How you do survive the worst economic downturn since the great depression? This is a big question. Many people never experienced the depression or even the big recession of 1981 and 1982. I was a controller of a large corporation back in 81-82. This got me thinking about how could I provide guidance to those who haven’t experienced such turbulence.

Based on my experiences I created a toolkit to package all the tips and techniques of how to get through the tough times. One of the key elements of the survival toolkit is developing a plan and a budget for recession survival. The toolkit contains a cash flow and budgeting template. The process of developing a plan should include an assessment of whether the business needs a tune up, a turnaround, or is in a state of crisis. When you can’t cover payroll, you’re in a crisis. This is why cash is king. If you don’t have adequate liquidity or access to cash, the chances for survival get pretty slim.

During a recession it is time to get aggressive with your sales and marketing. It isn’t always just pricing. Make sure you reach as many potential customers as possible. It’s a numbers game, and having more leads in the pipeline is crucial. Understanding your profit margins is another essential step so you can make price adjustments and at the right level to secure a greater share of the market.

The Recession Survival Toolkit  outlines tips and techniques for reducing costs on every facet of the business. Just reviewing all of the potential opportunities to reduce costs is a healthy process. Usually the first step in cutting back is reduction of headcount. There are numerous ways to control payroll costs without reducing headcount. Consider adjusting hours worked or vacations with out pay as a way of keeping your valuable employees.

Another opportunity is to use lean workflow techniques and paperless systems to streamline the office and accounting functions. Not only is it cheaper, but it speeds up data retrieval, improves accuracy and saves time. It also minimizes the cost of paper and storage space.

Getting financing and having a relationship with your banker is a key element of making it through tough times. When your bank is your partner, your survival chances get a lot better. The toolkit reveals the techniques used by banks to make loan decisions. When you understand what the bank wants, you are in a better position to get the necessary financing.

Having developed a recession survival toolkit for businesses, I am now motivated to provide more guidance for individuals and retirees. I think CPAs have a responsibility to help citizens achieve a higher level of financial fitness. The AICPA and the Virginia Society of CPAs have launched a website that offers a great deal of information and advice on financial management.

Remember, it took a while for us to get in this mess, and it is going to take focus, patience, and discipline for us to get healthy again.

I am sure many CPAs have seen IFRS and heard there was going to be a convergence from Generally Accepted Accounting Principles (GAAP) to international accounting standards. But how many of them realize the magnitude of what lies ahead? I was involved in teaching SOX and internal control standards under Section 404. This gives me a pretty good idea of the effort required to make the shift. Since this web site and blog is geared to providing current and cutting edge information for businesses and CPAs it made sense to get on the IFRS band wagon sooner rather than later.Why all the fuss? Well IFRS accounting standards have been adopted by 113 countries and by 2011 it will be the standard used by 150 countries. The United States is immersed in global business and investors need to have the ability to evaluate investments around the globe. This makes a pretty good cased for a single set of globally accepted accounting standards. As was the case with SOX, CPAs are not yet prepared to shift to IFRS. Because of the global implications, CPAs in the United States will need to be capable of preparing and interpreting financial statements using IFRS.

The education process will be massive. It will impact investors, CPAs, and other specialists such as actuaries, and professional associations. Comprehensive education programs will be needed across the board. The AICPA has launched an initiative to help educate and pave the way for 2010 when conversion will likely be a reality.

In drafting this post the potential impact of the transition became starkly real. Colleges and universities will need to revise their curricula to accommodate the new standards. The CPA exam will need to be revised. Many CPAs could find themselves in situations where clients will demand adoption of IFRS. Those CPAs who make the effort to educate themselves will be on the winning end of the conversion game. My prediction is there will be more unprepared accountants versus those who make the leap.

This post is just the beginning and a way of sounding the alarm. I will be busy in the months ahead developing training material. Plus, we will be offering regular and current information on this site to help with the education process.  I’m looking forward to the journey, so sign up for my RSS feed and newsletters.  Let’s saddle up and enjoy the ride.

There are tons of issues and challenges associated with succession planning. Most family businesses want the family to be involved with the business. This gets tricky when there is more than one child and even worse when spouses and cousins are thrown into the mix. Another component of the process relates to non-family managers involved in the business. They have a stake in the business and usually represent a critical link to the future success of the business.

