Times of economic crisis offer companies an ideal opportunity to strengthen their business core. All businesses, whether large or small, should use the coming months to evaluate and assess their businesses in a variety of fundamental areas, including fortifying internal and external contracts, tightening employment agreements and reviewing key company assets for physical and technical security.
The Prince Lobel attorneys focused primarily on closely held businesses have developed a "top ten" list of important areas to evaluate:
1. Goodwill Termination: Create a detailed action plan prior to any layoff, and make certain that you have adequate procedures in place to cushion the transition for employees during a layoff. Foster goodwill between your company and terminated employees by providing resume assistance, suggesting new job ideas and offering reasonable severance packages.
2. Essential Company Documents: Review buy-out agreements. Verify that company valuations are updated to avoid an overvaluation of the company for buy-out purposes. The value of your company may have changed dramatically over the past several years, so make sure your valuations reflect the current economy.
3. Customer Relations: Your company’s most valuable assets are always its customers, and in a downward economy, they are even more valuable. Reach out to your customers with complimentary visits and updates. Show your customers the added value of doing business with you. If you don’t, your competitors will.
4. Financing Documents: Review all your documents related to financing, including a review of your business credit lines. Understand all the terms contained in these documents, especially default provisions. In this economy, many financing institutions are enforcing seemingly insignificant reasons for default. For example, if a partner or another key staff member leaves your company, the financing institution may have grounds to suspend your financing or call your loan outright.
5. Lease Reviews: Currently, landlords are faced with empty buildings and defaulting tenants at an alarming rate. Review your lease agreements and start a dialogue with your landlord about potential rent reductions or modifications. In booming economies, landlords are unwilling to revisit lease provisions midterm. In today’s environment, however, a landlord would much rather have a conversation with a tenant that benefits both parties instead of having to confront a defaulting tenant and more empty space.
6. Data Security Review: With the enactment of the new Massachusetts privacy regulations, every company in Massachusetts needs to review both physical and technical safeguards for the private information collected from Massachusetts residents. If you collect the first name, last name and either a social security number, credit card number or state identification number from a Massachusetts resident for any purpose (payroll, credit card payment, etc.) you need to comply with all state privacy regulations.
7. Intellectual Property Audit: Desperate economic times create desperate employees and competitors. Complete an intellectual property audit to identify your trademarks, copyrights and patents. Protect your intellectual property through proper governmental filings, IP monitoring and employee contracts. One of the most devastating company events is the theft of intellectual property for use by a competitor. Now is the time to ensure that those assets are protected.
8. Theft Protection: A decrease in the economy often results in an increase in company theft. From large scale warehouse theft to cash register theft, companies need to re-evaluate physical security protocol and refocus their efforts on preventing physical and technical theft.
9. Gifting Programs: Small businesses often engage in gifting programs in order to pass the value of a company to future generations. While this may be an attractive estate planning strategy in a booming economy, suspend gifting programs until a proper evaluation of the program can be made. Aggressive programs may inadvertently place the gifting party in an impoverished state during a downturning economy.
10. Compensation Strategy: Evaluate your employee and business owner compensation plans. Consider suspending raises and instead offer stock and options tied to sales. Sharing the risk across the company will help sustain the business during difficult times.
Prince Lobel is uniquely positioned to assist companies of all sizes and across all industries to not only survive these difficult economic times, but to provide companies with the tools they need to thrive. If you would like more information or you have any questions about the information presented here, please contact Peter J. Caruso II at [email protected] or 617 456 8034.