Wednesday, February 3, 2010

Personal Guarantees and Your Business

Operating and growing a business often requires injections of cash to provide the working capital for expansion in staff, equipment, and market promotion campaign or to just get through a tight business climate and preserve essential resources. Depending upon your source for credit you may be asked to make a personal guarantee. Despite your confidence and enthusiasm in the ability of the business to bear the repayment of the loan and associated debt service consider the following 5 tips (see 5 Steps: A Personal Guarantee and Your Business (and Future ) to protect your self and your business.

  1. Know the risks. Understand what you will risk in the personal guarantee.

  2. For business partners, a new meaning to "one for all." Make sure that all partners share the same liability if the debt cannot be repaid.

  3. Beware the "clause" & effect. Know what the impact of changes or "flexible" alternatives to loan elements as such as determining interest rate over the term of the loan can have to you.

  4. Don't gloss over the fine print. Understand what the fine print says. Use a lawyer to interpret the legalize. You do not want a surprise if things go bad.

  5. You can't run. You can't hide. So don't! Bankers do not like surprises. Don't let them learn of a problem from someone else other than you. Don't let your bravado hide the true condition of your business. Be transparent on what you are doing if a problem situation and build their confidence in you.

Borrow wisely and take the time to exhaustively determine what range of liabilities you are obligated to in your loan agreement.

Monday, February 1, 2010

How Well is Your Vision Understood?

Successful companies are known for the clarity of their vision in guiding the organization toward a long term goal and how well it is understood and accepted throughout the company. Is this true of your organization? What stands in the way of a successful vision?

Where the strategic plan might be referred to as the outline or wire diagram, the vision is the solid model that ties strategies together into a complete picture. The leadership is responsible for framing the vision and the strategies that support it. A successful vision is the sum of not only detail strategic accomplishments but also passion and enthusiasm of employees for the vision.

Test the effectiveness of your company vision by measuring how well the people in your organization can verbalize the vision and how what they do supports it. The vision needs to be shared and adopted across the organization and not just appear on a plaque on the boardroom wall.

Leaders need to get the word out from the executive level down to line managers and then to first level employees. This can be accomplished using a variety of methods such as:
  • Giving life to the vision in a story that others can repeat.
  • Leaders who can effectively communicate a compelling vision in a clear, brief way ("elevator speech"), when they interact with people informally.
  • Use of multiple media channels - slogans, video, handouts - so that people get the vision,
  • Engaging others in one-on-one conversations using personal connections to transmit information and, more importantly, get feedback and clear up misunderstandings.
  • Involve customers, partners and vendors in the messaging path.
  • Back up your vision with actions and behavior that reinforce the vision. People seeing one thing and hearing another can destroy your credibility and compromise the vision.
Many struggle with the vision process and feel that it comes down to just mission. However, a small company that I worked with a few years ago made the transition from just having a mission to also having a defining vision for direction of the company. Consequently they were able to tell a much more compelling story to customers that were looking at why they should have a long-term strategic relationship with them. The new vision was instrumental in establishing business relationships with much larger companies than had been possible in the past.

Test your vision and validate that your organization is behind it. Make sure that your talk is consistent with your walk.