Yes, ladies and gentlemen. There is, unarguably, an increasing disconnect between Wall Street and Main Street. And, for the most part, the good folks residing on Main Street (situated somewhere between Lake Wobegon and Anytown, USA) are on the losing end of the misunderstanding, and will probably continue to remain so until a major disruption brought on by Peer-To-Peer lending and financing or crowdfunding takes place.
It seems that most everyone has something negative or nasty to say about investment bankers; sadly, I’ll confess to being conflicted in that both the critics and objects of their criticism are among my friends and acquaintances.
There’s a celebrated joke that’s made its way around business and financial circles over the years. It goes something like this:
An investment banker walks into a room where his colleagues are in a meeting. “I’ve got good news and bad news,” he announces. “The bad news is we’ve just lost $100 million. The good news is, it wasn’t ours.” An associate raises his hand. “What was the bad news again?”
It’s humor, but if you were alive during 2008 to 2009, you’ll know that there is more than a grain of truth to the tale. Whether we’re talking about brokers, bankers, or even your most trusted financial advisor, you are probably finding it increasingly uncomfortable to rely on anyone else to care about your money and keep it safe.
The primary forces which are driving prices ever-upward in the United States economy are entrenched flaws in the economic system, which I will endeavor to isolate, identify and describe in this brief “read it and weep” article. While the situation continues to worsen, economic policy steps and changes in consumer habits could go a long way to bringing prices for durable and non-durable goods and services back within the realm of affordability. Please read on:
Flaw 1: Too Much Consumer Credit Available:
While access to consumer credit does increase consumption and can indeed be economically stimulating, it also changes major consumer acquisition decisions regarding durable goods (cars, appliances, homes…) from being cost-sensitive to merely being debt/lease service affordable. If I can drive a $55,000.00 automobile for a reasonably affordable $350.00 per month, I will either lease or purchase the car on installments (regardless of the real “cash” price) without even stopping to think that a car of equal value would have only cost me $27,500.00 five years ago. We’ve become obsessed with monthly payments while becoming irresponsibly uninvolved with real costs, which continually rise in response to the availability of credit. Simply put: More credit availability leads to steeply increasing prices.
Flaw 2: Too Little Personal Saving
The average United States taxpayer saves less than 10% of his or her annual income due to cultural changes, the growing disparity between wages and household expenditures, and due to the irksome fact that an increasing percentage of what used to be disposable personal income is now going toward the servicing of consumer debt. This leads to increased borrowing, which brings us back to Flaw 1, above.
Flaw 3: Third-Party Reimbursement And Payment
Why should I decline a medical test (whether truly necessary or not) or any medical or healthcare protocol when my insurance company will pay for all or close to all of the cost? Medical costs (as well as healthcare insurance premiums) have risen astronomically because prices do not reflect the ability of individuals to pay, but instead, reflect the willingness of third party payers (i.e., insurance companies) to foot the bill. This third-party payment addiction (just like debt addiction) takes the focus off of the real cost and necessity per procedure, treatment or medication, and replaces it with a focus on “how much does my insurance premium cost and how good is my plan coverage?”.
Flaw 4: Too Many Monopolies Or Protected Territories
Without mentioning the names “Comcast” or “Xfinity” (two monikers for one of the least-beloved and most hated companies by users/consumers), government-permitted or inadequately-regulated trusts or constructive monopolies make competition all but impossible for new market entrants to offer better, cheaper alternatives to those offered by the Goliaths which dominate the cable/telephone/ISP service sphere, as well as the consumer spheres for most major utilities – all of which are necessary for ‘normal’ living. Impediments to fair and open markets invariably lead to lower quality and higher prices to consumers.
Flaw 5: The Notion Of “Too Big To Fail” And Resultant Bailouts And Subsidies
When governments selectively elect to print more money, allocate more of public funds or increase taxes in order to subsidize the inefficiency and provide cover for the mistakes and misdeeds of large institutions (under whatever guise that this is done), it activates cost-push inflation as these subsidies and bailouts are paid for by consumers and taxpayers. What is worse, is that these colossal corporate wastrels are all but encouraged to continue behaving poorly as there is absolutely no incentive (either negative or positive) for them to mend their wicked ways. These beached whales (with extensive ties to government policy and largesse) will always be pushed back into the ocean by the governmental administration. Consumers get poorer while the corporate elite continue to receive paychecks and bonuses in ever-increasing, stratospheric amounts. Unconscionable? Yes, indeed!
