Show Me the Way

June 1, 2009
Mercer Business Magazine

The consensus from a panel of legal and accounting professionals at the Mercer Regional Chamber of Commerce's “Show Me the Way” roundtable, held May 19 at the Trenton Country Club, was that in order for small-to-medium-sized businesses to survive the current deep recession, businesspeople must use their networks, reach out and be unafraid to ask for help and approach this chaotic time with a sound business plan.

Douglas Zeltt offered a personal experience to illustrate the importance of how troubled businesses can give themselves a chance to weather the economic storm. "I learned recently in my own personal life, you just have to ask," he said. "I called Comcast, which is my cable provider. And I said, 'I keep getting all this mail from Verizon. What are you going to do for me?' And after about 10 minutes, I saved $50 a month on the exact same service that I have today. And it's a lesson to take to heart when it comes to business. Just ask. Don't be afraid."

Zeltt also noted that smaller entities that have not been profitable over the last 24 months may find it hard to get banks to talk to them. "Those that don't have cash, I'm dealing with several clients now that are running up against payrolls, running up against servicing debt. Those businesses that are running low on cash probably are not necessarily going to be able to borrow. There are plenty of balance sheets out there that don't look very pretty."

"In the next six to 12 months, in my perspective... if you have cash, hold on to it. Consider some strategic acquisitions,” advised Zeltt. “If you don't have cash and you're struggling to borrow then you need to sit down with your professional, your controller or your CFO, your accountants, figure out what you can cut, where you can save money, who you can renegotiate with."

A business may be forced to consider other unpleasant options, such as downsizing and bankruptcy. Zeltt and the other panelists reminded the audience of the potential cost of laying people: breaching covenants with lenders or landlords in the process and being aware that employers now have to pick up 65 percent of the cost of the federal COBRA health insurance program through the end of 2009 for certain terminated employees.

Bankruptcy should not be viewed necessarily as a shelter from the storm. "You do need to come up with that business plan," Zeltt said, "but a plan in the short-term. Because the reality of it is if you're thinking about bankruptcy you need to think about it in a couple of contexts. One: Am I going to be able to come out of the other end?"

The panelists also explained that restructuring debts through a Chapter 11 filing does not guarantee the business will emerge at the other end of the tunnel unscathed. "People just say, 'I'll file bankruptcy,' but it may not be worth it," Zeltt said. “Chapter 11 filings are extremely expensive."