Financial Problems - no business income, personal O/D limit

[RegMolehusband]

So let's say, hypothetically, that I have a promising start-up business that hasn't paid me a penny yet largely due to the economic downturn, that I've put thousands into marketing and that is just drifting along in an overdraft - and I'm approaching my personal overdraft limit. I have no more significant assets to sell but I do have equity in my house.

In this hypothetical situation I would be demotivated and considering myself well and truly stuffed. I would have arranged to see the bank manager a week on Tuesday (hypothetically) to appraise him of the situation.

No dependents, aged 54.

I would of course bull up the business and engender some optimism into the bank.

What would you do? Thank you.

Edited by RegMolehusband on Saturday 14th February 17:39

[Muzzlehatch]

RegMolehusband said:

...largely due to the economic downturn...

How largely? Be honest with yourself about the other reasons. You may find they are larger than you think.

If they are, then it may be best to swallow your pride, take it on the chin and bin it.

If they aren't, then you should have a strong business plan to show the bank.

[_Voyager_]

Economic downturn or no downturn, good businesses will still make money. All the downturn does is expose the bad ones.

Woolworth's is always the example but that business had been failing for years and should have gone to the dogs some time ago.

If your business has no income, you have no business. Its as simple as that.

[JustinP1]

As has just been said, how much of the lack of business is due to the downturn?

20%, 50%? Would it make money if it increased by that much? Not from what you have said.

Secondly, if it doesn't function during the downturn, then there is no guarantee of an upturn any time soon.

The bank will ask a pertinent question. That is, at the moment your company has no track record of income. It is not a great bet. Realistically your only option would be personal debt or at best a guaranteed business loan against your house.

Maybe if you could give a hint as to the market or the angle your business uses the PH collective could cast a guestimate or help whether it is worth pumping more cash into.

[singlecoil]

Do you mean no profit, or no income?

[Ash 996 GT2]

Muzzlehatch said:

RegMolehusband said:

...largely due to the economic downturn...

How largely? Be honest with yourself about the other reasons. You may find they are larger than you think.

If they are, then it may be best to swallow your pride, take it on the chin and bin it.

If they aren't, then you should have a strong business plan to show the bank.

Yup, but you must be honest with the business plan.

If it is not working now, give up.

You have stated that it is eating into a personal overdraft. That is a sure sign that it is not working.

Can this be moth-balled till the climate improves?

I know you state money has been spent on marketing, this has not worked, otherwise you would be making a profit now.

Theoretically of course.

[skwdenyer]

_Voyager_ said:

Economic downturn or no downturn, good businesses will still make money. All the downturn does is expose the bad ones.

With respect, you're completely wrong. It is quite possible to have a strong, well-run, well-respected, hitherto-profitable business which flounders in the current economic situation. As the old saying goes: "all generalisations are invalid, including this one..."

For instance, one of my businesses provides specialist outsourced services to financial recruitment companies. Our turnover is down 100% in the last six months; yes, zero turnover for January. We have a great profile in the marketplace, have been running nearly ten years, all of our clients are happy to talk to us, all would like to use us, yet... there is no work, at all. Our clients are laying-off staff in droves and, where they need our service at all, are using their own staff to do it in-house (badly, but doing it) in order to try to avoid further redundancies.

I admit that ours is an unusual niche, but it exists, and there are others out there. For a slightly larger example, take a look at the car industry - almost everybody is suffering very badly.

[_Voyager_]

skwdenyer said:

With respect, you're completely wrong. It is quite possible to have a strong, well-run, well-respected, hitherto-profitable business which flounders in the current economic situation. As the old saying goes: "all generalisations are invalid, including this one..."

You make an interesting point. The only thing I would counter with is your definition of strong and well run. Being respected isn't worth a penny on the bottom line at the end of the year and as Jerry once said "show me the money". There is also another cliché which springs to mind; 'You are only as good as your last deal'. I take your point about generalisations though.

skwdenyer said:

For instance, one of my businesses provides specialist outsourced services to financial recruitment companies. Our turnover is down 100% in the last six months; yes, zero turnover for January. We have a great profile in the marketplace, have been running nearly ten years, all of our clients are happy to talk to us, all would like to use us, yet... there is no work, at all. Our clients are laying-off staff in droves and, where they need our service at all, are using their own staff to do it in-house (badly, but doing it) in order to try to avoid further redundancies.

I don't want to criticise your business specifically so please don't take this personally. However may I suggest that if a business is 100% exposed to a specific niche market then the business wouldn't fit in to my definition of a good business. When times are hard it is important to realise when a market is shrinking and move to more fertile ground. Even better would be to hedge before hand so if one niche shrinks there is the opportunity to grow the other.

skwdenyer said:

I admit that ours is an unusual niche, but it exists, and there are others out there. For a slightly larger example, take a look at the car industry - almost everybody is suffering very badly.

