Business going down.

Discussion in 'Growing and Managing a Business' started by adbusiness, Jan 17, 2012.

  1. adbusiness

    adbusiness
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    Hi,

    I’ve been running a software company with other two partners for last 4.5 years. I own 20% of the business and the other two partners own 40% each.

    The sales division (manage by one partner) has been heavily underperforming for last one year and this has been dragging the business down. We had a numerous management meetings about what to do but without any success. I was suggesting a cost cutting and also to get rid of unproductive people (including the other 2 partners as they have only minimal contribution to the company revenue but taking great salaries). The other 2 partners were only saying that we need to work harder and try more different things and need to learn more. They don’t seem to see the real picture (truth) of what has been going on. They seem to just hope that miracle will happen to save the business.

    So the company has been going the way (down) the other two partners had decided against my plan and on my expense. Only my division generates the majority of the revenue for the business.

    As a result of the wrong management we (3 partners) have not been paid a cent for last 7 months. We can only afford to pay the staff salaries.

    So I’d like to ask for advice how to deal with this mess. I’m thinking of cost cutting, selling the business or liquidate it.

    Thanks,

    Joe
     
  2. cesspadilla

    cesspadilla
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    That's the problem when wrong management comes in a company. Leaders should take certain drastic decisions to sustain it or just sell it to another or liquidate it. In my opinion, try to search for the problem first. Then if possible, remove the problem and make a solution on how you can get back up. If you can't find the problem then you can choose between the two.
     
  3. Jenifer

    Jenifer
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    Online Bookkeeper

    Success of a business is depend upon it's financial status.If the financial status of a business is good then the growth of the company is better.In a small scale company financial status play most important role.So if your company faces financial issues then To mange your account you can hire a Bookkeeper.Now days a lot of organization that is offering Online Bookkeeping Services also, so you may hire a Online Bookkeeper.These services are also cost effective.:eek:
     
  4. sigma

    sigma
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    If you really think that your plan is work and your partner refuse to accept it, then you gotta talk to them face to face to finalize it. If you dont satisfy with the final decision, then it is the time for you to think to leave the company, either sell the share to your partner or close the company or whatever. Then, set up your own company, start from small company. This can be considered if only you are confident with your plan.
     
  5. AliceNolan

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    You are stacked in very critical situation. I think that you have to show a different behavior and re arrange the company's structure. The matter is that, your department is earning high so you deserve high. You should take a look in right dividing of money so that the other partner think seriously on the matter of doing Good work and better output.
     
  6. sallya121

    sallya121
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    You meet a big business problem.Without good market and good leaders ,the company can't work well.Maybe you need think whether you need change your way to manager or be creative.
     
  7. Mark T

    Mark T
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    You might be missing something in your business, which is lack of cooperation from every contributors or team work.
    If you want to work you business and make it continue, you should look to what really is the problem, and what could be the possible solutions for that one. You said about them on making solutions but they said nothing at all and looks like just hoping for a miracle right, then it is time for you to look for other people or individuals that will work out their best to make the company or your business stand up again.

    It is a good experience for your company though, and it could make your company grow stronger. Don't let those partners of your who are not deserving to be in the business bring you down.
     
  8. adbusiness

    adbusiness
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    Hi,

    Thanks to all your replies.

    I can see a few options there.

    When we (I) started this business with the other 2 partners I was new to it and trusted them as they had business experience. But after a while I started to have doubts as the inability to bring sales and poor management was blamed on something else and not the real cause of the problems. It feels like going to school and learn every day. I always believe in hiring professional people but the others don’t. If I can’t do then get someone else better than me.

    We are the reseller of the ERP solution from one of the world’s software giant. The same ERP solution is also sold by other business as well. I guess in total it’s being sold by roughly 15 companies in Australia. Some companies are selling well but not us. Why?

    We’ve organised a few events, doing a cold calling, campaign and networking. But with minimum return.

    As I see the partnership in business should be fair. It means each person should contribute to the business equally and also be accountable for that. The lack of sales is mainly contributed to the person’s inability to make sales rather than the market itself. If other businesses can sell why we can’t. Also the attitude is wrong as every month the person promises to make it up the next month and so on and it’s never ending story with no plan at all. If it’s me I would just leave the business and find another salesperson who can deliver. However I’m the minor shareholder and I can’t just tell him to go, which I’ve already tried but the other partner did not want this to happen.

