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January 2018
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Time to button it up

I don’t know about you, but trying to figure out what is going on in this economy, this country, this state and the city you are in is getting out of hand. Here you are with the responsibility to manage and lead your organization, and you have to do it by basically winging it until the next big economic news points you again in a different direction.

Because I work, write, lecture and prepare Cost of Doing Business Reports for the industry, and in general keep current on industry issues, I do need to study the industry and everything that affects the industry one way or the other. I spend a lot of time on industry issues and how manufacturers, dealers, and end users react to each individual issue that comes across my desk. Now just to be clear what “industry” means, it means the construction equipment industry, the lift truck industry and the rental industry.

When all is said and done what I conclude is, we, and I mean WE, locally and nationally, are in a big mess that will take years to shake out. Those in the industry that have hung on this long believe they are in good shape going forward, which may be the case for some, but for many a more cautious approach is called for.

For many in the industry, the risk they run is assuming the recession is over to the point where they can consider “grow mode” going forward. As I have mentioned in the past, a dealer’s capital position is probably depleted from the first dip and will not be able to sustain a second dip if “growth mode” plans outstrip actual growth potential. In other words, you build inventory, take on fixed commitments, increase expenses and the growth part of the equation falls short to the point where you are back where you were two years ago, which is exactly where you don’t want to be.

The point is company planning and budgeting should remain conservative until we find the entire economy moving in the right direction. Hopefully, this is what you are doing, and if not, at least understand the risks you are taking.

Along these same lines, I was thinking we spend a lot of time discussing dealer issues and that maybe it is time to discuss executive issues. Dealer executives have probably experienced pay cuts, benefit cuts, are working more hours, have probably been in numerous discussions with banks, been negotiating with vendors and have plenty of customer issues to deal with.

In addition, executives have seen their houses and retirement plans shrink in value, while expenses for many items are increasing. There is probably not much good news for many dealer executives at this time.

If there ever was a time to spend the time to evaluate your personal position, it is now because the left side of your personal balance sheet has decreased while the right side has remained the same or increased. In short, your exposure is up from any number of sources. To see where you stand, I suggest you have someone prepare a basic financial plan for you personally. See what you have, what it is worth, your tax position with each asset, and just have a rough idea of what you are worth. Who owes the assets, who have liens on your assets, where have you signed personal guarantees, etc? This would include the FMV of the company if you are the one that owns it.

The next step is to see where you have exposure in terms of contracts and other agreements, with a goal to figure out how you can mitigate that exposure should a liability event take place. For example, you will be amazed at how many personal guarantees you have signed (or maybe not signed) but are part of a contract. Banks, finance companies, and many vendor contracts contain personal guarantees you don’t even know about. Another big issue is tax exposure, especially tax exposure if you decide to sell the assets of the company. Pass-through entities have caused many to have this problem. Do you know what your tax basis is in your company and company assets? I have met quite a few folks recently that tried to sell their investment but had to change their mind when they found out what the tax bite would be.

These are still scary times and it makes sense not only to manage the company, but also your personal finances as well.

Garry Bartecki is a CPA MBA with GB Financial Services LLC. You may contact him by e-mailing