Our biz - to kill or not to kill?

[TTreats]

Ok, so if your business is constantly running into a brick wall what do you do?

The past year has been a nightmare, and it seems just because the date has changed from 12 to 13 is not making a bit of difference. We have a small business with one delivery vehicle, which broke down 4 times last year. So today once again its out of order. To top it all, staff who were supposed to start work again yesterday haven't arrived which made us go find someone else, because if we do not have production, we do not have an income.

Due to the delivery vehicle being out of order so many times, we have built up a substantial amount of business and personal debt. Staff also went to the labour department and are forcing us to pay them extra money from when the bakkie(delivery vehicle) was out of commission for approximately 3 weeks due to lack of funds to have it repaired.

Do we just keep fighting and biting the ever-increasing-in-size bullet, hope and pray for an outcome, or do we put this thing to sleep and do something else?
Your opinion?

[Citizen X]

Hi Ttreats,


Welcome to TFSA

The past year has been a nightmare, and it seems just because the date has changed from 12 to 13 is not making a bit of difference.

Well, banking service fees have gone up on your account from 1 January 2013, sure you got the email or sms or both from the bank!! That’s changed!!
The business and personal debt is worrying!
I think you need to carefully weigh things here. If you close shop, what do you then do immediately after this?

Try keeping it running, as liquid, as possible for a couple of months. In this time I suggest you look at getting a buyer for the business, an investor or as a worse- case scenario closing shop, but at least this way, you have some form of plan for the future as opposed to just suddenly closing shop. The way I see it is if your bakkie was operational you would have been able to meet the needs of your customers, maybe look at a way of getting it properly fixed.

[AndyD]

.....hope and pray for an outcome, or do we put this thing to sleep and do something else?

No matter what the religious people say there's no linear relationship between hope and prayer and profit.

If transport is the main factor limiting your business then look at sub-contracting it out, at least it should then be a cost that's more proportional to your sales. If the transport headache of your business was taken out of the equation would the business be viable?

[Dave A]

I've heard one of the definitions of madness is to do the same thing over and over again and expect a different result.

Quite obviously you need to spend some serious time thinking about your strategic plan. You definitely need to change something, but exactly what you should do really needs intimate knowledge...

Make sure you push this to the top of your priority list no matter what other "urgent -not important" matters might be pressing. When you absolutely know you're going the wrong way, you need to stop and make a plan before you take another step.

If that decision does become "let's kill it", let me roll out another little truism - you don't have to make your money back the same way you lost it.

The world is full of options.

[TTreats]

Thanks Vanash. Yeah, at least the banks keep the change "flowing" - even if it is only in their own direction.

We actually HAVE to keep it running otherwise we will be stuck between a rock and a hard place! Bakkie been fixed properly for what ails it at the stage that it was not in running order, but it works very hard - more than 360 000 on the clock and it's a 2006 model. Things just keep on cropping up at irregular - and very inconvenient, times. Have spent over R50 000 on it last year to keep going - could almost have bought a new one!

[TTreats]

Thanks AndyD,

Transport is one of a few obstacles, but definitely the biggest.

We have looked at couriers and other ways of doing it, but we manufacture a specialised product and the person responsible for delivery has to have knowledge of how to handle it, or we lose out anyway. More on this later.

[Citizen X]

The world is full of options.

Take the best out of every experience you have. That's actually what I'm personally doing with Dave's last sentiments here.. Ironic how sometimes a particular set of advice is directed at one individual yet it can be almost soothing to someone else
I'll take what Dave says as something positive for all of us.. John Lennon put it a different way: 'Nobody told me there would be days like this!" This business of life can weigh heavily on an individual.

The world is full of options

When one door closes many more open up!

[Justloadit]

A mistake I made many years ago was attempting to maintain my bakkie. Fortunately, it got stolen, and with the insurance money, I used it as a deposit for a new bakke. The best investment I ever made. I made my monthly installments which turned out cheaper than the cost of immediate repairs on the old bakkie, and what do you know, I ran the bakkie for 5 years with out a stitch of trouble, traded it in for a new one, and what do you know, trouble free3 running.

Do the calculations, go find a new bakkie to do the job that you require, get all the info from the dealership, you will be pleasantly surprised on the saving that you will have. A new bakkie will require very little maintenance for the first 5 years of 100,000Km.

[Blurock]

Without any knowledge about the nature of the business, the market you operate in and industry specific information, it is very hard to give advice. That is why it is advisable to complete your profile to at least get a broad idea of what you're dealing with.

In manufacturing you look for bottle necks that slow down production. In retail or distribution you look for the biggest obstacle to doing profitable business. It is like first plugging the lowest hole in a leaking bucket.

Transport is one of a few obstacles, but definitely the biggest.

We have looked at couriers and other ways of doing it, but we manufacture a specialised product and the person responsible for delivery has to have knowledge of how to handle it, or we lose out anyway.

It appears that you have already identified the problem, but you have not effectively dealt with it. Good advice from Justloadit:

Do the calculations, go find a new bakkie to do the job that you require, get all the info from the dealership, you will be pleasantly surprised on the saving that you will have. A new bakkie will require very little maintenance for the first 5 years of 100,000Km.

Also consider a good 2nd hand at a much lower cost.

This appears to be your biggest problem, which has caused 3 weeks of lost production while you still have to pay the staff and the rent etc. The stress caused by this unfortunate chain of events must have had an impact on your customers, your staff, your cash flow and your own frame of mind.

A business needs maintenance from time to time. If you don't fix the leaking roof, your stock may get damaged. If you don't replace the old diesel computer, you may just lose all your files etc etc.