Yes, lets. The car industry has been over producing cars for many months before the credit crunch. It does not take a genius to work out way back in late 2007 that the sub prime market is about to collapse which would have a knock on effect to credit which in turn will stop people buying their cars. Even if they didn't then it was blindingly obvious to my wife this would happen autumn of last year. What have they done about it? Carried on producing expensive cars at the same rate and filling up airfields with unsold stock. Their answer is to go cap in hand to the government for bailouts and loans. Honda seem to be the only organisation taking real steps to stem their losses. Conversely, the buffoons running GM and Chrysler all need to be sacked immediately.


I hope things get better for you quickly.

[Muzzlehatch]

skwdenyer said:

_Voyager_ said:

Economic downturn or no downturn, good businesses will still make money. All the downturn does is expose the bad ones.

With respect, you're completely wrong. It is quite possible to have a strong, well-run, well-respected, hitherto-profitable business which flounders in the current economic situation. As the old saying goes: "all generalisations are invalid, including this one..."

For instance, one of my businesses provides specialist outsourced services to financial recruitment companies. Our turnover is down 100% in the last six months; yes, zero turnover for January. We have a great profile in the marketplace, have been running nearly ten years, all of our clients are happy to talk to us, all would like to use us, yet... there is no work, at all. Our clients are laying-off staff in droves and, where they need our service at all, are using their own staff to do it in-house (badly, but doing it) in order to try to avoid further redundancies.

I admit that ours is an unusual niche, but it exists, and there are others out there. For a slightly larger example, take a look at the car industry - almost everybody is suffering very badly.

Have you considered offering HR consultancy and legal services to the same clients? You know, redundancy advice, checking their employee contracts to help them lay off staff with minimal exposure to claims of unfair dismissal, etc? That way you could get business when they either hiring or laying off staff.

[Windsorphil]

RegMolehusband said:

So let's say, hypothetically, that I have a promising start-up business that hasn't paid me a penny yet largely due to the economic downturn, that I've put thousands into marketing and that is just drifting along in an overdraft - and I'm approaching my personal overdraft limit. I have no more significant assets to sell but I do have equity in my house.

In this hypothetical situation I would be demotivated and considering myself well and truly stuffed. I would have arranged to see the bank manager a week on Tuesday (hypothetically) to appraise him of the situation.

No dependents, aged 54.

I would of course bull up the business and engender some optimism into the bank.

What would you do? Thank you.

Edited by RegMolehusband on Saturday 14th February 17:39

In your plan, when were you expecting to earn money? How far behind plan and why hasn't "marketing" worked for you - and what do you mean by marketing?

You have to take risks, and sometimes things get very, very hairy - if your idea is strong and you have done all you can to make it attractive, you have to look at why people are not seeing the same; challenge your promotional activity, and ask seriously can you afford to completely write off your (hypothetical) investment you've made so far, especially if you're near to succes?

[_Voyager_]

Muzzlehatch said:

Have you considered offering HR consultancy and legal services to the same clients? You know, redundancy advice, checking their employee contracts to help them lay off staff with minimal exposure to claims of unfair dismissal, etc? That way you could get business when they either hiring or laying off staff.

Bingo! This is exactly the point I was trying to make (all be it in not a very good way) . Diversify...

[skwdenyer]

_Voyager_ said:

skwdenyer said:

For instance, one of my businesses provides specialist outsourced services to financial recruitment companies. Our turnover is down 100% in the last six months; yes, zero turnover for January. We have a great profile in the marketplace, have been running nearly ten years, all of our clients are happy to talk to us, all would like to use us, yet... there is no work, at all. Our clients are laying-off staff in droves and, where they need our service at all, are using their own staff to do it in-house (badly, but doing it) in order to try to avoid further redundancies.

I don't want to criticise your business specifically so please don't take this personally. However may I suggest that if a business is 100% exposed to a specific niche market then the business wouldn't fit in to my definition of a good business. When times are hard it is important to realise when a market is shrinking and move to more fertile ground. Even better would be to hedge before hand so if one niche shrinks there is the opportunity to grow the other.

No criticism taken. You're absolutely right in one sense; this business was 100% exposed to a specific niche. My view was that it was part of a portfolio of businesses and, as such, was hedged at my level, if not at the individual business level.

So I do take your point but, on reflection, I'm still unclear what we could have done - this particular service is so specialised, so requiring of "chinese walls", and so prone to client suspicion that it is still hard to contemplate it as anything more than a very narrowly-focussed operation.

After a lot of years operating businesses in the recruitment sector in one form or another, I can honestly say that the only parallels I have for the experience of the current market was the period after 9/11, when the downturn in our markets lasted for 9-12 months. This time around, however, there is simply no sign of a recovery.

Anyhow, onward, onward. The shame is not the loss of the business in any financial sense - it was a small part a larger whole - but the fact that the individuals concerned will be without work, and that the information and skills the operation relies upon will in all likelihood be lost by the time the market picks up again (if it does). The information has to be current to be useful, but to keep that going is an enormous investment of overhead against zero return. The information side has absolutely no other benefit beyond the use to which we put it, so it cannot be utilised in any other form. It is the classic "do we keep digging, guv?" scenario.

As I say, ho hum - need to learn to make a different mistake next time