The Value of Selling Your Story When Negotiating Commercial Debt

July 27th, 2010

When you are negotiating your commercial debt burden, it helps if you can “sell your story.” What I mean is that the other person you are negotiating with will likely only know you as a voice on the other end of the phone line. If you can inject story elements into the process, you will get the other person on your side to some degree. If you ever watch reality-TV shows, you will notice that those contestants with a grandparent in the hospital with a terminal disease always seem to garner more votes. It is because the viewers are rooting for them. They have successfully introduced story elements into their struggle. This is similar to the effect I am talking about.

After you set the stage, it is preferable to proceed with the process entirely in writing. You have planted the story seed and now you want to control the presentation with written communications.

By submitting a proposal in writing that appears to be a standard settlement letter, this reflects a financially desperate debtor who may not be able to keep his doors open, yet wants to try to “do the right thing” towards the creditor by paying as much as possible (as a matter of character).

These entities are not as motivated to put a lot of time into this particular collection account. Obviously, if the collection attorney or agency cannot realize a large fee, they will take a small fee and dispose of the case. It is clearly an issue of time management relative to the fee they earn.

In order to “sell the story” your position must present the personal side of your dilemma. This may seem contradictory to the preconceived notion that collection attorneys and agencies have no feelings and do not care about your problems. They are only interested in collecting the highest possible amount owed since their fee is going to be larger and that is how they make their money.

However, we know the poser of story, so it should be used whenever possible.

André Larabie

www.andrelarabie.com

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The Commercial Debt Reduction Process – Negotiating by Mail Versus Fax

July 27th, 2010

For many years, businesses have negotiated contracts and proposals using the telephone or mail or some combination. This is fine if there is no sense of urgency to reach a quick decision.

And while telephone negotiations are typically memorialized in writing for all parties concerned, it takes time to write up agreements, contracts, etc. It also takes time to make copies available to all of the parties by using US Mail.

That is why courier delivery services such as Fed-Ex, DHL and others have proliferated. They are a viable alternative to US Mail. Delivering documents through a courier service can be timelier, and the delivery times are often guaranteed.

However, faxing your offers is a better method for negotiating with your creditors and it allows for presenting the needed documents to the parties in a timely fashion. You might still want to call your creditors as mentioned in a previous chapter, but you now have an alternative method of communicating.

I have found the facsimile (fax) machine to be a very successful method of initiating the negotiation process. Fax machines have changed the landscape and the time required to effectively communicate information between people and businesses.

Some readers may ask, “What about email?”

My answer to you is that email is also a good method, but you might not have the email address of the business owner, and unless you have a scanner, you may find it difficult to send a signed settlement letter to your creditor or their representative. The logistics of digitizing documents, uploading them to the computer, accessing them with the email program and attaching them to the communications add another level of complexity that you should try to avoid. The negotiation process is difficult enough without introducing these additional procedures.

André Larabie

www.andrelarabie.com

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“Successful Business Turnaround – A Definition”

July 27th, 2010

What does “successful business turnaround” mean?

At first this might seem to be a simple questions, but like many things in business, it is more difficult than it first appears when you get further into the details.

It turns out there are many ways to measure and define a “successful turnaround.“

You might say that keeping your business alive for at least one year means that you have executed a successful turnaround.

You might say that keeping it alive for five years is the definition.

You might say that converting your business from a nonprofitable to a profitable company is the definition.

Or you might say that it is something else.

I am going to define what I call a successful turnaround. A successful turnaround has two elements:

1) Your business has a positive cash flow
2) Your business is transformed to sustain a positive cash flow

I think you could reasonably add a third element to the above definition:

3) Your business has a well-defined plan to restructure and further stabilize

I think this last item reflects that it is not enough just to fix a few problems with the business and nudge your company back into positive cash flow territory. The fixes you implement to accomplish this may be only temporary; as a result, your company may inadvertently fall back into turnaround range. Therefore, further steps are necessary.