Flaw 6: Premeditated Obsolescence
The adoption of new technologies is a natural outgrowth of scientific advancement and market demand, and that’s perfectly fine; but when you buy a generational model of something that you use (either a product or a service), such as an iPhone 5 – just to cite one example – and the company which manufactures or provides the product or service stops supplying peripheral support for your version and all but forces you to buy the newer, more expensive version, prices are driven up as unwitting or unwilling consumer hostages line up to trade in the increasingly-useless older model for the shiny new one. This inflates costs (i.e., the new version is more expensive than the old), and increases the requirement to buy replacements, virtually turning a durable good into a consumable, depletable item.
Flaw 7: The Disappearance Of The Middle Class
As the middle class shrinks to an ever-decreasing percentage of the total population, the wealthy become wealthier and can afford to buy more, while the poor proceed to either rely upon government aid (quite inefficient and expensive) or live an increasingly leveraged lifestyle. Please refer to Flaw 1, at the beginning of this article…
The provisions commonly known as the Foreign Account Tax
Compliance Act (FATCA) became law in March 2010. If you are a
U.S.-domiciled individual or entity with assets or accounts
outside of the U.S., or if you are a non-U.S. individual or entity
with assets or accounts in the U.S., you must be in compliance
with FATCA or risk the imposition of civil and potentially
criminal penalties. The Internal Revenue Service is charged with
enforcing compliance and its (the IRS’) reach is international by
fiat. While FATCA purports to target individual taxpayers,
entities are affected (based upon their ownership by individuals
subject to FATCA), and the author believes that the issuance of
actual regulatory reporting requirements for non-financial
entities will be required in the near future.Here are the stated objectives of FATCA:
FATCA targets tax non-compliance by U.S. taxpayers with
FATCA focuses on reporting:
By U.S. taxpayers about certain foreign financial accounts
and offshore assets
By foreign financial institutions about financial accounts
held by U.S. taxpayers or foreign entities in which U.S.
taxpayers hold a substantial ownership interest
The objective of FATCA is the reporting of foreign
financial assets; withholding is the cost of not reporting. The
term “witholding” can be a euphemism for de facto
forfeiture or extensive, expensive delays in transacting business
or transferring balances.
If you are an individual:
U.S. citizens, U.S. individual residents, and a very
limited number of nonresident individuals who own certain foreign
financial accounts or other offshore assets (specified
foreign financial assets) must report
Use Form 8938 to report these assets
Attach Form 8938 to the annual income tax return (usually
Taxpayers with a total value of specified foreign
financial assets below a certain threshold
do not have to file Form 8938
If the total value is at or below $50,000 at the end of
the tax year, there is no reporting requirement for the year,
unless the total value was more than $75,000 at any time during
the tax year
The threshold is higher for individuals who live outside
the United States
Thresholds are different for married and single taxpayers
Taxpayers who do not have to file an income tax return for
the tax year do not have to file Form 8938, regardless of the
value of their specified foreign financial assets.
Third-party reporting: Foreign financial institutions may provide
to the IRS third-party information reporting about financial
accounts, including the identity and certain financial information
associated with the account, which they maintain offshore on behalf
of U.S. individual account holders.
Application to domestic entities: The IRS anticipates issuing
regulations that will require a domestic entity to file Form 8938 if
the entity is formed or used to hold specified foreign financial
assets and the total asset value exceeds the appropriate reporting
threshold. Until the IRS issues such regulations, only individuals
must file Form 8938. For more information about domestic entity
filing, see Notice
If you are a financial
institution, or if you are simply an entity (either within or outside
of the U.S.) which issues payments to individuals or other entities
internationally, it might be advisable for you to “play it safe”
– conduct a Google search [ https://www.google.com/#q=us+withholding+agents+fatca
for some basic background
information regarding any reporting or other compliance requirements
to which you may be subject (especially if you may be deemed a “U.S.
