My back is against the wall and don't know where to turn

[White8]

I bought what I thought was a good business 18 months ago. Income to debt ratio was 3 to 1. Since the 2007/ early 2008 numbers I bought the business based on, the economy has gone to crap culminating in a $140k loss for 2009. If I didn't have the loan on the business the situation would be a better but I don't have that amount in my pocket to pay it off. Since Christmas, things have been very slow with my people in the field working an average of 20 hour or sometimes less weeks. Competition has been brutal with other contractors coming from as far away as 100 miles and some bidding projects below cost. Psychologically, the last year in particular has completely drained me and I've pretty well lost all confidence in the business and any ability to run a business I thought I had. To make matters even worse, when my Dad died in 2007, I inherited a 25% interest in his and Mom's rental properties so I can't default on the loan or I put Mom in Jeopardy. I've even considered using my life insurance policy to cover the debt but it hasn't seasoned yet.

Sorry for the downer rant. I just can't seem to come up with a solution.

 

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[Kung Fu Steve]

Well first off my good sir let's get you into a better mental state.

What is going right?

 

[Runum]

Well first off my good sir let's get you into a better mental state.

What is going right?

Damn you're good Steve. White 8 if you were at B&P you would have seen several people with their backs to the walls. These guys are putting in the hours, day after day, that it takes to survive not expand. It seemed to be the theme this year, many of us were in survival mode and not much talk of expanding of grand plans.

I do agree with Steve. You have to have something in your life that is working for you. If you start from there, maybe you can slowly turn the ship around. I wish you well.:cheers:

 

[EastWind]

when your back is against the wall, that's when you will know what you are made off. trust me, there is still plenty of fight in you! you haven't started. there was a thread on here, about the carrot, egg and coffee, see if you can find it. it would help if you can share the details of the business, what field, what you do, how you make money, why you are not making money. let many minds on here help you. people on here tend to hide their business ideas because they think someone is going to steal em, but you don't have to worry about that. there are lots of smart and nice helpful people on this forum. we are family. let's help you brainstorm new solutions if possible!

 

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[australianinvestor]

Can you sell a property to give you a cash buffer to protect the other properties? Can you restructure your business/modify your expenses/increase its income by offering a new product/service? Can you sell your business to create some cash to protect the properties? Can you restructure the properties so that the deficit between the income and expenses is lower? Does the mortgagee have a program to allow you to suspend payments for 6 months? Can you sell some under-performing business assets to create a cash buffer to protect the properties?

I don't know how many would be feasible, but these ideas just came from the little bit of info you gave in your original post. If you give us more info, maybe we can come up with more ideas

 

[randallg99]

Psychologically, the last year in particular has completely drained me and I've pretty well lost all confidence in the business and any ability to run a business I thought I had. .... Sorry for the downer rant. I just can't seem to come up with a solution.

Australian investor had some good questions. I'll go a step further and ask about the business. Is there an untapped market or niche you can go after?

I am going to give you the best advice anyone can give that I wished someone had shaken my shoulders and yelled into my face a couple of years ago: DO NOT JEOPARDIZE YOUR PERSONAL ASSETS (cashing your insurance policies or using any other personal resources)

Well first off my good sir let's get you into a better mental state.

What is going right?

great advice. In my business' darkest days I count the blessings I enjoy. My children and wife bring me a sense of accomplishment as do many of the actions I've taken in the past 20 years.... revel in the positives to help offset the negatives.


White8, you're not alone. Many people in small businesses are suffering terribly and needlessly.

There's nothing to be ashamed of. Due to the circumstances, you have to do what you have to do to protect your assets.

 

[Kung Fu Steve]

I should probably follow that up... I looked at it and I know your response is going to be: "What is going right?... NOTHING!" and who wouldn't?

Let me explain that you are not going to get a quality answer (or the answer you're looking for to get everything turned around and make it all a success) unless you ask a quality question. You will not ask a quality question unless you change your current mental state. It is not resourceful. When we are depressed and down we come up with bad questions and even worse answers.

Example:

A question you might ask yourself "Why can't I achieve this goal?"

Your brain is not a merciful kinda guy. It will respond with an answer to whatever question you ask. Usually if you ask a question like that, your brain will respond with something like...

"Because you're a dumbass!"
"Because you're a loser!"
"Because you'll never succeed!"

Obviously that doesn't help anything. So if you're willing to trust this group get out of that mental state and ask a better quality of question so we can really help like we want to!