If—in addition to correcting your immediate problems and sustaining a short-term positive cash flow—you restructure your company SUCH THAT THE REVENUE STREAMS ARE MORE STABLE AND PREDICTABLE, then you will be on the right track to stabilizing your business and avoiding the need for a future turnaround.

André Larabie

www.andrelarabie.com

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Reducing Commercial Debt Burden – Developing Your Story

July 27th, 2010

Suppose you have a prioritized (based upon how critical each is to our business) list of 20 creditors, and number one the list is a $50,000 debt that you owe to a supplier who provides you with raw material that you need to create whatever it is that you produce in your business.

Since this creditor is number one on your list, without that supplier you cannot run the business. You must satisfy this debt or negotiate with them if you are to continue operating. If you don’t address this issue, then that creditor is not going to advance you any more credit and may even ask you to pay the balance before any more goods are delivered.

Some creditors may have a policy requiring you to pay 100% of the delivered invoice amount plus 10% of the total outstanding account balance. If your current balance with that creditor is $50,000 and the delivered invoice amount is $6,000 you would have to pay $11,000 ($6,000 for today’s delivery plus $5,000 against the overall debt) to get the delivery and keep operating.

But suppose for the sake of argument that you do not have the extra ten percent to give because you are really deeply in trouble.

What can you do?

You can negotiate with the creditor. But before you contact them, I can assure you—and I have learned this from 20 years of experience—that unless you have a deep understanding of your current financial situation and the particular approach required for this particular creditor, you really don’t know what to tell them and you do not want to call them until you do.

If you call them now, you will probably end up saying exactly the same thing that all of their other creditors say, and this will get you nowhere. So before you contact them, put together all the reasons you are in financial trouble, all the reasons you are in this turnaround situation—it might be that sales are down, or you might be delinquent with some bank loans and the bank is threatening repossession of assets, or a creditor is threatening with a lawsuit.

Write all of these reasons down.
- Does the business owe money to the IRS?
- How much does it owe to all the creditors?
- Does it owe money to the bank?
- Is it in default now and what is the status of the business?

Contacting your creditor and talking with them is the best approach, and here is why: there are many debtors out there like you who owe them money, and these debtors usually ignore the problem rather than being up front with the creditor. They are silent while you are contacting them directly. For this reason, they will view you in a more positive light. If you introduce you “story element” into the conversation, you will likely gain some sympathy from this creditor and this sympathy may help you in your negotiations later in the process.

André Larabie

www.andrelarabie.com

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Using Article Marketing To Market And Grow Your Business

July 2nd, 2010

The Internet is increasingly the method of choice for consumers to research products, and this is why it is important to have some type of connection to this form of marketing. Traditionally, if you are a writer about a subject, you are viewed as an expert because in order to write about the subject, you must know something. If you can write an article on boat propellers, then you will have some credibility on the subject, and if you make a suggestion or recommendation about certain boat propellers—the ones you sell—you can increase your revenue dollars. Simply put: Write articles about the products you sell, and in each article, have a link to your website. A basic equation is at work with article marketing, and it can be verbalized as this: the more articles (with backlinks and/or hyperlinks that point to your website) you write, the greater your sales revenues. Specific Internet sites focus entirely on publishing articles for this very reason. Traditionally, getting an article published in a glossy magazine is very difficult and a large amount of vetting takes place before you get published. That is not true on the Internet, and almost anyone can publish an article on any subject using one of these article websites. Some people have taken this to the extreme and published thousands of articles on hundreds of subjects. Some Internet marketing gurus have made thousands of dollars (or millions) with article marketing techniques, and if you read their how to material, you will find that they are able to generate 10 or 20 articles per day, all with backlinks to their money sites. Some of them have taken it one step further and hired writers in 3rd world countries to generate articles for them. This increases their output. Companies exist in cyberspace that sell software to generate articles. You input 1 article and the software mixes all the words around so you get 5 or ten articles from the original article, all saying about the same thing (as you can imagine). Why use such software? Because the search engines know about this type of thing and if they find a bunch of these “gibberish” articles on the Internet with backlinks pointing to your site, they will LOWER you in the search rankings. This is the opposite of what you are trying to accomplish with search engine optimization, so you don’t want to do this sort of thing. In any case, at a minimum, you should author a few good articles (or hire a good ghostwriter to do so) on the subject area of your business products, and get them published on these article sites.

