The ten reasons businesses fail

  1.  The business was started and run for the wrong reasons.Some companies are set up and then run more like a hobby than a business.  Lifestyle businesses tend to merely exist, not doing spectacularly, until something bad happens to cause the wheels to come off;
  2. I can do it all myself!In his book, the E-myth, Michael Gerber spoke of the 3 skill-sets needed by business owners today – entrepreneurial, managerial and technical.  No one I know has all three, in the right degrees, not in today’s fast pacing business environment.  Seeking support from outside the business to plug skills gaps is a show of real strength, not weakness.
  3. Inadequate working capital.It always costs more than you’d expect to set up a business and survive the inevitable troughs later on.  It’s incredibly dangerous to rely on credit lines over which you don’t have full control.  Either way, the business owner didn’t properly assess how much money would be needed, where it’s best to get it from or what might happen;
  4. Weak financial skillsEvery business owner needs to understand how the business clicks financially.  If you don’t, you haven’t a business, you’ve got a hobby.  If you’ve got weak financial skills, there’s a good chance you probably also lack the profit motive, you love what you do and will return to stereotype ‘manager’ or technician’ roles when things get bad, digging an even bigger hole for yourself.  ask us to explain this;
  5. The location is wrongQuite simply, the business opportunity was not fully explored;
  6. Lack of planningThere’s a lot of truth in the saying ‘to fail to plan is to plan to fail’.   The unexpected does happen, particularly in our increasingly complicated world!;
  7. Over-trading (and what I call under trading)Over-trading / over-confidence can cause terminal cash problems in fast moving businesses.

    There is also something I call ‘under-trading’, where the business owner adopts a strategy of merely cutting costs to deal with their financial, operational and strategic problems – they do this because doing so can be the easiest decision and produces short term cash benefits.  However, we find that if this is all you do, you store up much more severe problems in the medium term.  It’s simply not possible to cut yourself to greatness!;

  8. Poor marketingThe Company waits for business to come to it, as ‘it always has done’.  The business could be ‘invisible’, there’s no route to the changing market, no sales force;
  9. Failing to follow a clear strategic directionOver time the business develops haphazardly.  It is slowly strangled by ‘unfair’ relationships with major customers, suppliers or employee groups;
  10. Inflexible business modelAn inflexible business model and high fixed cost base while they may work in boom times cause significant problems in the inevitable times of bust.

If your business demonstrates and of these, we can help… just call us on 01902 672323 now.

Another (small) screw in the coffin of smaller community credit unions

A good many small community based credit unions have had a torrid time in recent years and probably right now aren’t seeing much of an improvement.  The Co-Op Bank’s decision to cut the interest it pays on its community bank accounts – such s their Community Directplus, Co-Operatives Directplu and Social Enterprise Directplus accounts – will prove to be another, small and slow, but certain turn on the screw in the coffin of already beleagured credit unions.

Small community based credit unions are really struggling – at best, they have seen flat income levels, at worst they’ve seen their income fall away, especially from grants and interest receipts.   Yet there is often little opportunity for them to reduce their overheads in line with the fall in income.  Trying to increase income by growing the loan book can often carry a disproportionate risk of bad debts so for some they have a stark choice – grow or merge or die a death of a thousand cuts.  The Co-Op decision will prove to be just another cut…

Let’s look at what the Co-Op is doing…

Interest rates paid on customer balances have never been lower, certainly not in my lifetime.  Until June the Co-Op will be paying a tiered rate of interest – Nil% on balances up to £1,999; 0.12%  on balances £2,000 to £9,999; 0.15% on balances £10,000 to £24,999; 0.18% on balances £25,000 to £99,999; 0.21% on balances £100,000 to £249,999; and 0.25% on balances over £250,000.

That’s to say the most the Co-Op will ever pay any credit union right now is one quarter of one per cent per annum… peanuts.

Yet those peanuts are being crushed!

The new rates from June 2015 will be: balances up to £24,999 Nothing, yes absolutely nothing – the Co-Op will get to keep your money for free!; £25,000 to £99,999 0.06% – a third of the already derisory amount it had paid previously; £100,000 to £249,000 0.09% – less than half it had previously paid; £250,000 to £499,000 0.18% – a cut of one third from the rate it had paid previously; over £500,000 0.25%, no change.