How? Like randall said, start by writing down what you are grateful for in your life right now. You're glad you have a family, you're thankful for the money you do have, you're thankful to have a roof over your head, a bed to sleep in, food in the fridge, gas in the car. Can't tell you how much that stuff means to me, especially when you don't have it.

This will start you to feeling better and more resourceful.

Good luck, we're pulling for you!

 

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[phlgirl]

Dude.... so sorry to hear it. I remember when you made this purchase.

My first thought, when reading your situation, was Sales & Marketing. I know nothing about the industry but it sounds like competition is tough and when that is the case, you need to differentiate yourself. It might be just a gimmick or something to get people to think of you first? Pretty sure the last thing you want to do is throw money at a business, which is suffering already, but I think you need to do something radical. That might include sale/restructuring, as Aussie suggested. All good ideas worth entertaining.

Step back, grab a white board for a few hours and think it out. Invite anyone you think might add value.

I'm very sorry to hear about your situation but I know you are a smart guy and will work through this spot. Time for creativity.

Keep asking questions. You will find the answer.

 

[GlobalWealth]

I bought what I thought was a good business 18 months ago. Income to debt ratio was 3 to 1. Since the 2007/ early 2008 numbers I bought the business based on, the economy has gone to crap culminating in a $140k loss for 2009. If I didn't have the loan on the business the situation would be a better but I don't have that amount in my pocket to pay it off. Since Christmas, things have been very slow with my people in the field working an average of 20 hour or sometimes less weeks. Competition has been brutal with other contractors coming from as far away as 100 miles and some bidding projects below cost. Psychologically, the last year in particular has completely drained me and I've pretty well lost all confidence in the business and any ability to run a business I thought I had. To make matters even worse, when my Dad died in 2007, I inherited a 25% interest in his and Mom's rental properties so I can't default on the loan or I put Mom in Jeopardy. I've even considered using my life insurance policy to cover the debt but it hasn't seasoned yet.

Sorry for the downer rant. I just can't seem to come up with a solution.

I agree completely with Randall here. You cannot use your personal assets here. Do not even think about cashing in a life insurance policy. And you REALLY need to do something now to protect the assets from your father's inheritance. You cannot put her assets at risk, but there are ways to protect you, her and those assets.

I think many of us on here have been 'in a pickle' at some point in our careers, myself included. Steve mentioned getting in a better state of mind. This is critical. Do whatever you must do to improve your mood. It may seem artificial, but your brain doesn't know any better, just do something that will improve the mood. What do you do that puts you in a better mood? riding a bicycle, working out, surfing, riding a motorcycle, going camping, etc... It is also important to spend some time alone, like on a weekend camping trip (for example), to eliminate the 'noise' that surrounds you. This alone time will allow you to think without distraction and you may even come up with some creative solutions to solve your problem. I have always found that in order for me to solve a problem, I have to get away from it. I cannot solve it when the daily pressure is weighing on me.

 

[MJ DeMarco]

Failing businesses are like a disease -- there are symptoms and there are causes. The key is to address the CAUSE and not the disease. How does Apple survive and have the most expensive computers? How does Lamborghini survive when it's products are 10X as expensive as a normal car? These companies have carved out BRANDS.

I don't know your business -- but I do know businesses without brands are fighting an uphill battle to differentiate themselves and unfortunately, their only play in the playbook is PRICE. Slash prices! Cut prices! I must be the cheapest! This is the game most businesses play and unfortunately, it is a losing game.

"Business is bad" is really a symptom to the problem. Why is business bad, aside from the economy? Is your business predicated on a need? Or a "me too" business like all the rest, remanded to an existence of price wars? Brand building is the only defense to price commoditization. Is there anything about your business that sets it apart from the rest? When your customer has a need and is evaluating businesses to satisfy that need, is there anything about YOUR BUSINESS that will compel them to buy from you? Or is price the only lure?

While this information might not help you immediately, it is a lesson to stockpile in your arsenal for future use.

 

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[Pinnacle]

Failing businesses are like a disease -- there are symptoms and there are causes. The key is to address the CAUSE and not the disease. How does Apple survive and have the most expensive computers? How does Lamborghini survive when it's products are 10X as expensive as a normal car? These companies have carved out BRANDS.

I don't know your business -- but I do know businesses without brands are fighting an uphill battle to differentiate themselves and unfortunately, their only play in the playbook is PRICE. Slash prices! Cut prices! I must be the cheapest! This is the game most businesses play and unfortunately, it is a losing game.