Withholding Agent”) and follow your initial research with a
consultation with competent legal and tax counsel in order to be
certain that you are in compliance with the law.
informational resources follow. While these resources may indeed be
helpful, they may be outdated (in some cases, as the regulations and
interpretations are constantly changing) and cannot be used or
construed as a substitute for professional legal and tax advice. The
author does not endorse any of the firms providing the information
Labels, Tags, Categories,
Keywords And Search Terms For This Article:
FATCA, Foreign Account Tax
Compliance Act, international business, import/export, international
trade, the Internal Revenue Service, offshore and overseas accounts
and assets, U.S. Withholding Agents, regulatory compliance, The
Global Futurist Blog, The Internationalist Page Blog, Douglas E.
THE INFORMATION CONTAINED IN THIS ARTICLE SHOULD NOT BE CONSTRUED BY
THE READER AS BEING LEGAL, FINANCIAL, TAX, ACCOUNTING, ECONOMIC OR
INVESTMENT ADVICE. NO OFFERING OF SECURITIES OR OTHER INVESTMENT
INTERESTS OF ANY TYPE IN ANY ENTITY IS MADE HEREBY, NOR IS A
SOLICITATION FOR THE PURCHASE OF SECURITIES OR OTHER INVESTMENT
INTERESTS OF ANY TYPE IN ANY ENTITY MADE HEREBY. THIS ARTICLE IS
INTENDED FOR GENERAL INFORMATIONAL PURPOSES ONLY AND REPRESENTS THE
VIEW OF THE AUTHOR ONLY.
ARTICLE IS COPYRIGHT 2015 BY DOUGLAS E. CASTLE, WITH ALL RIGHTS
RESERVED. ANY REPRODUCTION, TRANSMITTAL OR DISTRIBUTION OF THIS
ARTICLE, EITHER IN WHOLE OR PART, IS UNAUTHORIZED AND MAY BE
UNLAWFUL, UNLESS FULL ATTRIBUTION IS GIVEN TO THE AUTHOR AND ALL
IMAGES AND LINKS IN THE ARTICLE REMAIN INCLUDED AND “LIVE.”
International Business Update: Wiring Funds And Banking
If you are either conducting business internationally or are contemplating conducting any type of business which may require international electronic or SWIFT transfers of funds (i.e., funds transfers inbound or outbound via wire) the current terrorist threat levels are already creating additional diligence and reporting on the part of depositary institutions, as certainly as it will now take you longer to go through airport security clearance protocol on any international flight due to the prevalance of consciousness relating to possible terrorist or Ebola virus-related problems throughout the world.
Following are several suggestions to provide your banker, or your recipient’s banker – as well as the host of regulators to which they now answerable – with additional comfort regarding the nature of your transactions, business and funds. While you may see these steps as “overkill,” rest assured that they are not, and that they will reduce the likelihood of any holds or restrictions on your funds. Again, these are not legally mandated, but are just an extra step of precaution:
Do not, under any circumstances, accept any inbound transfers, or make any outbound transfers by wire (or by check, for that matter) to businesses or other organizations located in any of the prohibited jurisdictions on US Ex-Im Bank’s most recent publication of the Country Limitation Schedule (a link to which which follows for the purposes of example) or which happens to be on the Department Of The Secretary Of State’s “Watchlist” (a link to which follows for the purposes of example) ;
Pre-advise your bank, via email to your account officer or manager, if you are anticipating any transfer into or out of your account in any amount in excess of $1.0 million US;
Have any transferor execute the following undertaking [or one in a format suggested by your legal counsel] in a signed writing and either fax or email the same to your banker (in the form of a PDF attachment) with your own covering letter to accompany it: “ _________________ is transferring funds in the amount of _____________________ to ________________ [recipient name] via SWIFT [or even via check, if you’d like to take that extra precaution when you are accepting a check drawn on a foreign bank in payment for goods or services]. This transaction is made using clean, cleared funds of non-criminal origin, and is being transferred in compliance with applicable laws; further, these funds are free of all liens, taxes, encumbrances and other claims of any sort, and are being conveyed to be utilized for legal purposes.”