There are many stories about fights and disputes that arise when family members get side ways over the selection of who is in charge. Without an effective planning and communication process, you open the door for lawsuits and fighting between family members. It doesn’t need to be that difficult when the succession and transition process is handled properly from the beginning. We use an approach that sets the stage for proper evaluation of both involved family members and non-family member managers. Our methodology makes a clear distinction between owners, boards, and management. This is done at the beginning and family owner plans are developed and shared with management in an effort to achieve agreement on how to move forward in a balanced fashion. Owners have a role separate from management and it should not be mixed with management responsibilities. These are separate roles and responsibilities. Open communication amoung family members is critical as they reach consensus on ownership goals and on the direction of the business.

One of the major obstacles to succession is the failure of entrepreneur owners to give up control of the company. This often is an attitude of denial and deceit relative to their own mortality. Once founders realize that it is healthy for them to move out of the center of the circle, we start to see progress. The lack of an effective ownership transition plan could be fatal if something unforeseen happens to the founder.

Our process involves family and non-family members in a positive fashion. By fostering effective communication, the business can focus on the right things and achieve a smooth transition. The failure to engage in this critical planning and communication process can prove fatal to the business. Maintaining a balance between all family owners and non-family management is the best way to secure a successful future and build the value of the business.

What is the typical outcome of succession planning? This is a frequently asked question. The typical results from such planning end up with a transfer of ownership as well as management. Some of the results include:
• Management buyout
• Outright sale of the company
• The transfer of stock to children
• An employee stock ownership plan (ESOP) or other internal transfer of ownership
• Sometimes you have a parent retaining control with a child stepping into the CEO spot
• Other times you have an owner retaining control with a manager stepping up to CEO

Regardless of which direction it goes, succession planning should provide for an integrated approach that considers the organization, management, and the ownership. There is a lot of work that needs to be done to achieve the correct balance point for all of the involved parties.

Because of the many issues and challenges facing owners of family owned businesses, it is imperative that they begin this process and avoid procrastination that only invites disaster and problems. The price of the succession and transition planning will be well worth the time and effort.

This planning effort should be done by professionals experienced in dealing with these areas. They will help facilitate the strategic thinking of the owners to create a solid ownership plan. These professionals will also help to coordinate work with other professionals such as the CPA, attorneys, and other specialists likely to be part of the process.

This type of approach represents the best way to preserve the value created by the business and have it transferred according to the desire of the owners. Application of a proven blueprint avoids mistakes, saves time, and keeps legal and professional fees to a minimum. We’ll talk about financial planning, family planning, management, and organization plans in future posts.

The key here is to take a systematic and proven approach to the process. If you don’t do the planning, someone else will do it for you and it might not be the way the owners envisioned.

• As an example, there was some cedar that was delivered that they found to be inferior. They refused to use it and had the cedar supplier make it right.

The subcontractors they used were highly skilled.
• The stone mason seemed to work magic with the placement of the stone (and we have a lot of stone!)

• The painters did an outstanding job of painting and staining. If we decide to repaint a room in the future they will be the first ones we call.

• Architectural Interiors from Olathe, CO designed our alder front door and mantle which are show stoppers! They have since built a beautiful walnut table desk for the study.

• Superior Alarm did the alarm and sound system. When we had trouble figuring out the system – they would promptly send out a technician.

• A euro style shower door had to be adjusted. The installer, Colorado Glass and Shower, came out the same day we called and took care of the issue.

• We woke up one morning to no heat or hot water. We called Paul, and, he and Mitch were there within 30 minutes along with the plumber. We were back in business in no time!

• Best Appliance is the local company we used to buy all of our appliances. They did a fantastic job of accommodating us when we had a problem with the dishwasher and microwave.

• Last, but not least, U.S. Bank did a fantastic job providing the financing. They were there for us, especially our loan officer Lance Michaels; he got the job done. Their service and support was the best I have ever received from any bank.

We could go on and on……. from the interior alder cabinets and doors to the white oak floors and everything in between. But you can see what we are saying about “building customer value.”

Once the construction began we became less apprehensive, enjoyed the process and truly are satisfied customers who will definitely recommend Ultimate Design Construction Inc.

The term “downsizing” wasn’t in our vocabulary. So we are now enjoying our beautiful Colorado home on a lovely golf course in the Uncompaghre Valley with views of the San Juan Mountain Range, the Cimarron’s, the Uncompaghre Plateau and the Grand Mesa.