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Negotiating Tactics – The Settlement Letter

June 28th, 2010

The Settlement Letter, often called the Settlement Proposal, can be a highly effective tool in the negotiation process. As with many things, this proposal should be a form of sales pitch and not completely about facts. Add in elements that will endear the reader to your plight. Include hardships and any story elements you can think of.

When you are negotiate on the telephone with attorneys, collection agencies, or collection attorneys, one may encounter an impersonal, or even rude attitude on the part of the person you are negotiating with. Do not take this personally. The reasons for this behavior are varied but can be reduced or even eliminated by negotiating in written form.

When one negotiates with a general practice attorney representing a creditor, this attorney is typically motivated to get the file “off their desk.” If a relatively minor amount of money is owed to the creditor, the attorney may not wish to invest a lot of time on the case since the fees will be nominal or non-existent. Many general practice attorneys have indicated that they are handling this case for their client because they represent the client’s other business interests and the attorney may be doing this task as “a favor” to their client, but would otherwise not be doing it.

In this scenario the attorney may indicate that if a reasonable settlement can be achieved, they would be willing to present it to their client. They may even advise the creditor to seriously consider the Settlement Proposal. This is especially true if the consultant representing the debtor, or the actual debtor, has properly set the stage to reflect the debtor’s deteriorating position. In effect, if you can “sell the settlement” to the attorney, the attorney will probably “sell it” to their client.

www.andrelarabie.com

andre@andrelarabie.com

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Key Features of a Good Turnaround Consultant – The People Factor

June 28th, 2010

When hiring a turnaround consultant, there are certain features you should require. First and foremost, this should be a person you feel comfortable with. You should like this person in a way that you can only assess personally. Some people are likeable and others not. I can’t explain exactly how to determine this, but if you feel comfortable with them, that is usually a very good indicator.

As a business leader and entrepreneur, I think you know what I mean. This feature may also have something to do with leadership qualities or charisma or trust, but it is probably the most important characteristic because the last thing you want to do is bring in someone that your employees don’t like and have this person irritate the situation worse than it needs to be.

Advanced degrees are nice, but they are hardly the most important credential. Someone who has an MBA or a CPA will certainly be a benefit, but if they have no experience, those degrees will not add up to much. The turnaround professional you select should therefore have a fair amount of experience with turnarounds (successful ones), and if possible with turnarounds in your business sector.

Ideally, this person should be a self-started and a leader. They should be able to deliver an honest opinion even if it is one you may not want to hear. C-level experience is necessary, and a good understanding of accounting issues would be a huge benefit. This person must also confirm to you that they believe they can turn your company around if you hire them. They should also have a solid grounding in negotiations, and if possible in debt negotiation. Debt negotiation and reduction will play a vital role in a successful turnaround.

www.andrelarabie.com

andre@andrelarabie.com

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Debt Settlement Tactics – Personalizing the Problem

June 28th, 2010

When you negotiate to reduce your overall commercial debt, it is a good idea to use a Settlement Letter to communicate your offers.

This form of presentation allows you to take full control over the presentation.
One element of the Settlement Letter should personalize the problems you are facing. This element of the settlement letter allows you to “humanize” your plight and gain sympathy. This is where the “storytelling” aspect of the settlement negotiations comes into play. This section will be the “setup” to provide a solution to the problem(s) you are facing, as well as a justification for considering accepting the settlement offer. Therefore, the importance of this aspect of the settlement letter cannot be overstated and should be addressed with keen interest.