Should you wish to find out if the country with which you are considering doing business is “watchlisted” by either the Department Of State or the Department Of Homeland Security, go to either http://www.state.gov/ or http://www.dhs.gov/ respectively. Both websites offer you telephone numbers to contact helpful civil servants to answer any of your questions.
Douglas E. Castle
NOTE: THE INFORMATION CONTAINED IN THIS ARTICLE SHOULD NOT BE CONSTRUED BY THE READER AS BEING LEGAL, FINANCIAL, TAX, ACCOUNTING, ECONOMIC OR INVESTMENT ADVICE. NO OFFERING OF SECURITIES OR OTHER INVESTMENT INTERESTS OF ANY TYPE IN ANY ENTITY IS MADE HEREBY, NOR IS A SOLICITATION FOR THE PURCHASE OF SECURITIES OR OTHER INVESTMENT INTERESTS OF ANY TYPE IN ANY ENTITY MADE HEREBY. THIS ARTICLE IS INTENDED FOR GENERAL INFORMATIONAL PURPOSES ONLY AND REPRESENTS THE VIEW OF THE AUTHOR ONLY.
THIS ARTICLE IS COPYRIGHT 2014 BY DOUGLAS E. CASTLE, WITH ALL RIGHTS RESERVED. ANY REPRODUCTION, TRANSMITTAL OR DISTRIBUTION OF THIS ARTICLE, EITHER IN WHOLE OR PART, IS UNAUTHORIZED AND MAY BE UNLAWFUL, UNLESS FULL ATTRIBUTION IS GIVEN TO THE AUTHOR AND ALL LINKS IN THE ARTICLE REMAIN INCLUDED AND “LIVE.”
US exports are still not either in positive balance against foreign imports, foreign domestic investment, or against GDP (Gross Domestic Product).
Not only are our exports inadequate in the aggregate, but we continue to show very limited progress in penetrating the emerging nations markets where the profitability per unit exported would be higher for reasons of lower tariffs (some of which could actually be negotiated directly with the appropriate agencies and individuals in those countries — especially in the Pacific Rim, Southeast Asia, parts of the African continent and parts of Latin America).
This represents a failure, on the part of the US (and on the part of many US-based companies) to exercise the powers of diplomacy and to invest in our domestic economy’s future due to an unwillingness to “pioneer” new territory and to learn about other cultures. And those territories are where the U.S. dollar is worth the most and the arbitrage advantage is the greatest.
Working in these parts of the world would not only serve the US economy well, but it would help us gain a competitive foothold politically in these nascent markets before they are completely beseiged by overtures (both friendly and hostile) from China and other countries which the US perceives as being adversaries in the conquest for [silly as it sounds] world domination.
Diplomatic visitation and courtship, combined with credit insurance and other insurance products would make these markets safe and profitable for some of the smaller to middle-sized US companies, which could use EXIM programs in combination with virtual export divisions (visit http://www.GetGlobalEdge.com, http://DouglasECastle.com and http://DouglasECastleConsultancy.com to learn more about the notion of virtual export and import divisions) to penetrate and dominate these smaller but growing markets.
In all of the time that we are not pursuing this course, we are missing out on 1) a higher percentage of profits per export dollar, and 2) gaining valuable political capital.
Leaders from the private and public sectors will discuss ways to boost U.S. exports and create American jobs
– The Export-Import Bank of the United States (Ex-Im Bank) will host
its Annual Conference April 24-25, 2014. The conference will focus on
the global business environment and prospects for growth. Business and
government leaders will address export opportunities and challenges for
American companies, the role of emerging markets, and the U.S. Trade
Agenda. The Bank will also celebrate 80 years of promoting American
jobs and exports.
Ex-Im Bank Chairman and President Fred Hochberg will kick off the conference with remarks Thursday morning at 9:00am EDT.