[TTreats]

WE have looked at the option of acquiring a new or 2nd hand vehicle, the challenge with regard to this is that we are unable to get finance to purchase a vehicle at this point in time. This would be the best option for our business and take away one of the major headaches we are dealing with. Our financials are far from up to date and this is 1 requirement most financiers require that we know of, also we don't have the funds to have the financials audited so we are stuck there as well.

Our most pressing challenge at this point is that our staff who we asked to return to work on 2nd January, used their outstanding debt with us to extend their leave to 7 Jan. When they left on 21 December we were meant to have payed them about R1500 each in leave pay and including our forced weekly payment owing at that date. We didnt have funds at that point and were promised by a customer who owed us R6500 that they would pay us by end December, so we told the staff we would pay them as soon as this payment came in. Unfortunately we never received the payment and my staff are refusing to return to work unless we pay this. WE can collect the funds from this customer, but only when we deliver to them again, so in effect we need staff to produce so we can deliver and collect the funds to pay them. Already because of having to pay our staff R6000 pm in back pay we have cancelled many expenses such as vehicle insurance and such to be able to pay this. Because of this extra expense, we could only pay our rent at the end of December a month overdue and we now have to choose between paying our staff or paying the rent.

My staff and the dept of labour dont seem to want to come to a reasonable arrangement that will keep the business afloat and pay them back over time. As a result of our staff not coming as required on 2nd Jan we have lost in the region of R20000 in sales over this past week which makes cash flow during Jan & Feb (traditionally our slowest months) a really big challenge. Already our customers are unhappy because we havent delivered to them this week and we fear we are going to lose a few before the end of the week. This issue needs to be resolved asap, but have no clue how to do this. IF we pay the rent, then staff dont start, if we pay the staff we will not have funds to buy ingredients to start the week next week when they come back. Catch 22 if uve ever seen one.

[Justloadit]

So get some temporary staff to complete your order.
You need to think out the box here. From the tone of your posting, you are seeing problems only, and expecting the forum to give you solutions. We have no idea what you manufacture, what costs are involved, or any information pertaining to your business. Making any suggestions is going to be wild gueses in most part.

Effectively your staff are refusing to come to work, also concludes a breach in the labour regulations.
Staff have no idea how business works, and in many ways destroy their own employment because of their short sightedness.

Right now you need to salvage the business. Pay the rent, get temps to do the orders and get the business on track.
Since the staff are not at work, they are not entitled to payment, so effectively they are giving you the green light to do as you feel is right to make the business work.

So what happens if you never decide to pay your staff their outstanding amounts, does it mean they will never come to work for you again?
They can take you to the CCMA and demand you pay them. Their is no hard and fast rule that you have to pay them immediately, so let them take you to labour court. When you get the court order to pay, then you worry about getting the money. Until this happens, it can take up to 3 months or so, enough time to get the business going, and get some money in to settle the bills.

PLEASE NOTE, any suggestions here are given with out any responsibility to the outcomes which may occur, and it is your decision to implement anything that is said here.

[TTreats]

Without any knowledge about the nature of the business, the market you operate in and industry specific information, it is very hard to give advice. That is why it is advisable to complete your profile to at least get a broad idea of what you're dealing with.

Have completed the profile - hope it helps.

[TTreats]

Thanks Justloadit,

With these postings we are just trying to get some perspective and ideas on where to go from here - any input is welcome, and we understand that the advice given here is from personal opinion and experience and would never think of holding anyone else responsible, other than ourselves. We are just so stuck in the hole where we find us at the moment, that we need someone from the outside, without personal attachment, to help us see out.

[adrianh]

I think that I've worked out which company you are and what you do. Does this word mean anything to you: Naaldehout

Ok, if you do what I think you do then I would can the business. Your business is marginal at best and your profitability is directly tied to your workers working and delivering on a daily basis. You are already on the backfoot financially and unless you do something drastic your income isn't going to cover your expenses, let alone your financial backlog.

Do a little calculation:
Lets take best case:
How much do you make per month
How much do you spend per month
What is left?

Right, now lets look at accumulated losses; how much money do you need to make to cover your losses?

Ok, so given what you can make in a good month how long will it take to cover your losses?

Lets look at reality:
You need money to make money - can you get enough money in to make enough money to dig yourself out of the hole - if so, how long will it take?
If you get yourself out of the hole will you still have customers left?
If you get yourself out of the hole will you still have staff left?

I don't have all the question nor the answers but the bottom line is that you have to look at the situation with your head using a spreadsheet. Look at your history and predict your future based on historical facts (not make believe). Take your emational attachment to the business out of the equation and look at it like a school project.

You must remember that there is nothing wrong with scrapping a business and starting over. If the recipe is wrong it is wrong and there is simply no point in trying to force a flop into a wedding cake. Richard Branson, Apple, Microsoft and most other business had ideas that didn't work out; nothing wrong with it provided you learn from the experience.

I think that your business model is problematic because your manufacturing and delivery schedule is too tight. Maybe you should start a business where you are able to retain stock in fridges and deliver it on a more relaxed basis giving you a margin of error. Lets say you are able to store 3 days worth of stock. That would give you a couple of days to sort out issues that may arise.

You must remember that you and your business are not one and the same, the business is something that you created, if you need to knock it down and start over then go for it.

[TTreats]

adrianh, sorry not sure about Naaldehout, but thanks for the other input. As I mentioned before, any and all input is welcome - what we do with it is up to us, but we are thankful for it.