Take steps before closing up shop

I doubt a day goes by that we don’t get a call from several people who are holding a gift card/certificate from a company that has gone out of business, or a customer who has merchandise in for repair at a shop that is now locked up.

Worse yet is the buyer whose furniture they paid for is sitting in the front window and suddenly the store is padlocked by a taxing authority. These are all true scenarios that seldom have happy endings.

About two years ago when Kar Brite Car Wash went out of business, there were hundreds of individuals, government agencies and companies with prepaid car wash coupons that were no longer valid. Complaints rushed in yet, unfortunately, there was little the BBB could do about them. Inquiries to company representatives informed us that there were few assets remaining, and refunding unused certificates was highly unlikely.

So how, with a clear conscience, can a company in financial trouble continue to sell gift cards, allow customers to place goods in lay-away or pre-sell services? Unless you have found yourself in this situation, don’t be too fast to criticize this kind of action.

When you are in business, and times are rough, you always have the hope of selling or working your way out of the hole. (Frankly, if you don’t have that attitude, you will find being in business a bad place to be.) You must look hopefully and enthusiastically at the future and only see success, with a few bumps in the road.

The majority of business failures are due to under-capitalization from the beginning. But from BBB’s perspective, a second large percentage fails because they grow too fast. Systems fail, customer service falls apart, and the money necessary to grow is underestimated. All sorts of things begin to fall through the cracks and can return as monsters, with the potential to drag the company under.

For example, that personnel policy that was not followed is now a discrimination lawsuit, or the cash management system had just enough holes in it for the bookkeeper to embezzle several thousand dollars before detection. You get the picture.

There are ways to determine that you may not have the ability to sell your way out of a downturn, and that is where your business partners play a more active role. Your banker, CPA, attorney or trusted mentor can help you look at the facts and gain perspective on when to close the door, change paths or refocus.

A word of advice: Use these key business partners on a regular basis, not just when things look dark. I know business owners who avoid sharing any bad news with their banker, fearing retaliation. This avoidance tactic is not an appropriate approach to being transparent. After all, they really are invested in your success.

An outsider with no emotional ties to your success or failure can sometimes bring you great flashes of reality. I have a board of directors that delivers great insight every time I meet with it. I know several executives who have a “kitchen cabinet” of individuals who offer fresh eyes and ideas on a regular basis to keep their companies thriving.

But if you determine there is a high likelihood you will not survive the next three to six months, you can begin that process ethically:

•Don’t offer prepaid gift cards. If you do, escrow the money.

•Keep good records of customers who deal with you during a transitory period, just in case you do not make it.

•If offering lay-a-ways, shorten the time, and escrow that money, too.

•When you take a repair, mark it clearly with the name of the owner to make it easier to return items where they belong in the event of closure.

If you do make the decision to throw in the towel, let your clients know before they read it in the paper or see the lock on your door. Post a notice to your place of business, giving them information on how to contact you. Even call and let the BBB know so we can help your clients get in touch with you.

The very best way to avoid having to think about how to end your business is to get some help as you form and grow. Consider these assistance sources:

•SCORE (scorespokane.org): Offers the services of retired executives to guide you.

•SNAP (snapwa.org): Offers micro loans to new business.

•SNEDA (sneda.org): Offers micro loans and technological support.

•SIRTI (sirti.org): Offers incubation and connections for small technology companies.

I love the man that can smile in trouble, can gather strength from distress and grow brave by reflection. ’Tis the business of little minds to shrink, but he whose heart is firm, and whose conscience approves his conduct, will pursue his principles unto death.

– Thomas Paine