Too Little, Too Late
A few weeks ago, I got a call from a hardware company about our work. They were referred to us from an investor who knew what we do and suggested they talk to us. We have many initial calls like this. The conversation reminds me of the accountants that get clients who are a complete mess, haven’t filed taxes, and are too embarrassed to share how bad things really are. They were probably telling themselves things were fine, and the accountant slaps them in the face with the realty that things are far from fine. In some cases, the accountant’s potential new client could be facing jail time for tax evasion. Nobody wants to hear that reality.
I meet a lot of CEOs who’d rather not know what they don’t know. In some cases, it’s internal corruption where a CFO has falsified records, or done something in the name of the company that was highly illegal or improper. I know of one CEO who had a team falsely billing a client and pretended not to know a thing about it. What controls are not in place to let that happen? The point is, companies find themselves in trouble and it’s so bad, they don’t want to know. It’s like closing your eyes, putting your fingers in your ears and saying, “Lalalalalala…” so you don’t have to hear the horrible news.
In my ten years as trustee, the companies frequently handed to me all started out on that same slippery slope where they were covering losses using money that wasn’t their own, and little by little, the numbers piled up until there was no return. The accountant doesn’t know where to begin with such clients, but what matters is to not judge, and get the job done. In one case we had a client who failed to file what’s called a “Prohibited Transaction Exemption” and initially, it would have been a small matter, but left over several years because the attorney didn’t want to come forward and it was suddenly a massive deal.
This potential client that called us was in a real mess but didn’t want to disclose how bad. They may not know because they don’t want to know. We didn’t get that far. What I gathered was that, not only were there operating losses, but there was no reprieve in site. Every solution required money and management the company didn’t have. We could only provide some tips, but as always, we are built to offer a solution that we think could be workable. The problem is, too often, it’s too little, too late, to use a tired expression.
I know how doctors feel when a patient comes in when things are dire and the doctor asks, “Why didn’t you come in sooner?” In our case, we know why. Asking the question solves nothing. It’s not how we think. We know time is critical to any turnaround, so we start with what matters. We dive right into the analysis of the problem to get to the right solution. We can talk about why someone didn’t come in sooner after we have a plan. What matters is the execution.
If you’re one of those companies who knows something is amiss, don’t wait. Let us diagnose the problem early. You’re otherwise digging a bigger hole and some of it won’t go away in bankruptcy court. You’re far better off confronting the problem sooner than later. If you don’t want to disclose how bad things may be, call us anyway and we can talk hypothetical under various scenarios to help you through your situation. What I love about my partners is often they come up with ideas that have not yet been considered and that’s where we shine.
The shipwreck in the photo is the Edro III that hit rocks in a storm in 2011. At some point, the captain hit that decision point where there was nothing left to do but abandon ship.