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These are economic conditions that I have not seen ever in a career of over 45 years. It will impact and hurt all businesses, particularly the smaller family-owned entrepreneur. One of the reasons for this is that driven entrepreneurs prefer to go solo and either do not want to ask for help or are unwilling to pay for advice that could save their business. The entrepreneur likes to break the rules and often feels they can get away with things. The danger of this approach in this tumultuous environment is there is a good chance of going down blind alleys with no escape.Now is the time to think strategically about the business. Get the help of advisors who can help lead businesses out of trouble before they get in too deep and go too far. The thinking and planning process is where entrepreneurs need to listen to advisors. If they don’t have an advisor they should go find one. Setting here writing this blog, I can think of several examples where companies didn’t want to seek advice or if they did, they didn’t listen. In some of these instances the results might be fatal. Companies failed to expand credit lines when they could and now getting credit isn’t an option. They also purchased assets when they should have save their cash.
I have had bankers tell me they wished some of these companies would seek help because it makes their job easier and reduces risk. It is all about being penny wise and pound foolish. A little money spent on planning and prevention could be the difference between solvency and bankruptcy. You would think more entrepreneurs would pay the price and choose solvency.
Another issue where procrastination is high is succession and transition planning. Time and effort devoted to putting good succession and transition plans in place allows business owners to preserve the wealth achieved over a lifetime of work. The failure to implement these plans either due to lack of time or not wanting to spend advisor fees results in the loss of all the accumulated wealth or in excessive estate taxes. It also produces a mess for the survivors to clean up when it could have been avoided.
One final caveat is that advisors do their best work when they can focus on fixing the business rather than managing a short-term cash crisis. It is easier to prevent the fire than to put it out after it gets started.