The message is clear… the Co-Op isn’t interested in supporting small organisations, it’s using you, the small credit union, to extract itself from its own financial difficulties … it doesn’t have the cohonas to abuse bigger organisations in the same way as they’re prepared to abuse you.

So it’s you, the smaller community based credit unions, and organisations just like you who will feel the brunt of this decision… it will be another straw on the camel’s back…

You see, right now, because you’re getting virtually nothing on the money you are sitting on and with additional grant income difficult to come by, the only way you can meet the regulator’s solvency targets might be by increasing the interest you receive on your loan book.  As you’re limited by law as to the maximum interest rate you can charge on the loans you make, this means you need to grow your loan volumes – the number of loans you put out and the amount you loan out.

The issue is you need to do this without increasing your bad debts.  Desperate people will go to any lengths – you will be lied to, some applications will be pure fabrication. How robust are your application procedures throughout your credit union?  You might get credit reports on potential new lending, but how reliable are those reports? – they are not as accurate as you’d hope!  And you probably can’t always rely on your longstanding members’ past savings history as an indication of their ability to repay any new loans – because people have so many ways nowadays of avoiding repaying their debts – not just the formal insolvency processes of bankruptcy, DRO, and IVA, and informal debt solutions such as DMP and DRO, but also pleading poverty in any debt collection process passing through the courts, and even disappearing.

It’s easy to see the situation whereby a credit union that’s already struggling with the the regulator could be forced into administration and then closure because of its bad debt experience and low level of bank interest income.

 

Another (small) screw in the coffin of smaller community credit unions

A good many small community based credit unions have had a torrid time in recent years and probably right now aren’t seeing much of an improvement.  The Co-Op Bank’s decision to cut the interest it pays on its community bank accounts – such s their Community Directplus, Co-Operatives Directplu and Social Enterprise Directplus accounts – will prove to be another, small and slow, but certain turn on the screw in the coffin of already beleagured credit unions.

Small community based credit unions are really struggling – at best, they have seen flat income levels, at worst they’ve seen their income fall away, especially from grants and interest receipts.   Yet there is often little opportunity for them to reduce their overheads in line with the fall in income.  Trying to increase income by growing the loan book can often carry a disproportionate risk of bad debts so for some they have a stark choice – grow or merge or die a death of a thousand cuts.  The Co-Op decision will prove to be just another cut…

Let’s look at what the Co-Op is doing…

Interest rates paid on customer balances have never been lower, certainly not in my lifetime.  Until June the Co-Op will be paying a tiered rate of interest – Nil% on balances up to £1,999; 0.12%  on balances £2,000 to £9,999; 0.15% on balances £10,000 to £24,999; 0.18% on balances £25,000 to £99,999; 0.21% on balances £100,000 to £249,999; and 0.25% on balances over £250,000.

That’s to say the most the Co-Op will ever pay any credit union right now is one quarter of one per cent per annum… peanuts.

Yet those peanuts are being crushed!

The new rates from June 2015 will be: balances up to £24,999 Nothing, yes absolutely nothing – the Co-Op will get to keep your money for free!; £25,000 to £99,999 0.06% – a third of the already derisory amount it had paid previously; £100,000 to £249,000 0.09% – less than half it had previously paid; £250,000 to £499,000 0.18% – a cut of one third from the rate it had paid previously; over £500,000 0.25%, no change.

The message is clear… the Co-Op isn’t interested in supporting small organisations, it’s using you, the small credit union, to extract itself from its own financial difficulties … it doesn’t have the cohonas to abuse bigger organisations in the same way as they’re prepared to abuse you.

So it’s you, the smaller community based credit unions, and organisations just like you who will feel the brunt of this decision… it will be another straw on the camel’s back…

You see, right now, because you’re getting virtually nothing on the money you are sitting on and with additional grant income difficult to come by, the only way you can meet the regulator’s solvency targets might be by increasing the interest you receive on your loan book.  As you’re limited by law as to the maximum interest rate you can charge on the loans you make, this means you need to grow your loan volumes – the number of loans you put out and the amount you loan out.

