The first thing that has to be said about backup plans is that there is a definition of a backup plan that your bank uses for its purposes, and a quite different definition of a backup plan that you’ll want to use for your purposes. Trust me – you don’t want to experience the bank’s “backup plan”. When a bank talks backup plans, it usually means (at least as a first step) your banking relationship being transferred to “Credit & Asset Management” or some equally ominous sounding department that is typically interested in only one thing – getting the bank’s money back as quickly as possible and then sending you on your not-so-merry way. That’s the bank’s idea of a backup plan – commonly referred to in the industry as the “secondary exit” when described in credit papers. As you may have already guessed, this secondary exit usually means selling off your assets and placing your business into liquidation.The first question that the bank asks when considering an application for credit is “Is there an underlying, viable, sustainable business here?” Or, to put it into terms that we have been using throughout this series; “Is this business bankable?” In answering these questions, a great deal of analysis is done and your business is assigned a “PD” or Probability of Default based on the estimated ongoing viability of the business. The PD, expressed as a percentage, is an estimation of the likelihood that you will default on your loans within the next 12 months. If you default, the bank has already calculated what they need to know about what to expect from their “backup plan”. Another measure called the LGD or Loss Given Default would have been calculated for your business and is an estimate of how much the bank stands to lose (also expressed as a percentage) when they move from default to recovery – selling off your assets.The backup plan I’m talking about here is the one you need to have prepared for your business. Preferably, your backup plan will kick into effect long before you start defaulting on your loan repayments. Otherwise, the bank’s backup plan tends to take precedence over yours.So how do you go about putting this backup plan together? There are really four “steps” to putting it all together, and the great thing is, the first step is already nearly done for you. That is, it’s already nearly done if you’ve taken my advice from the first few articles in this series and you are now the proud owner of a business plan that includes a sound risk management plan.Step one is all about measuring the things that you need to measure in order to keep tabs on the key risks you’ve already identified in your risk management plan. Needless to say, it does absolutely no good to identify risks your business might be exposed to and then come up with ways to mitigate those risks if you’re not going to measure key elements of your business (internal factors and external factors) to see whether or not you’re being exposed to those risks on an ongoing basis. So step one is simply to regularly measure how your business is going against the potential risks you’ve identified in your business plan in the “risk management” section.Step two is the evaluation of the things you’ve been measuring. In other words, you need to be able to critically analyze the data you’ve collected and understand the implications of them for your business. This is the most important step in your backup plan, because without it, you cannot progress to step three and four and finish the backup plan. Not to mention, you’re left with a load of useless data that you’ve been collecting to mitigate identified risks to your business and you have no clue what it all means. Proper evaluation is required to see how you’re traveling at avoiding or minimizing the risks, but it also allows you to do step three, which gives you the practical, “what to do” part of your backup plan.Step three is to adapt your business plan in whatever way necessary to improve your business, make your business more successful and ensure the long-term survival of the business as a whole. In short, step three is about “reinventing” your business regularly based on the evaluation (step two) of the data you’ve been measuring (step one) to ensure that you NEVER have to revert to the bank’s backup plan, no matter what. The U.S. Marines have a motto that reminds their troops how to perform in any situation, even in the heat of battle – “improvise, adapt, and overcome”. Now, in business, as I imagine would be the case in war, I think it’s always better to do a lot of planning to reduce the amount of improvising necessary. But you get the point – things don’t always go to plan – that’s why you need the backup plan.These first three steps sound pretty straightforward, pretty simple. But getting it right couldn’t have more profound implications for the survival of your business. And properly thinking out what to measure, how you interpret the data collected, and how to constantly improve how you do business will definitely make your business more bankable. Simple? Maybe. Easy? No way. Even the best business minds in the world know that the first three steps don’t make for a complete backup plan if you don’t include one more step…Step four is to seek out expert advice. You will not be able to run a lasting, successful business without creating relationships with trusted advisers that can help you out from time to time. In fact, having established relationships with key advisers that you trust and are willing to “share” your business with comes in handy in almost every aspect of what I’ve been talking about in this series – from putting together a business plan to creating and updating your backup plan. A business owner that thinks he knows everything he or she needs to know without the assistance of some expert advice from time to time is fooling himself and no one else. He certainly won’t come away from an encounter with a bank without giving them at least one reason not to back his business. Connections with and, to an extent, reliance upon key advisers in key areas should never be considered a weakness but an advantage. Competent, trusted advisers can help even the most talented business owners keep a proper sense of perspective on the “forest” and the “trees” simultaneously.Consider some key areas where a trusted adviser could be helpful:Accountant- Do you have an accountant that can help you understand the numbers, what they mean, what the key drivers of your business are and how to act to improve the bottom line? Or do you have “some guy” that you talk to once a year when you need your taxes done?Solicitor – Do you have a lawyer that knows your business, your industry and your individual situation to the extent that he can look out for you and proactively keep you up to date with legal issues that could potentially impact upon you and your business? Or do you have a solicitor (that you only go to when something has become an emergency) that you know only because he did the conveyancing on your last property purchase?Financial Planner – Is your financial planner creating opportunities for you and growing your investment or retirement portfolio in a manner consistent with your appetite for risk and the plans that you have agreed to in regular consultations? Or is your planner just the guy that helped you set up your self-managed super fund that now consists of a term deposit and the commercial premises you operate your business from?Business Banker – Do you have a business banker that is like a business coach; that understands how to run a business and understands how you run your business in particular? Is he proactively looking after your needs whether or not it means he’ll sell you another product? How often does he call you? Visit your premises? Do you have a business banker or a glorified bank teller?Of course, you don’t really need a backup plan if these four steps sound all too hard. Remember, the bank has a backup plan prepared if you don’t already have one. But the bank won’t back your business if they think that they are going to have nothing to rely on other than selling up your collateral. They want to see that your business has made plans to adapt to adverse circumstances and that you are not so set in your ways that you cannot think of alternative ways to run your business if a problem arises.