    The money we make are just enough for the staff and we’ve have not been paid for last 7 months. So even if I ask to be paid more because I bring more money into the business then it will be just on the paper as the future is uncertain.

    Maybe I should just leave the business but on the other hand I really care about this company. If I leave the business how then am I going the get back the unpaid salaries for last 7 months? Am I required to sell the shares to the other partners first or it can be anyone?

    Thanks again,

    Joe
     
  9. sigma

    sigma
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    First at all, you gotta make clear whether the company not paying you or you dont have salary, just the revenue sharing
    Some share holder themself dont have salary, they only get the revenue sharing from the company, if this is the case, you will not get single penny because your company is not making profit. However, if you have salary agreed by company, then you can actually ask the company to pay back the 7 months salary

    It is fine if you are selling the share to anyone since it is your property. However, i suggest you first offer to your partner, only offer to somebody else if they are not interested.
     
  10. adbusiness

    adbusiness
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    Hi Sigma,

    We've got an agreed monthly salary and also dividends if any. Actually the salary is not really salary as we provide consulting services to this company and invoice it every month. We do not have any employment agreement in place. So we are just working as subcontractors. Does this make any difference? Is the 7 months of unpaid services classified as insolvency?

    Thanks,

    Joe
     
  11. kundansingh

    kundansingh
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    you have to make your mind what you want , if some straight foward steps are required for profit than go for it , that's the only solution.
     
  12. Navida

    Navida
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    In my opinion you should have to go for retrenchment and try to distribute your divisions as per revenue sharing individually. It will create a competition among you partners to save and each of you will try to grow your own division, which will be fruitful for the company and for you partners also.
    Just go for retrenchment on the basis of 80/20 rule. the idle on low performance employees should be fired and you should have to revise you strategy with some corrective amendments. I think it its time to change or go back home as defaulters.
     
  13. ArcSine

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    Joe, your posts make it clear that you've got to take some action soon. It doesn't sound like a problem that will be corrected with, say, more marketing efforts or better cost efficiencies. The problem is that 80% of the company's ownership is either ineffective or inexperienced. That kind of problem rarely has a happy ending.

    You mentioned that you are contemplating an exit. You can leave the company without leaving the business. How feasible is it for you to continue in the same---or similar---business activity on your own? Or with different partners? You mentioned that the division which you oversee is the only one bringing in any revenue. That by itself suggests a reasonable possibility for your going solo.

    First you've got to review your written partnership agreement with a fine-tooth comb. In that agreement will be spelled out the rights and obligations of all the parties should you decide to exit. Such as...
    • Is there a noncompete clause? What are its terms, if so?
    • Do you have to offer your equity to the other partners first?
    • What does the partnership agreement specify regarding the valuation method to be used in pricing the buyout amount for your equity, if you exit?

    It's likely that the unpaid "salaries" for the last 7 months are simply a non-issue. It's kinda rare for a partnership agreement to provide for some sort of guarantee whereby one partner is entitled to a salary, to be extracted from the other partners' pockets if the partnership itself has insufficient net earnings to cover it. But before writing it off as just a lost matter, review the partner contract carefully to see if such a 'guarantee' is provided therein.

    Realistically, do you see any possibility of an impending turnaround for the better, under the current mode of operation? Take yourself outside of your own shoes, and look at it through the eyes of an outside, independent investor. After having carefully examined the company, would you be willing to invest any of your own cash in it? What changes would you demand before you'd be willing to sink some funds into it?

    Unless this critical, outside-looking-in analysis reveals some sort of restructuring plan that would likely make the company viable, it might be that you'll need to carefully consider your exit. Otherwise, the 7 months without salary might become 8, 9, 12, ...

    And again I refer back to your note that your division is the sole money-maker in the current company. Can you replicate this profitable activity on your own, or perhaps with a fresh set of partners and/or personnel?

    Best of success with it!
     
  14. mishawatson

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    If you want your business to survive then you will need to understand the 5 important things you may have to do something about.

    These are:
    Understand your model.
    Use your competitive advantage.
    Put in good management.
    Have sufficient capital.
    Don’t panic and don’t quit
     

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