In addition, the two-day event will feature remarks, discussions, and
panels with some of the world’s leading economic voices, including Wells
Fargo Chairman and CEO John Stumpf; SpaceX CEO and Chief Designer Elon
Musk; Secretary of Commerce Penny Pritzker; Secretary of Energy Ernest
Moniz; Secretary of Agriculture Tom Vilsack; Pemex CEO Emilio Lozoya
Austin; Former Treasury Secretary and President Emeritus of Harvard
University Lawrence Summers; television host and bestselling author
Fareed Zakaria; Virginia Governor Terry McAuliffe; former U.S.
Ambassador to China Jon Huntsman; and others.
More than 1,000 lenders, insurance brokers, U.S. exporters, international
buyers, and government experts will also be in attendance. A more
detailed agenda is available at http://go.usa.gov/kXSF.
To RSVP for Ex-Im Bank’s Annual Conference, please email your name and media organization to firstname.lastname@example.org. On-site registration may be limited.
For coverage of morning sessions, we politely ask that all cameras arrive by 8:00am EDT.
Tags, Labels, Key Words, Categories And Search Terms For This Article: Export-Import Bank of the United States, Fred Hochberg, United States, Emilio Lozoya Austin, Terry McAuliffe, John Stumpf, Elon Musk, China, Douglas E. Castle, The Internationalist Page Blog,
OptumRx and its parent company think that they can merely pacify a few of the noisemakers and ignore the rest of the unspeakably abused herd. I don’t like when someone calls me stupid — Or worse, when they presume that I am… How about you? I’ve been assaulting them in the Court of Public Opinion, which means a great deal to me – It is marketplace justice — it is not bribed, bought or sold — and the sentence is carried out by the customers.
OptumRx has the worst customer service record of any of the firms within its industry in the entire United States! And since they do not care, we have to make them care.
THE CORRESPONDENCE RELATES TO MY POST “OPTUMRX MUST DIE”
NOTE 1: These people at OptumRx have all of the morality of monopolist-in-process Comcast (XFINITY) Cable, but in this mail in pharmaceutical racket, they are tampering directly with patient lives — literally. If you haven’t already done so, please take the Quick Survey by going to the hyperlink in the next paragraph.
NOTE 2: Been mistreated by OptumRx? Please help us by filling out a fast survey at the end of this article. http://douglasecastleblog.com/2014/01/05/optumrx-must-die-mailorder-pharmacy-monstrosity/ We need you! Thnx. #RF. If we receive enough compelling, emotion-packed responses to our Quick Survey, I will send a petition to the leaders of all of the Regulatory, Legal And Consumer Affairs bodies having influence in such matters, and we’ll either 1) Put OptumRx up to the light of intense scrutiny and possible punishment (including the loss of the ability to conduct their feeble excuse for a “business,”, or 2) We’ll get them to mend their incompetent, fraudulent and depraved ways, and win their long-suffering customers better care and cash compensation for the hardship which they (WE!) have had to endure.
Below is the Twitter exchange between the ignominious OptumRx (and their publicly-traded parent company, United Healthcare/ United Health Group). They certainly enjoy control, and love the idea of calling a country-wide problem an “isolated Consumer Matter.
Instead, what I received from the cowardly, guilty pukes at United this afternoon within only minutes of my sending my Twitter terms was simply a telephone voice mail from “Christine” (no last name, no title), from United Health Group’s Consumer Affairs Division indicating that she wanted to ‘help me resolve this issue‘, and that I could telephone her at 800-842-2656, press prompt 1, and then speak with her at her direct extension, which is 3042511. I’ll give her the opportunity to speak with me, but I smell a delaying tactic combined with a smokescreen. My suspicion is that I will have to speak with one of her titled superiors (with a last name, too), in order to settle this matter.
They are trying to insulate themselves from dealing with me directly.
I’ll not only keep you posted, but I’ll see to it that OptumRx, and its incredibly greedy, publicly-traded parent get their problems fixed an that things are made right — for all of us. And if you haven’t done it, take the Quick Survey (see the earlier part of this letter for the link) — if we get enough blood, bile and verifiable complaints — we will circulate a petition to all of the persons of influence at all of the agencies whose attention this may require.