The issue is you need to do this without increasing your bad debts.  Desperate people will go to any lengths – you will be lied to, some applications will be pure fabrication. How robust are your application procedures throughout your credit union?  You might get credit reports on potential new lending, but how reliable are those reports? – they are not as accurate as you’d hope!  And you probably can’t always rely on your longstanding members’ past savings history as an indication of their ability to repay any new loans – because people have so many ways nowadays of avoiding repaying their debts – not just the formal insolvency processes of bankruptcy, DRO, and IVA, and informal debt solutions such as DMP and DRO, but also pleading poverty in any debt collection process passing through the courts, and even disappearing.

It’s easy to see the situation whereby a credit union that’s already struggling with the the regulator could be forced into administration and then closure because of its bad debt experience and low level of bank interest income.

 

Bank sold your property for less than it’s worth?

I’m seeing a good number of customers of the banks complaining that their assets have been seized and sold at a massive undervalue, often leaving them with a personal guarantee liability that could lead to them losing everything.

Why is that?

Is it just because of where we are in the recovery/recession? Are the banks merely taking the opportunity, as they always do at the end of recessions, to reduce their loan books by selling out at a time they, but their customers don’t, consider to be optimum?  Or is there a concerted land grab going on? Are the banks really not best set up to, or interested in, maximising realisations?  Are the people that come to see me the victim of the negligent actions of a few?  Are some individuals within the banks acting fraudulently to feather their own nests or those of preferred clients/contacts?

All these views have been expressed to me and more… exactly where the truth lies differs from bank to bank, department to department.  Suffice to say there is a growing number of former clients of the banks who tend towards the blacker views…

It’s clear to me that the banks are flexing their commercial muscle and ‘burying’ many claims for having (at least allegedly) sold assets at an undervalue.  You see it’s really not very easy for anyone, however knowledgeable they are in the law and resources they have, to take the banks on.  The banks will wheel out their tame, (very) expensive, and (very) experienced legal eagles – I say tame because they do the banks bidding without any exploration as to whether their arguments have any legal or moral foundation.  The banks have simply bought them to cover up their malpractice.

What I’ve seen several times recently could potentially be attributed to mere incompetence.  5 years on from the start of the recession, the banks have been holding on to a lot of property, in one way or another, for a long time, longer than they want.  Unable to sell it until now, they’re now shifting far more property.  But what they are not doing is:

  1. Casting a fresh pair of eyes over cases.  Old mistakes are being perpetuated.  There’s no vision.
  2. Getting a fresh agents’ report advising on how best, at this time, in these market conditions, to expose the property to the market.  They’re adopting a tick box  approach more appropriate for an earlier time.  If they marketed it previously, they’re relying on that.

Let me give you an example of one case I am working on right now.  In the 3 or so years between the bank’s repossession and ultimate sale of a piece of land, some laws changed and the market for development land in the area improved massively.  My client’s property turned out to be a ransom strip, holding up a £30m residential development, making it very valuable indeed on a Stokes v Cambridge basis.  The bank had even failed to heed their own agents’ advice to investigate the possibility of the land being a ransom strip.  They’d sold it as a piece of pretty useless land yet still chased the personal guarantors for their alleged ‘losses’ – had they sold the land for what it was really worth my client would have had a serious amount of money handed to him, there would have been no loss.   Negligent? Fraudulent?  Whatever it proves to be, it is actionable, although the bank will fight us every step of the way.

My advice?

Be prepared for a long fight – the bank will not give way unless forced to do so in court.

You can expect judges to give you every chance to present your case.  It is almost as if they have seen a lot of other similar cases to yours and are driven to see justice done for you, the small man.  Do your best to present your case properly, backed up by lots of hard evidence – after all you can expect the banks to best present their own position and you need to prove they were somehow lacking.

Expect the fight to be costly in money terms.  Your lawyers, agents and other experts will be expensive.  And if you lose you can expect the bank to seek costs against you – and that will be at their lawyers’ extortionate rates, meaning you not only pay your own costs, but also a good proportion of the other side’s.