We usually don’t provide all these details but this was the best way to demonstrate how you “build customer value” and thank the people who made our dream become a reality.

One thing about customers is that they have memories and will remember you regardless if you remember them. Therefore, how you treat your customers is going to affect your future profitability. The more impatient a company to achieve results, the more likely they are to take some action that will destroy customer behavior.The value of a company results from the future accumulation of “free cash flow.” You just can’t go the bank and borrow more customers. There are only so many customers to go around so it is critical to take of your existing customers in a positive fashion because they will likely represent the source of additional cash flow. Your customers will come back multiple times if they are satisfied and will also recommend you to other potential customer. This will have a multiplying effect of helping your business build customer value.

Your customers are your most valuable asset and resource. Therefore, it is imperative for you to create the most possible value from the customers and prospects available to you. The constraint on your profitability is going to be the limited supply of customers. In tough economic times you need to reorient your thinking and reorient your company. The real secret to building business value is to build customer value. Remember, the good guys win in the long run.

In our next post we will share some real life examples of how the good guys win.

I thought it would be useful in this troubling economic environment to explore complacency. Linked together with complacency is a false sense of urgency. These are the two biggest issues that I wrestle with in my consulting practice and in dealing with clients.Complacency emerges from a sense of success or perceived success. Hey, I know what I’m doing because I built this successful business. The wagons might be circled and the bank has shut me down, but I know what I’m doing. Perception might be nine tenths of the law, but here reality is a different story.

Then the urgency level starts to spike. The trouble is this is a false sense of urgency because the complacent paradigm has these people doing the same things they’ve always done except they’re doing it faster. All they are doing is digging the hole deeper when they should stop digging.

I try to invoke the unvarnished truth and get them out from under the covers and feel how cold it really is out there. Maybe it is time to slow down and really think through the business and what we need to do going forward versus the same old things that aren’t going to work anymore. We need to change.

This is the challenge for CPAs in today’s economic reality. Stop doing what we have always been doing and start dispensing real business advice to our clients. It is going to be tougher and it’s likely that the same products and services won’t get the job done. It’s time for innovation to kick in and start thinking different about what to change and how to change.

Here are seven simple management concepts that will help keep you on track and get things done. I thought it was appropriate as we get ready to celebrate another Thanksgiving.The seven steps are:
1. Know your people.
2. Insist on realism.
3. Set clear goals and priorities.
4. Follow through.
5. Reward people who get the job done.
6. Expand people’s capabilities.
7. Know yourself.

Have a great holiday, rest, and recharge your batteries so you’ll be ready to look for new opportunities behind those rocks of resistance.

Because our economic environment has bcome more precarious it is more important than ever for owners of closely-held businesses to think about their future and what happens to their business. Here are some key questions that need to be addressed:

• Have your personal goals been defined and have you established a vision for transfering ownership of the business?
• Do you have a successor in mind?
• Have you addressed the techniques for reducing or eliminating estate taxes?
• How much liquidity do you have and can you avoid a forced sale of the business?
• Is there a buy/sell agreement in place?
• What happens if you become disabled?
• Do you have adequate personal retirement savings to meet your cash flow requirements?
• What is your business worth and could you get it if you wanted/needed to sell?
• Have you considered the techniques for transfering stock to achieve your succession goals?

If you haven’t addressed these questions, you might want to take a minute and give them some consideration. In many instances, family businesses don’t have the liquidity to continue growing and lack the level of management talent and expertise needed to cope with growing a business that is capable of surviving in these tough economic conditions. In order to avoid a shutdown or a forced garage sale it might be time to address these questions before a problem becomes a crisis.

Remember it’s the business that provides for the salaries and wages and ultimately the liquidity to support the employees and the owners.

I sent my son this tip and he said, “Dad, you should post this on your blog.” So here is and I hope it is helpful.

Here is an idea you might want to pursue. We were able to get a 0% rate for 12 months on a credit card for balance transfers. We then transferred purchases relative to our new house to the card to avoid any interest payments for 12 months. This saved higher service charges and interest on the cards we used for the purchases. They went to zero. It also allowed us to avoid using our HELOC line so we have that for emergencies and we kept our cash in the bank.

This might not be available to everyone, but it is worth a try. The key is that this buys you some time when cash is king, which is a big plus.