrepreneurs, Executives &
Celebrity Experts to maximize income today & tailor a
success plan for growth tomorrow. Get more FREE tips at
http://www.DicksNantonAgency.com .