Firm Ailing? Just Call for Outside Help
The same gritty, risk-loving qualities that drive a small-business owner to succeed may eventually lead to his demise if the business falters, says “business doctor” Gary Goldstick. Goldstick, whose Los Angeles computer company failed about nine years ago, believes that an entrepreneur’s strengths--self-confidence and self-esteem--often make him reluctant to seek outside help to solve his serious financial problems.
So, instead of turning to objective, outside advisers for help, he joins the 60,000 or so businesses filing for bankruptcy protection every year. Or, the ailing company quietly closes its doors and pays off creditors to become one of the 300,000 to 400,000 businesses that fail in this country each year.
“Not seeking help for your business is like being a guy standing in front of a mirror reading a book about how to give yourself a heart-bypass operation,” said Goldstick, author of a new book, “Business Rx--How to Get in the Black and Stay There” and founder of G. H. Goldstick & Co., a consulting company specializing in business turnarounds.
In fact, Goldstick compares a successful business turnaround to finding a cure for cancer.
“The earlier detection and the earlier you accept the fact, the more options you have for curing the disease,” he said. “People who engage in denial with respect to their business problems basically foreclose the opportunities for recovery, and that’s the tragedy.”
By not accepting the painful fact that their business is failing, executives are obviously unwilling to seek help. Goldstick said it often takes a dramatic act, such as creditors suing to be paid or a bank calling in a loan, before the seriousness of the situation hits home. And, by that time, it may be too late to save the sick business.
While some troubled owners call Goldstick for help, he is frequently hired to do an independent analysis by the company’s attorney, accountant or banker.
Goldstick first tries to figure out how the business operates and what went wrong. Goldstick said his six-person staff charges $125 to $200 an hour; their initial digging can take from one week to a month.
In the past nine years, Goldstick has been hired to rescue about 100 businesses, ranging from a meatpacking house to a trade school. He said he has managed to save about half of the businesses he has examined. About 25% were liquidated and the “the jury is still out” on the remaining 25%, he said.
In some cases, he has served as the temporary chief executive to implement the rescue plan. Other times, he consults with current management and guides them through a recovery.
“If a company is in trouble, you have four major strategies to consider,” said Goldstick. “You can do a turnaround, sell it, liquidate it or abandon it to creditors--I mean just turn off the lights and throw the keys on the table.”
He said that sometimes, by the time he is contacted, it is too late and too expensive to try to repair the damage. Still, there is hope if Goldstick can find certain key factors.
“When we walk in the door, we look to see if there is a core business worth saving--one that if it had no debt to deal with could produce a gross profit large enough to cover the fixed costs of the business,” he said.
If that core business exists, he starts looking for competent middle managers who are willing to stay on and help the company recover. Without them, it will be nearly impossible to turn the company around.
“Then, you need to make sure the employees doing the work are well-trained, competent people because there is no time to recruit new ones,” said Goldstick.
The fourth and most critical factor is to have “honest and cooperative ownership.” This means owners who are not “skimming profits, doctoring the books or harboring some hidden agenda, because if this is happening, it will be impossible to do anything,” Goldstick said.
With an MBA from Pepperdine University, Goldstick said he feels qualified to help business owners because he ran a company during its ups and downs for 15 years.
“I learned things to survive and had the experience of going through a liquidation and transition,” said Goldstick, who is 56. He said the company filed for bankruptcy protection in 1981 after interest rates hit 22% and the firm lost some major contracts.
“We did a liquidation where all the employees were paid and all the taxes were paid,” he said. “Now, even the shareholders are going to get something.”
Soon after that, eager to escape the “rat race” in Los Angeles, he moved to Bakersfield.
His book, published by John Wiley & Sons, offers practical advice and suggestions in a readable format. He not only walks readers through a bankruptcy proceeding but also provides an excellent quiz to help rate a company’s health. The book also emphasizes the importance of hiring the right kind of consultant to help turn around an ailing company, “someone you feel comfortable with.”
Goldstick said it seems odd that a business owner, who has no problem with hiring a mechanic to repair his broken car, will resist hiring a professional business consultant to fix his business.
“It’s almost as if the executive pulls it off the freeway and announces that to call a mechanic is a sign of weakness,” said Goldstick. “So, instead, he drives to Pep Boys and buys a book on how to fix his car.”
Seminar to Explore Positive Self-Promotion
Secrets of positive self-promotion will be shared at a one-day seminar scheduled for June 10 at the Century Plaza Hotel. The session will be taught by marketing consultant Lawrence Kohn and management consultant Warren Reid.
“Attendees will learn solid, effective business tools which they can use immediately to acquire new customers,” said Kohn. He said participants will create a personal marketing plan before they leave the session.
The seminar will run from 8 a.m. to 4:30 p.m. at the hotel, located at 2025 Avenue of the Stars, Century City. The $100 fee includes refreshments and parking. For information and reservations, which are required, call Kohn at (213) 652-1442.
An Ordinary Idea Is Behind Most Success
An Inc. magazine survey found that 88% of the 665 chief executives who responded felt their successful business was based on an “ordinary idea.”
“We tend to hear most about the guy with the unorthodox style or the one big idea,” said George Gendron, editor of Inc. “But the fact is, these people followed a logical progression. They got their training as an adult (by) working in the same field and then succeeded by taking an ordinary idea and pulling it off exceptionally well.”
Gendron said the “Origins of Entrepreneurship” survey revealed that most owners started without a real plan and used their own funds.
Inc.’s survey was sent to 2,300 companies that have appeared on the Inc. 500 since 1982. The average Inc. 500 business in 1988 posted $15.5 million in sales and employed 214. According to the survey, 34% of the owners started their businesses with less than $10,000; 69% with less than $50,000, and 56% used their own money.