"Business is bad" is really a symptom to the problem. Why is business bad, aside from the economy? Is your business predicated on a need? Or a "me too" business like all the rest, remanded to an existence of price wars? Brand building is the only defense to price commoditization. Is there anything about your business that sets it apart from the rest? When your customer has a need and is evaluating businesses to satisfy that need, is there anything about YOUR BUSINESS that will compel them to buy from you? Or is price the only lure?

While this information might not help you immediately, it is a lesson to stockpile in your arsenal for future use.

:great:

 

[andviv]

Sorry to hear about your situation.

My advice, based on two years of really bad business-related crap:

1. Keep personal assets separated from business assets. If the business fails, oh well... do your best, but your family's assets are family assets. Personal responsibility does not equate moving to live under a bridge to pay for a business failure, in my opinion.

2. It is "just business"... business are business. If it is not letting you sleep at night, or eat well, something must change. Your health (both, physical and mental) must be preserved. If it is going to fail, let it fail, without stealing your inner peace.

Question, though:
I don't understand your point about the properties and your potential business failure. Why owning 25% of the rentals is a problem? Why don't you sell that portion to your mom (it can be a note, do not need to be a cash transaction) and that way her assets are covered. Yes, it will have some cost to do this paperwork, but that way you won't drag everything else down with you if things don't improve.

Finally, and the most important thing I have gotten out of the problems I've had in the past, is that life is too short and no business is worth ruinning your mental peace and happines.

 

[White8]

Thanks everyone for your posts.

Steve: As far as what's going right, to be entirely honest, I really don't have anything other than work in my life (something I learned all too well from my Dad who was quite successful) no wife/girlfriend, kids, hobbies to speak of. You're right, my brain screams those sorts of comments.

AustralianInvester: I've contacted the lender about modifying the loan and at least at the level I spoke with, they are not adverse to it. I've been very reluctant to contact them out of fear of having my loan called. We'll see what the next level has to say. Regarding selling a portion of the property, all of the rental property is contiguous. I don't own a home for myself as a home isn't an asset so I don't have that as an option.

Randall: The shame is extremely hard not to feel, my Grandfather and Dad were both successful and I've felt many times that I've failed to live up to their accomplishments.

Phlgirl: I've thought about marketing, including having my admin assistant making sales calls to local general contractors. The difficulty I face is a tremendous amount of competition with other contractors traveling up to 100 miles and bidding jobs at or below cost just to get the job. I do have the capability to install home theater systems but they tend to be low margin as often my wholesalers are higher priced than Best Buy and other box stores which is a frustration in itself.

MJ: The business has a great brand, there just isn't much as far as a place to sell the brand. A few of our general contractors have taken the low price bidders on a job only to return after being dissatisfied with what they bought. Many of the projects that are bidding right now are government projects and they are bound by law to take the low bid unless they have a compelling argument to not accept a bid. We are still successful in the government projects that squeak under the price limits requiring bids and recently got one that should have gone to bid but for some reason didn't.

Andviv: That's an excellent suggestion to let Mom buy my interest in the property. I have spoken with my attorney who advised that if I were to default on the loan, the lender could go after my interest in the property.

Some more details:

The business is a 22 year old electrical contractor with a mix of residential and commercial. We also do low voltage. Some things I've been working on:

1. Ecommerce site for light fixtures: The data has been a nightmare with virtually no assistance from the manufacturers. I'm working with a programmer to scrape data from the manufacturer sites to be matched with the pricing data I have been able to get. My programmer is in India which has temporarily blocked international payments until they can determine how to deal with taxing. Project stalled

2. Generator Imports: I've located a company in China that produces small, suitcase style, generators and have ordered samples. It seems that it can take quite a while to import despite the fact that the freight forwarder/customs agent has thoroughly checked the company and it has an excellent reputation. The samples shipped the 14th and should be here in about 20 day. Project on hold until generators arrive

3. LCD projector switch: We have installed a couple of hundred LCD projector source switches for a local school district. I have back engineered the function of these switches and have a programmer working on the software. I should have a prototype in 30-45 days based on his present progress. Based on the dealer cost of the system we have been installing and considering that extensive research has yielded no other competitors, I should be able to market these at a 350% profit margin while still undercutting the other company by 40% In Process

4. Union: I have spoken with some of my electricians about leaving the union which would save me $7000- $8000 per month based on a full crew in health insurance costs alone. It would also allow me the freedom to modify hours worked per day to my benefit, and a possible savings on retirement as I could shift to matching rather than simply paying. The sticking point has been the pension for the electricians who have been union members for a long period of time. Gathering data

5. Marketing 1: I've thought about having my admin assistant visit area contractors to drum up business. I'm still working on a commission based compensation program

6. Marketing 2: I've spoken with sales at 97.9 KNRQ which I listen to in the morning on the way to work regarding advertising during the morning show in the form of the DJs having a short conversation about an aspect of my business such as home theater systems rather than a traditional ad. (I tend to listen to banter more than ads) I've also thought about contacting 101.5 KFLY about the same with their afternoon show which is syndicated in Eugene and Medford. KNRQ is reasonable at $32 per instance + a small talent fee. Still trying to decide if I want to invest in the advertising. These radio station are for the Gen X and Gen Y demographic and I don't know if it's the correct demographic to go after.

