How to Confidently Run a Business in a Difficult Economy
As entrepreneurs, we are naturally confident and aggressive. Often times, it is not simply a good business model or strong leadership that causes a company to succeed, but rather is the positive outlook that allows us to see and take advantage of opportunities others miss that makes the difference between success and failure. The U.S. Delta Force uses the motto “Delta makes its own luck.” Not to compare the two in any other way, but so too do successful businessmen and businesswomen.
Despite this, it is difficult to escape what seems like more and more bad news about the national and world economies. It is apparent that after finally reaching bottom and slowly growing again, the rate of growth in the U.S. economy is slowing again. Job growth continues to be bleak with the number of unemployed persons growing recently by another 350,000 to 100.9 million and the number of employed persons shrinking again from 58.5% to 58.4%. While you hear news of job growth, it continues to lag behind the rate of population growth, resulting in an overall increase in the number of unemployed individuals. Durable goods orders dropped in May 2012 by 4% with inventories rising. Home prices dropped again and consumer confidence dropped significantly. With consumer transactions making up such a large part of our economy, that is particularly troublesome.
What does this mean? Continue moving forward and take advantage of your opportunities and contacts, such as through the Shelby County Chamber of Commerce. But at the same time, you should play defense. The following are a few low-cost, high-reward strategies and techniques that are often times overlooked but should form the foundation of your defensive business strategy to protect your personal assets:
- Incorporate your business. It is relatively simple and inexpensive to incorporate your company with the Secretary of State. If you do not and your company fails, your personal assets are subject to collection for the company’s debts.
- Get your business records in order. Even if you have incorporated, if you do not maintain the business properly, creditors can attempt to “pierce the corporate veil” and collect from your personal assets. Do you have written bylaws or an operating agreement? If required, do you have annual minutes? Do you have all of your records in a readily-accessible corporate binder?
- Have you filed your biannual reports? Even if you properly incorporate, you must file a biannual report every 2 years with the Secretary of State or risk having your company administratively dissolved and placing your personal assets again at risk.
- Market under the business name. If you have a properly-formed company but market (especially in writing) under your individual name, creditors can attempt to argue that they did business with you and not your company, placing your personal assets in jeopardy.
- Sign contracts for the company. Be sure all contracts are written in the name of your company and that you sign them with the word “President, Shareholder or Member,” as applicable, after your name to avoid any confusion of who is entering the contract.
- Pay attention to taxes. Unlike most other debts that, in a worst case scenario, are dischargeable in bankruptcy, taxes are not and business owners can be held liable for them. They rarely go away and the interest and penalties that accrue on top of the principal can be breathtaking. If you are forced to decide between paying taxes or other bills, think long and hard before placing other debts ahead of taxes.
- Monitor your employees. Many of us are graced with having extraordinary employees that truly keep us up and running. Unfortunately, in difficult times, the incentive for employee theft is greater. Be vigilant, especially with employees having access to bank accounts and company credit cards.
- Check your insurance coverage. If you are operating on a tight margin, one uninsured claim can take down even a long-standing business. Find an agent you can trust to not give you a hard sell but that will objectively tell you whether you have enough coverage.
- Get audited. I know to most of us, that is a terrible thought. However, this is not an IRS audit. There are companies, such as Sherpa Performance Improvements in Indianapolis, (317) 607-2022, that perform audits on things such as credit card processing charges, shipping fees, energy use, property taxes and other matters at no cost to you unless they save you money. Because Sherpa Performance only gets paid a portion of any money it saves you, it is a no risk, all reward proposition that can save your business substantial money every month and free up more cash for future investment or to pay down debts.
The businesses and their owners with the best chance of surviving these difficult times are those that are simultaneously bold in their efforts but also successfully protect themselves ahead of time. As Benjamin Franklin said long ago, an ounce of prevention is worth a pound of cure.
Ray Basile owns the Basile Law Office, LLC and provides legal services in business, construction and real estate matters. His office is located at 11 Public Square in Shelbyville where he is a member of both the Shelby County Chamber of Commerce and Shelby County Builders Association. He can be reached at 317-825-0531 or firstname.lastname@example.org