One of the things that I see quite often where businesses and people have got into financial difficulty, is the fact that they tend to, whether you want to use the word ‘procrastinate’ or extend it out, they don’t really have an answer, so they don’t do anything.
Now in my experience, the best thing to do is handle there and then – don’t let it fester. Sometimes you’ve got to make the hard calls and you’ve got to ring people that you don’t want to speak to but in ringing them don’t make promises we cannot keep. But just deal with it straight away, and if we deal with it straight away it doesn’t fester.
Now the problem with the festering is that all sorts of other things come into play. If you’ve got a person that hasn’t been able to pay you or your business is in trouble you deal with that there and then. If you let it go on and on and on, what happens is, is your suppliers get upset, you start going home for the night and your partner starts to worry, or you get grumpy with the kids – all these sorts of things happen. Then you start getting served summonses, and they come to the door, and it’s all an uneasy situation that develops. Also what happens is, that the people that are pressuring for the money, have time to get more information. Now the more information they get, may be nothing, but it also may be that you’ve got other creditors and the business is in trouble. So all these things happen when you let it go on and on and on.
I sometime ago was involved in a bankruptcy for a client, where he had over $300,000 worth of credit cards. And what had happened was, he had a business that was struggling ‘cause a competitor opened down the road, and instead of saying “What do I need to do to fix the business?” or “I need to get a different business,” what he kept doing was borrowing money on credit cards to buy stock, to keep propping the business up, while he attempted to sell it. Now $300,000 later and his house mortgage fully extended, it didn’t work , and he ended up going bankrupt. And that’s because he left the whole thing fester, as opposed to fixing the problem.
One problem is that you can’t pay your creditors, that’s one problem. The underlying problem that you need to really fix is why you can’t pay your creditors. And that’s the one you should be working on. But too often, we say, “I can’t pay my creditors. I need to borrow money against my house,” or “I need to sell a car” or “sell my boat” or something like that to pay the creditors, to get them off your back. That doesn’t solve the problem. You’ve still got the reason why you couldn’t pay your creditors.
And the number of times that I’ve seen a business, where they’ve borrowed against the house, sold their personal assets 12 months previous, and here they are in the same situation winding the business up 12 months later. And what I’m saying is, is that – Look at the problem of why you haven’t been able to pay it, and fix that problem, and then all the other problems will resolve themselves.