Again, thanks everyone.

 

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[Kung Fu Steve]

It would be tough for me to give you the "perfect" advice for your business. But as the famous Zig Ziglar would say "Your business is never good or bad out there, your business is good or bad right in between your own two ears."

Steve: As far as what's going right, to be entirely honest, I really don't have anything other than work in my life (something I learned all too well from my Dad who was quite successful) no wife/girlfriend, kids, hobbies to speak of. You're right, my brain screams those sorts of comments.

Well if this is the case... you've got nothing to lose! :smilielol:
Just kidding, just kidding, bad joke. Hopefully we can start with a sense of humor :smxB:.

I'll tell you though, I am the same exact way. I do nothing but work and occasionally go out dancing. I work 16 hours every day and have no other hobbies or anything like that. So in reality we are very similar.

But you know feeling bad and feeling down about what is going on, as my buddy Greg so kindly reminded me of on a nice ride in Scottsdale, is a choice. You can choose to feel differently.

I will say it again because I think it is very important you write down and remind yourself of what you do have instead of what you do not have. I will tease you a little bit because when I asked you "What is going right?" you responded "Well I don't have anyone or anything." Well good sir, do you have your health? Do you have eyes to see with? Do you have a heart that beats even though you don't tell it to? Do you have a brain working at full capacity? All of your limbs? I just posted a video on my blog of Nick Vujicic... If you think you have problems, check him out.

I've contacted the lender about modifying the loan and at least at the level I spoke with, they are not adverse to it. I've been very reluctant to contact them out of fear of having my loan called.

My favorite line to someone calling in their debts is "Get in line!"

Randall: The shame is extremely hard not to feel, my Grandfather and Dad were both successful and I've felt many times that I've failed to live up to their accomplishments.

I'm not a real religious kind of guy but I love the saying "God's delays are not God's denials."

How do you think they became successful? I guarantee they didn't do everything perfect from the beginning.

So while I am giving you the mental side of things, listen to these geniuses on how to change your business.

Sounds like the two questions you are really asking are...

"How do I get people to see value in my service instead of paying the cheaper price."

I would imagine personality, salesmanship, and finding a way to provide more value than the people undercutting you. Don't lower your prices to compete, add more value to justify the price difference.

"How do I decrease expenses and increase income?"

The million dollar question of any business of course. I know a lot of businessmen who won't even consider hiring a union person. And if they join a union they are let go immediately. Is this right? I won't argue yes or no, but I do see how expensive a union employee is to have versus a non union employee. On top of that any employee you do have should be there because they make the business more than enough money to take care of their salary.

I don't know exactly how your business works because I'm kind of a knucklehead with contracting stuff except for putting up studs and drywall. But I do know that one of the most successful pieces of advice I've given was to a construction company here.

We were hit hard with hail and as soon as that hail hit, a direct mailer was sent out to all of those people to repair the siding of houses, windows, etc.

Could you do something similar? Is there a time when people really need electrical work and could you send a timely piece of material to them then?

Again, good luck sir, hope some of this helps!

 

[camski]

There is no better marketing or stamp of approval than a testimonial. I would recommend that you contact some of your more satisfied customers and ask them for a testimoniual or even a referral.This wont cost you anything and should give you a little lift in the positive mental image area. Contrary to popular belief that when money is tight everyone is looking for the cheapest deal, the reality is that when money is tight people are looking for the best value. They are reluctant to let go of their money on lower quality and inferior prodcuts that they will ahve to replace soon or get fixed again.
As far as lenders go, you should always run to your lenders when repayment becomes an issue, not away from them. Lenders want repaid, not collateral or for you to give up and just file bankruptcy.
I agree with phlgirl, take some time find a sheet of paper or a whiteboard and sit down and make a plan and then work the plan. Create objectives and then organize your activities around those objectives.
I hope this helps , good luck!

 

[WestCoast]

A fellow Oregonian, hang in their man.

--
Here is something that I went through about 10 months ago. I panicked as things started to slip.

As I panicked (mainly due to lack of experience), then ALL sorts of things became self fulfilling prophecies.