If only Detroit were one of my Turnaround Business Clients (sigh), either the bankruptcy might have been avoided, or its method of conducting its “Municipal Business” might have been radically changed some time ago. There should have been much more oversight, checks and balances in all aspects of management, and operation, financial and forensic audits by a competent independent third party firm on a short notice basis. But then, the sad aspect of the public sector is that is by no means as accountable, or as interested in its investors (the taxpayers), as would be a simple medium-sized company.
When you combine poor accounting (and a lack of individual accountability), a lack of variance analysis, a lack of integrity in leadership, the absence of a formalized budgetary review process, the informality of fiduciary authority and a plethora of useless contracts for services and purchases that were not of benefit to the client [in a business they either call that “Other People’s Money” (OPM), which doesn’t really have to be accounted for directly if there’s enough of it (and who is keeping count as the nectar pours through the sieve? And more importantly, who knows what the total available capital for expenses and expenditures actually is?), or, in the worst case breach of fiduciary duty, fraud and embezzlement.
Goodness, if taxpayers realized that they were really shareholders, with the right to demand an accounting, a reconciliation, and an explanation of any ‘treasury leakage’ either through negligence or through political favors paid for at the expense of the populace. — DEC at 1Turnaround.
What follows is my curating and rather extensive and opinionated commentary regarding an article which I found in my inbox from Scoop.It!, a wonderful source of excellent articles and opportunities to really get a grand view of the topics which interest me, and are of crucial importance to my clients.
I am in full accord with the writer’s point of view as it concerns Detroit, specifically, and as it concerns all businesses and organizations which have fiduciary responsibilities. Sadly. election politics as well as organizational office politics tend to bring out some unsupported or unsupportable promises which ultimately will become perceived as lies. In any business or organizational structure (For-Profit and Not-For-Profit) you cannot make empty promises, as they will cost you all of your negotiating power (based largely in credibility), and possibly your career when the truth comes out.
Let’s assume that we are following a sensible business protocol, and that we are responsible to the Board, our colleagues, our employees, our customers (or constituents), our creditors and our investors. A methodical approach must be undertaken — it is sad that these politically-oriented individuals don’t examine the financial position and projections of the governments or businesses which they are trying to get the opportunity to lead prior to embarking on their campaigns.
A general rule to start with is that you cannot ever make a promise which is unconditional, especially if it is dependent upon the promises of others (grants, investments, lots of new business revenues, a technological breakthrough and the like). Make fewer promises of good and plenty, and more commitments to fixing problems at their source to ensure safety, stability and success.
Aside: Not to ridicule anyone at the federal government level, but you can’t make inferences to “getting out of debt by increasing borrowing,’ or balancing the budget and helping businesses by increasing taxes on the poorer and middle classes and reducing services to them as well!
Never make a commitment that you do not intend to keep, and that you do not have a plan (a method) to keep. Exaggerate costs and the length of estimated completion or delivery time frames – it makes it easier to be a hero.
In terms of examining, monitoring, course-correcting and maintaining or improving the enterprise (whether it is government or non-government, For-Profit or Not-For-Profit), the protocols are universal.
Of course, in the case of all-too-many governmental subdivisions and entities, there is tremendous complexity, inadequate supervision, and labyrinthine accounting, authorization and record keeping. There’s too much capital, and too many persons with access to it, without proper oversight. A large number of seemingly trivial expenses and expenditures can eventually accumulate into a cavernous loss. This waste (being kind with my choice of terminology) is taxpayer money — in private enterprise, the shareholders would be taking the company’s management to court for this type of abuse. They would be speaking of breach of trust, breach of fiduciary duty, diversion of funds, fraud and possibly embezzlement.
I believe that Detroit is the first host organism to fall victim to an epidemic , and that municipal bankruptcies will be hooping up like crocuses in early springtime. And we’ll get closer to the truth about the extent of the federal deficit and the value of the U.S. dollar, fresh off of the press. That’s a scenario for The Global Futurist Blog to paint.
