Now is the time to...
Matt Crouch says we should look beyond the current economic climate and plan for the future.
Story by Matt Crouch
I don’t know about you but I for one am over reading articles that just add to the doom and gloom – reminding you that 12 months ago the burning economic issue was the labour shortage and now we have rising unemployment. I’ve had enough reminders about stock market volatility and commentators who bemoan that consumer confidence falling are just contributing to the problem!
Instead of adding my little piece of curmudgeonly I thought I would make some practical and positive suggestions that just might help you avoid being a casualty of the times. Indeed they are things you should be doing even in the good times!
So here goes – the top 11 tips for “Now is the time to…”
Tip #1 – Now is the time to get your business structure right. If you have been trading as a partnership or as a sole trader, you and your assets are personally at risk. Worse still if you are in a partnership you are jointly and severally liable for the acts and omissions of your partners. If you are in this category you should seriously consider folding your business into a company structure. There are many advantages to using a company as the vehicle for your business but surely top of the list is the virtue of limited liability for shareholders.
Tip #2 – Now is the time to ensure that your internal arrangements are appropriately documented. Even if you already operate under a corporate structure, have you got a shareholders agreement in place? We are told that most stress in marriages arises over financial matters – the same is true of business relationships. A shareholders agreement can provide business “partners” the security that a married couple might get from a pre-nuptial agreement. It would typically cover a range of issues that can become contentious, particularly when money is tight – such as the policy on borrowings, personal guarantees, dividend policy, admission of new shareholders and decision-making on a range of issues.
Tip #3 – Now is the time to get your customer contracts right. I know you have been putting it off and it sounds like an expense you’d rather avoid, but truly, a well written contract between you and your customers can save your bacon. Not only can appropriate limitations of liability potentially save you from potentially businessending law suits, but you can include appropriate credit and debtor control measures (see below!) – it can be the start of some good habits for the new year...
Tip #4 – Now is the time to get your supplier contracts right. Right now might be the best opportunity you have ever had to renegotiate with your suppliers – buyer is king and I am not just talking about pricing and payment terms. More favourable terms and conditions should be pursued also. As buyer you have just as much right to initiate the terms and conditions of contract with your suppliers.
Tip #5 – Now is the time to remember what I have been hammering in this column for some time – ie avoid signing indemnities and accepting harsh liability clauses wherever you can. Remember that you will be exposing your business to a liability greater than the ordinary principles of common law provide, and worse, your insurance will almost certainly not cover you for that liability.
Tip #6 – Now is the time to implement appropriate credit and debtor control measures. Service providers should be wary of doing work for customers who pay slowly or not at all! This sound obvious but when business is slow the temptation is to do work for anyone who asks. You should consider a policy – with trading terms in support – to suspend work where a customer is behind on payment of fees, or to allow only a specified amount of work in progress to be performed without some funds at least being paid on account. Make sure the policy is applied (and complied with) across your whole organisation. It is of little use if some members of staff apply such a policy and others ignore it.
Tip #7 – Now is the time to check your insurance. Is your business insured for appropriate risks? Is the amount of cover adequate to your exposure? What are the exclusions? How many reinstatements do you have?
Tip #8 – Now is the time to identify and protect your intellectual property. In the meetings and events sector, this means (largely) your trade marks and copyright. Ensure that all trade marks are registered and get professional help from your lawyer to do it. Your trade marks represent your goodwill and are intrinsic to your business reputation. Your copyright is the reward for creative effort and will be particularly important in your promotional material, your website – and for those of you who are suppliers of creative material for the sector, your very products! Ensure that appropriate copyright notices are used on all copyright material. If you discover pirates infringing your intellectual property rights, prosecute them vigorously!
Tip #9 – Now is the time to ensure you actually own the intellectual property you are using in your business. I know of a client who wanted to sell her business to a buyer who was willing to pay a handsome price. When the buyer did the pre-sale “due diligence” and discovered that much of the intellectual property used was not actually owned by the seller, the price dropped dramatically.
Tip #10 – Now is the time to consider quarantining. What I mean is that you should be wary of mixing too many business ventures under the one corporate umbrella. Many is the successful business that has been dragged down by diversification plans; the less-than profitable new business that drains cash form the established, profitable part of the business. Robbing Peter to pay Paul. Even if you don’t “stick to your knitting” at least consider quarantining new business ventures in separate corporate vehicles, with separate funding. Quarantining valuable intellectual property in a separate entity is also worth considering. Remember that with any transfer of assets there may be cost, and in some cases stamp duty. Also, unless assets are transferred for valuable consideration a liquidator of the transferor may be able to recover the asset as a preference. So don’t DIY – get professional help!
Tip #11 – Now is the time to do good and careful work! Do not breach your duty of care! This might sound simplistic, but even though I heartily recommend appropriate liability clauses in your contracts and as much insurance as you can afford, it is always better not to attract claims in the first place. My litigation colleagues may not like me saying it but the courtroom is one place to be avoided! Try a legal health test – can you hold your hand over your heart and say that you have already followed the foregoing tips. How many? Now make a new year’s resolution! Cheers and a happy, healthy and successful ’09 to you!
For further details contact Matt Crouch on (02) 8281 7800 or email mcrouch@bartier.com.au.