Hassle-Free Loans Are Available Online
Borrowing money can be such a hassle when you have to stand in long lines before your loan is approved, or worse, rejected. If your application fortunately receives approval, you still have to wait for about a week before the money is released. This would not be of much help to you if you need the funds immediately.Well, these days you no longer need to commute to the bank or to a lending establishment in order to have your loan application processed. Now you can apply for a loan right from the convenience of your home, through online payday loans.The easy accessibility of the Internet has been a big influence in the quick transactions between lenders and borrowers, through online sites which offer fast loans of 200 to 2500 dollars; these include the secured and unsecured types. This method obviously appeals to you if you are in need of significant amounts of cash as soon as possible.Fortunately, you can acquire a loan approval even if you have a bad credit rating. So you do not need to fret if your credit history is apparently less than stellar. Typical online loan offers are marketed through e-mails, or through small sponsored links on any web page (not necessarily finance-related in content), so you have no problem of running into an available lender.You can also try putting a keyword query on your search engine and it will display a list of various lending companies. These are not only willing to do business with you, but will practically chew each other inside out, just to get your attention.Different lenders have varying rates of interest to offer you. It is best to browse extensively if you want to get the best deal for your loan. Rates are practically very competitive since there are a lot of established money lenders online. Submitting particulars in your application is usually a breeze, since the sites guide you through the process in a user-friendly way.You fill out a faxed or an online form with your personal information, your bank account number, social security number, and necessary information from your employer. You then fax out copies of financial information such as a check, your recent bank statements, or some signed paperwork. The site automatically assesses your credentials and gives you the results immediately. In fact, some sites are known to be able to give you a final response in as little as an hour from signup.As soon as your application is approved, the loan is quickly deposited into your checking account, a period which usually does not exceed a week from approval. You are not obliged to pay the loan until your next payday. Once your paycheck comes in, the funds are automatically withdrawn from your account.These same online money-lending sites also provide you with indispensable advice on how to go about your financial matters and how to choose the right lender. They also warn you to be wary of loan sharks, by giving specific information on how to recognize them on the spot.With these perks in place, you not only have the opportunity to apply for a loan in quick convenience, you also have sound financial advice at your own disposal.
Consultants: Are They Really Worth the Money?