But then, I’ve gotten off of my focus. Let’s return to a standard fiduciary management protocol where each individual in the chain of command or hierarchy structure is responsible — truly responsible — at every level:
1) If a responsible individual sees or suspects a problem, it must be reported immediately to the appropriate persons of supervisory authority;
2) That person of supervisory authority should follow through with vigilance and persistence to see to it that the problem is solved before it wastes any more money and before it worsens;
3) The problem must be expediently fixed, and noted as such – after all, every minute of loss is a drain on profitability and solvency;
4) If there are too many systemic problems, and the organization’s current financials as well as its proformas (always have worst-case, realistic-case forecasts handy; they should be created frequently as assumptions and conditions change; they are a powerful management tool, and an early warning system) are not looking good, senior management must gather the right experts, both from inside of the organization and from senior management’s “A” list of outside professionals, and;
5) Re-examine the organization’s entire business model in terms of S.W.O.T. analysis, critical path dependencies analysis, and possible displacement (or antiquated assumptions) analysis. Look to prune your sunk costs and nonproductive recurring costs;
Note: From this point forward in my discussion, I’ll address this issue as if the business (even if it is the business of running a municipality) were yours, and that you were the executive ultimately in charge.
6) Reconstruct the organization’s business model with the help of the assembled expert committee, create a realistic, turnaround reconstruction plan, promulgate it to all of the involved and affected individuals, as well as to all other parties doing business or trade with the organization. Let them know of the changes, what the time frames really are, what sacrifices or compromises they will have to make lest the team effort fail (Note: If you’re a charismatic, credible, strongly committed leader, you will convince every individual, from the board room down to the janitorial staff that they are each, and all, partners in the the success of the business, and that necessary sacrifices may have to made to bring stability and better results for the benefit of all). Take a serious tone, especially when asking for sacrifices and compromises. Make everyone feel like a stakeholder and an employee or an agent of help;
7) Work the new plan to the letter, diligently, faithfully and without deviation. Report to all of your “partners” frequently as results come in and new forecasts are made. Your diligence, conscientiousness and candor in terms of reporting frequency and transparency will be appreciated and might make potentially hostile parties feel more like allies in a group project and a united effort. That latter is the effect for which you should strive – it justifies the sacrifices and compromises…and to make it even more potent, be certain that the C-Suite occupants, senior executives and the directors make visible meaningful sacrifices as well. You don’t want to look like a “too-big-to-fail” company that the U.S. government just bailed out [grin];
8) Demonstrate by variance analysis (projected versus actual results) how you are actually achieving the goals set forth in your turnaround business plan, and how you have converted waste and losses to a positive, potentially distributable fund balance;
9) From that positive pool of hard-won cash, reward all of the parties who have cooperated in the effort (at a sensible level,and not just to the senior most executives and directors, but to all of the participants, sacrificers and compromisers who have made it possible. Everyone enjoys a participatory celebration of success and a feeling of having participated in a victory…everyone! The object:
Demonstrate in distributable dollars and cents that the tough cuts have paid off in terms of solvency, stability and a positive cash flow. A great leader (as opposed to a basically attired career politician) rallies his forces for a job successfully done, reminds them that their efforts need to continue, and also reviews the victorious results of the variance analysis — show them how inflows have increased and how outflows have decreased. Make them all feel like stakeholders.
10) Promise to continue on course, and to remain vigilant and practical, as well as honest and tough. Continue to restructure and turnaround the business periodically with a “no sacred cows” and a zero-based budgeting approach. These techniques and tools work.
In industrialized nations, particularly the USA, the prevailing attitude is in either 1) the instant success or in 2) the disposable item. That disposable item can be a small to medium-sized business which is experiencing some financial turmoil and might well be on the road to Reorganization pursuant to Chapter 13, and more often than not, to a Chapter 7 liquidation proceeding.
The terms and notions associated with business “repairs,” or outright cures such as turnarounds (i.e., turnarounds leading to sustainable solvency with a healthy and consistent positive cash flow), restructurings, negotiations, workouts, re-amortizations, debt-equity conversions, debt-service coverage increases, re-budgeting, a Re-Emergence Plan, creditor settlements, investor arrangements, employee buy-in /buyout plans, and management buy-in/buyout plans. [Please feel free to look under the DEFINITIONS Section in this blog’s navigation bar if any or all of the foregoing terms seem or seems unfamiliar to you.]