It is important to realize that negotiating directly with a creditor can be very different than negotiating with attorneys or collection agencies. When one business owner (the debtor) negotiates directly with another business owner (the creditor), the creditor may have a more personal understanding or sympathy to the situation. In fact, the creditor may indicate that they have experienced similar accounts payable problems at some point in the past. As such, the negotiations may be more congenial and personal. This makes personalizing the problem all the more effective.

Business owners usually have a personal awareness and understanding of the intrinsic value associated with “sweat equity,” “goodwill,” and other aspects of their business that make it personal to them and their customers. In other words, business owners have a more personal feeling about their business and may be more compassionate when it comes time to negotiate a settlement. Obviously, these negotiations may proceed more smoothly.

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andre@andrelarabie.com

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Debt Negotiation Tactics – A Sense of Urgency Promotes Your Position

June 28th, 2010

If your company is distressed and facing bankruptcy, I have found that when your position becomes public to your vendors, suppliers, bankers and competitors, every creditor will want to get what they can from this “fire sale” before funds are no longer available. This sets the stage for settlement.

Everyone is in fear of ending up with nothing when all the vultures swoop in to tear apart your business. This makes anyone and everyone more likely to take your settlement offer and not be too picky when it comes to the final agreement.

When appropriate to do so, I would like to suggest some of the following solutions to be inserted in the settlement letter:
• A straight, one-time payment with reduction of amount owed, plus any accrued costs, fees or interest.
• Survival payments provided to allow you to remain active, as an ongoing, viable concern, perhaps while bridge financing or accounts receivable factoring is arranged.
• Graduated workout payments to continue the business relationship between you and the creditor. This option may allow the creditor to recover some, or all, of their costs over a period of time, if the creditor agrees to continue the relationship, even if on a cash only basis.
• Schedule monthly payments, perhaps with a balloon payment at the beginning or end of the settlement terms.

Properly and professionally worded settlement offers typically receive the most expeditious responses. One may even combine elements to continue providing to the creditor reasons to accept the offer. Suppose the letter has outlined the desperate financial situation facing you. This will increase the overall sense of urgency.

www.andrelarabie.com

andre@andrelarabie.com

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Your Customers Are The Most Important Asset You Have

May 30th, 2010

So it all comes down to this: you must provide a quality product and service. Also, customer perception is key to your success or failure. Without your customers, you cannot be in business, no matter how good your product is, no matter how good your service is. It’s that simple. Customers are the most important component of your business.

And since your customers are the most important component, it is fair to treat them as a business asset. The interesting thing about this is that many business owners do not treat their customers as assets. They just let customers come and go, maybe giving more attention to the ones that spend more money.

When they do this, business owners are missing something big. Let me explain it with an example. I consulted for an Internet business that was in negotiations to sell their operation to a larger competitor.

How do you think the competitor was going to pay them for their business?

It turns out that the payment would be in the form of a per-customer payment. I think it was somewhere in the neighborhood of $300 per customer.

Why did they structure it this way?

Because it makes the most sense. When you think about it, customers are a good indication of the value (and health) of a business.

Now this works best for businesses that are primarily subscription-based, and generally other parameters are used when calculating the worth of another type of business. If it is a distribution business for example, the gross sales or net profit numbers may be used because each customer varies more widely in their worth.

In a subscription-based business, the monthly net worth of a customer is even more than in a distribution business where one customer may spend $10 per month and another $100,000. You can see how the gross sales figure might be more indicative in this case.

In any business, you can look at the customer base and put a “value” on each customer. The key point here is that customers should be viewed as assets and treated as such.

Note that these assets, your customers, do not appear on the traditional balance sheet or income statement, which are probably the two most common financial statements in a business. Even so, they are assets!

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andre@andrelarabie.com

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