The past several years have seen a growth in outsourcing and an increase in the number of consultants of varying types. The bad economy has spurred the growth of entrepreneurship as people realize that jobs just aren’t there and start their own businesses instead. The government and many companies see outsourcing as way to reduce overhead costs and purchase services as needed.The interesting thing is that there is no certifying body or job qualification to becoming a consultant. You’re a consultant if you say you are and if someone is willing to pay you for your services.So with all the money being spent on consultants, it begs the question, “Are they really worth it?”Contractor or Consultant?An educated consumer is my best salesperson. However, many people don’t really know what they are buying when they hire a consultant. I personally make a distinction between contracting and consulting.Contracting involves the performance of a specific task and is characterized by an emphasis on deliverables and hourly rates. For example, the contractor may be asked to develop a specific plan or report or provide training. While there are exceptions, most of this type of work involves tasks that are well within the capability of the client organization. In essence, the contractor is doing work that the client could be doing but cannot do because of lack of time or resources.The problem with contracting work is that it is focused on a predetermined deliverable. Further, the deliverable can usually be developed by any competent contractor. This means that the contractor has very little latitude for creativity and hence must compete on the basis of price rather than expertise.Consulting is something quite different. As a consultant, my goal is to improve my client’s condition. My focus is not on specific deliverables but on the end result the client wants to achieve.Let me give you an example of what I mean. A client decides that his or her company needs an emergency plan and decides to hire a consultant. A contractor approaches the project by studying the requirements of the plan and estimating the hours required to produce the plan. A consultant realizes that the actual output is not the plan but increasing the company’s ability to respond to an emergency.This can be a hard sell sometimes. I once lost a potential contract because the client felt that I was asking their organization to do some work. They just wanted someone to revise a plan to meet an administrative requirement.Now don’t misunderstand me. I’m not against contracting work or suggesting that it is somehow bad. I actually do a fair bit of contract work, usually as a subcontractor to a larger firm. But during these types of assignments I am just another member of a team. I am neither particularly challenged by them nor is the client getting the full value I could provide.Who’s the Expert?A common misconception is that a consultant must always be an expert in your particular field. This is certainly true in many cases. However, particularly when you’re working with contractors, the individual working with you may not have any real expert knowledge. They may indeed have a background in your particular field, such as being a retired emergency manager, but that does not necessarily translate to expert knowledge nor to any special training in consulting practices.So who is the real expert? Actually, it’s you. You’re the one with expert knowledge about your field, your organization, and your problem. A consultant brings experience cleaned from working with other clients but will never have the in-depth knowledge that you possess.The fact is many consultants, myself included, are what we call “process consultants”. Our strength is not expert knowledge in your field but the skill set that we bring to your project.What this means is that a consultant can guide you through a process that leverages your expert knowledge to help you achieve your desired outcome. We help you build on your organizational strengths to achieve the results you are seeking.If there is a need for expert knowledge in a particular area, a good consultant will be able to access a network of professionals to find the information you need, much like a general practice physician will consult specialists.Because many clients don’t understand this concept, they tend to narrow their options by only considering consultants with specific knowledge, experience, and/or certifications. There are times when this is appropriate and necessary but in many cases the demonstrated skill set a consultant brings to your project may well be more important than specific knowledge of your industry.Working with ConsultantsTrue consulting work is about relationships. What will set one consultant above another is the level of trust that the consultant engenders in the client. If you have the slightest doubt about the ethics of a consultant or his or her ability to help you achieve your desired end state, get someone else.The relationship extends to how you work together. Unlike a contractor, a consultant is your peer, not a just a hired hand. You’re paying for the consultant’s advice and counsel, so make use of it. The consultant is a guide who helps you through the process to achieve your goals but this means you have to be part of that process. If your total involvement is to review deliverables prepared by the consultant, you are not getting your money’s worth.This doesn’t mean that you can let a consultant have free rein to do as he or she pleases. It is important to agree up front on metrics for progress. These are not the same as deliverables, by the way. They can be performance milestones or comparative surveys. The important thing is that you mutually agree on how you will define the success of the project and the metrics you will use to demonstrate that success.Getting More ValueOnce you understand these facts about consultants, you can make more informed decisions and get more value for your consulting dollars.Begin by looking at your project and defining what it is you want to accomplish. Forget the deliverables for the moment. You must first understand your expected outcomes. Once you have done this you can consider whether a specific deliverable is the true measure of achieving that outcome. You can also determine whether you need a consultant or a contractor.A common mistake is to try and work out all details of the project in advance. Contractors like to see this as it provides them detailed information on which to base their proposal costs. Consultants are not hourly workers – we’re paid for our results, not our time. If you can describe your desired outcome and the value of the project to your organization, we can usually offer a creative solution that would work for you. Again, do not focus on deliverables but on what you’re trying to achieve.Consider what it is you need in a consultant. Does your project require specific in-depth knowledge of your industry or field or will general knowledge suffice? What skill set should the consultant bring to the project?As you assess candidates, don’t just look at resumes, certifications, and other projects of a similar type. Focus on whether the candidate has the skill set you want and whether or not you feel comfortable with him or her. For example, instead of asking, “Have you ever done a similar project?” ask how they would approach your project. Past performance on a previous project is not necessarily an indicator that the same techniques will work in your corporate environment.As you begin the project, establish your metrics up front. It’s amazing the number of times I have had a client look uncomfortable when I ask how they will measure whether I have been successful with their project. They’re uncomfortable because they haven’t really thought about the end result of the project.So are consultants worth the money? That ultimately depends on you. If you haven’t defined what you want out of the project, then you’re not getting the full value out of your consultant. If you don’t allow the consultant to propose creative solutions, you’re not getting full value. If you don’t trust your consultant and seek their advice, you’re wasting your money and the consultant’s time.It’s really up to you to answer the question.