The calculus of this focus on start-ups to the extent that troubled businesses have become neglected or stigmatized as “corporate raider targets (Dell Computer, anyone?) or “extinct” simply because they are not genesis centers for new technologies, or because they do not have venture capital curb appeal (anyone interested in saving a ball bearing or paper clip manufacturing business? – I can hear your deafening silence as I watch [I can’t literally look at you through your computer or device, but I like to be as fearsome and awe-inspiring as possible] you look down in shame at the floor).
You don’t have to be a calculus superstar to visualize that a small start up entity might create five jobs this year, and fifteen next year, and perhaps a number more (if they are not bought up by Google, in which case, some of those jobs will likely evaporate into a consolidation), while saving the Cruddleston Corrugated Packaging business [fictitious, but which would possibly be located in in the “Rust Belt” of the USA or near Newark, New Jersey] might conserve 80 existing and productive jobs, and might create new employment (perhaps another 10 – 20 permanent full-time positions as well as some precious student internship training.
Perhaps the bloom is off of the proverbial rose when it comes to manufacturing and industrial businesses in the small ($1 million up to $100 million in sales revenues) to medium-sized ($100 million up to $500 million per year in sales revenues) sectors. Part of the difficulty is that these businesses cannot necessarily be fixed and set on the right trajectory without investing some serious analytic, planning and implementation time. Negotiations, correspondence, restructuring and a multitude of changes, some of which will be painful but which are necessary, will have to be implemented and monitored. This usually requires the retention of an outside specialist, in additional to legal counsel — there are a plethora of law firms, but very, very few positive-minded, tough turnaround advisors (or business leaders of this age in general) who understand that 1) not every business problem can be cured by throwing bundles of cash at it, and 2) that it is not pre-ordained by any “Higher Authority” that because a business has problems that they must be fatal.
If these prospectively viable turnaround clients fail (and it isn’t a failure which is based upon technological obsolescence or a colossal and uninsured legal judgment or settlement) it is because they were convinced that they could never recover, and that the path most frequently taken is either directly to Chapter 7 or being on Chapter 13 “life support” – with the expectation of a fatality so no restructuring and Re-Emergence Plan is even hinted at. Working to save the company and its jobs is definitely the road less traveled. Death of the entire mid-section of America — which is not the true subject addressed by the JOBS Act or anyone’s legislative, regulatory or professional menu — has been occurring at an increasing rate, and is perceived as a self-fulfilling prophesy.
In my professional capacity, I am keenly aware that most company owners, management, directors or even legal counsel do not know who to turn to to perform this type of special precision surgery.
The problem is one of epic proportions. The following statistics for court bankruptcy filings of businesses were provided by The American Bankruptcy Institute for the entire United States, based upon data accumulated from judicial records:
Quarterly Business Filings by Year (1994-2012)
You’ll note that the highest number of filings was in 2009, one year following the central banking system and capital markets meltdown that decimated this country’s economy, with the rest of the Global Economy to follow soon thereafter.
One insidious implication, referring again to the above table, is that businesses in the United States (as well as their clients and consumers) were so dependent upon access to credit and the expectation of serial refinancing to prop up cash flow, that they had no cushion of equity in the form of cash reserves, and the other implication was that these companies were taking some liberties with what they considered to be collateral assets, profits and earnings.
These companies, and their legal representatives where virtually running to the courthouses to throw their businesses away. They were collapsing like dominoes, and the overwhelming negativity in the emotional drivers of the economy accelerated this flight to the express route. Many of these companies were unaware that possibilities existed for a reversal of their fortunes — and those who actually thought of the possibility of a means of saving the business by bringing an outside expert inside simply did not know where to find an expert.
Applying some simple and strictly hypothetical assumptions to the numbers set forth in the above table for the second calendar quarter of 2012, let us say that :
10% of the companies (that’s 1,037) could have been saved;
That each company, while operating at full capacity, had on average of 75 full-time employees;
That if all of those existing jobs could have been saved, the total of persons seeking unemployment assistance or very low-paying jobs would have been reduced [just for that quarter!] by 77,779.
I believe these numbers to be reasonable.
In sum, companies do not have to die for their mistakes, transgressions and lack of adequate stewardship. There is help for them. It shouldn’t be a secret.
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