Expect the bank to play the giant’s role in your David v Goliath fight.  They will use every trick in the book to bully you into giving up the fight.  They will try to wear you down over time.  They have systems to take care of things, to manage the litigation, but for you it’s personal and there is no escape.  You’ll not sleep properly, this will be a constant worry.  To win you will need to be resilient and in good health.

If you’d like some help fighting a bank, I’d be delighted to help… just call or email me.

Bank sold your property for less than it's worth?

I’m seeing a good number of customers of the banks complaining that their assets have been seized and sold at a massive undervalue, often leaving them with a personal guarantee liability that could lead to them losing everything.

Why is that?

Is it just because of where we are in the recovery/recession? Are the banks merely taking the opportunity, as they always do at the end of recessions, to reduce their loan books by selling out at a time they, but their customers don’t, consider to be optimum?  Or is there a concerted land grab going on? Are the banks really not best set up to, or interested in, maximising realisations?  Are the people that come to see me the victim of the negligent actions of a few?  Are some individuals within the banks acting fraudulently to feather their own nests or those of preferred clients/contacts?

All these views have been expressed to me and more… exactly where the truth lies differs from bank to bank, department to department.  Suffice to say there is a growing number of former clients of the banks who tend towards the blacker views…

It’s clear to me that the banks are flexing their commercial muscle and ‘burying’ many claims for having (at least allegedly) sold assets at an undervalue.  You see it’s really not very easy for anyone, however knowledgeable they are in the law and resources they have, to take the banks on.  The banks will wheel out their tame, (very) expensive, and (very) experienced legal eagles – I say tame because they do the banks bidding without any exploration as to whether their arguments have any legal or moral foundation.  The banks have simply bought them to cover up their malpractice.

What I’ve seen several times recently could potentially be attributed to mere incompetence.  5 years on from the start of the recession, the banks have been holding on to a lot of property, in one way or another, for a long time, longer than they want.  Unable to sell it until now, they’re now shifting far more property.  But what they are not doing is:

  1. Casting a fresh pair of eyes over cases.  Old mistakes are being perpetuated.  There’s no vision.
  2. Getting a fresh agents’ report advising on how best, at this time, in these market conditions, to expose the property to the market.  They’re adopting a tick box  approach more appropriate for an earlier time.  If they marketed it previously, they’re relying on that.

Let me give you an example of one case I am working on right now.  In the 3 or so years between the bank’s repossession and ultimate sale of a piece of land, some laws changed and the market for development land in the area improved massively.  My client’s property turned out to be a ransom strip, holding up a £30m residential development, making it very valuable indeed on a Stokes v Cambridge basis.  The bank had even failed to heed their own agents’ advice to investigate the possibility of the land being a ransom strip.  They’d sold it as a piece of pretty useless land yet still chased the personal guarantors for their alleged ‘losses’ – had they sold the land for what it was really worth my client would have had a serious amount of money handed to him, there would have been no loss.   Negligent? Fraudulent?  Whatever it proves to be, it is actionable, although the bank will fight us every step of the way.

My advice?

Be prepared for a long fight – the bank will not give way unless forced to do so in court.

You can expect judges to give you every chance to present your case.  It is almost as if they have seen a lot of other similar cases to yours and are driven to see justice done for you, the small man.  Do your best to present your case properly, backed up by lots of hard evidence – after all you can expect the banks to best present their own position and you need to prove they were somehow lacking.

Expect the fight to be costly in money terms.  Your lawyers, agents and other experts will be expensive.  And if you lose you can expect the bank to seek costs against you – and that will be at their lawyers’ extortionate rates, meaning you not only pay your own costs, but also a good proportion of the other side’s.

Expect the bank to play the giant’s role in your David v Goliath fight.  They will use every trick in the book to bully you into giving up the fight.  They will try to wear you down over time.  They have systems to take care of things, to manage the litigation, but for you it’s personal and there is no escape.  You’ll not sleep properly, this will be a constant worry.  To win you will need to be resilient and in good health.

If you’d like some help fighting a bank, I’d be delighted to help… just call or email me.