I wasn't selling product because I wasn't confident. I wasn't doing the marketing and leg work, well, because no one wants to buy my stuff....

--
So, no one is aware, but I started seeing a therapist. Talking through some of this stuff. Someone who wouldn't judge me, and I could just talk to about my mental state.

--
As I mentally got stronger, things started to get become more clear.
Cut expenses. Check
Level with the staff. Check
Figure out what our best customers wanted, and start marketing to them.

What are my marketing activities that yield cash NOW? (this helps get you back on a good mental footing too)

Next, what are the activities that are high margin that I want to be doing in 3 months?

--
Then, buckle down, full program, all day, all night. Work, Grind and make it happen.

Our business is on a much better place and we're working hard to keep the old mojo in place despite ANY business cycle.


You sound like a smart guy - remember that half of the stuff is mental.
You're the boss, you're the leader. Do a quick mental check and get geared up for the drudgery ahead.

Failure is not an option for you (same situation here) so dig in and do what you do best there!

GO GO GO!

 

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[yveskleinsky]

How is your interest in these properties held? Perhaps a good approach is to meet with an attorney and see if doing some sort of quit claim can get you off title for starters. If there are multiple people owning interests in these properties, perhaps a corporation or trust needs to be set up.

Hang in there. Take a step back and examine with a critical eye everything you (and your competition) are doing right and wrong then develop a plan.

If this biz goes under it is not the end of the world. This is just money. Money can be made back. It will be okay. ...I didn't go to the B&P this year because I had a lot of major life events happen in a short period of time, and I just got to the point where I couldn't cope anymore. I completely shut down--and I was embarrassed that I just couldn't cope anymore. A cashier at the grocery store would ask how I was doing as she scanned my groceries and I'd break down sobbing. I kept telling myself that I was at the end of my rope. I just couldn't go on. I was either going to continue to be dragged by this rope by hanging on (which was currently happening) or I was going to hang myself with it. After all, I was at the end of my rope. Then one day I had this moment of clarity, if there was ever a God moment in my life this was it. Clear as day I had this thought, "put the rope down." So I did. And by putting the rope down I was able to see my problems as they were, nothing more, nothing less. Take away the emotion. Take away the guilt, frustration, doubt and anxiety. Basically, stop caring. Get clear, then get a plan. ...The reason I am telling you this, is because of your title of the post "My back is against the wall and I don't know where to turn." If your back is against the wall, then move. Picture yourself simply and easily walking to the middle of the room and spinning in a circle. You can easily move away from the wall, and you can easily turn in a circle--and while you turn in that circle notice all the people who love and support you for you--their love and support is not based on the success of your business. Your business is not you. Your business is not your life. The money can be made back.

[ame=http://www.youtube.com/watch?v=UPg9DnMP2D4]YouTube - Eckhart Tolle, not reacting to content, www.soundstrue.com[/ame]

 

[Jill]

Wow, you've already gotten a great wealth of advice here. Hopefully it's some consolation to see that you aren't alone. Some of the sharpest, most successful people in this community have struggled over the past year or so. Even those of us who were "doing everything right".

Add us to the list... [details redacted]

The best thing that has come from it is that we know that we can survive setbacks because we're not afraid to start over from scratch. Fortunately, it appears that we've dodged that bullet and won't have to start over from scratch. But I am prepared to start with the ebay business again (after I swore I never wanted to do it again!) When all else (things that are out of your control) fail, what is your backup plan? That's ours. And we're once again reminded that we can make a pretty darned good living just doing that.

I will probably remove the more personal details of this post after you've had the opportunity to read it. But I wanted you to know that your back is never really against the wall. There are always things you can do.

Have you considered 1) diversifying your service offerings? 2) getting your name to the top of the list of Angie's list and/or American Home Shield type of home warranty companies? The margins might not be great, but it may keep your best guys busy enough that they won't leave you. Just a thot.

 

[Russ H]

. . . A cashier at the grocery store would ask how I was doing as she scanned my groceries and I'd break down sobbing.

I know, I know. I had the same reaction when they pulled Count Chocula off the shelves. . .

Good to see ya, Yves.

-Russ H.

 

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[Nstyle]

not sure if this is much help but I had an idea that may possibly work for me as well. People are versocial and like above recommendations from others are important especially those testimonials. Maybe you could donate small fractions to a cause or different causes. For instance I plan to donate a small portion to a communtiy basketball league when those particular parents use my service. Just an idea I am no pro still learning, I can relate tho hold your head high and remember to smile it really can change a day when we think of the simple things