Our economy in general for the past handful of years has been not just dry, but in a drought without an end in sight and with not even a sprinkle of showers having come this spring.
More and more companies that have survived the drought up until now are giving up the ghost and fading back into the landscape, just as parched plants would. Even the toughest plants out there need some rain eventually … Think of cacti. Sure the cactus family is made up of tough plants with scales and spines, found in dry areas, but these plants need rain too to survive, just as the toughest firms out there cannot survive in this drought-stricken economy forever. Considering that our business cycle is longer than most other industries and generally is a lagging, not leading, indicator of economic recovery to come, it's a wonder that as many firms have survived as they have.
You, a senior-level estimator and/or project manager, can rain dance all you want to invoke projects for your firm. But if there's not a cloud on the distant horizon to bid on, not even your medicine man talents can create work since there is simply no work to bid on. There can also be so much competition that rather than take a money-losing job your owners or executive managers have or will eventually make the decision to shut 'er down to try to salvage what value is left of the ever-more drying husk of what's left of the company.
If the company you're working for is a truly large company with mid- to high- eight or nine figures in annual revenue, then more than likely this column won't be of any help to you since a business that large is usually disposed of by those well-dressed and well-paid locusts normally called lawyers. If you're working for a mid to smaller firm where you might be one of two or more estimators or project managers, and you and your guys served as a multi-function, multi-purpose middle management team, then your talents and track records will be called upon to help harvest what can be gleaned in the fields, salvaging what value you can in what's left of the equipment and capital assets.
Steps to take
The first thing any company that’s getting ready to shut its doors in 30 to 90 days needs to do is collect all monies due. If any debtor of yours is out past 120 days and owes enough to make it worth a trip to do a face-to-face, go after them first. You probably won't be able to collect 100% owed if they've dragged things out that long. But assuming you've been given at least some latitude in negotiations, then do what is necessary this side of legal and ethical to walk out of there with at least some money, even if you have to kind of strongly cajole (but never threaten) and maybe even do some horse trading for it.
Any money at this point is better than no money although no money is better than a possible future lawsuit, assuming you and they will be around long enough in the near future to be able to collect it. If the lawyers are brought in to settle a major or minor dispute then both of you lose, and the only ones that win will be the lawyers.
Next, and some would argue this should be first, is to pay all taxes currently due and set aside enough cash to pay anticipated taxes (payroll, sales, use, etc.) for the current quarter and near future as well.
Just because you don't have any stock or equity in the company and maybe can't even authorize or sign checks, and by design you took steps when you came on board to minimize personal liability doesn't mean the IRS won't come knocking on your door. Trust me … If a "reasonable man" would ordinarily perceive that you’re in "a position of responsibility" then the IRS will too. They will come after you equally as well as the actual owners or limited partners.
The IRS truly doesn't care who pays any back taxes owed by the company. If you have any personal liquid or fixed assets they can seize to pay the company's current tax liability, more than likely they will indeed do so. State and local taxes are different from locale to locale, so we won't go there, just know that the IRS is always first in line and has ways of getting what's owed to them. They are merciless in their means and methods of collecting them, so assemble as much free cash as you can and pay taxes owed immediately from that.
Breaking the news
Next is the delicate task of breaking the news to the employees that the doors are indeed closing soon. This won't be any shock to them. They're not stupid because if they were you wouldn't have hired them in the first place. Try as best as you can to give them a more or less fixed date of actual business closing. Of course they'll be looking for another job in the meantime and are subject to quit without warning, but in this economy they'll probably stay on as long as they can because at least in most of the country there's simply not that many if any other places to go to.
If you can find the money to do this, make it clear, at least to certain key field and service personnel in private, that if they'll stay on until the end you'll pay them any vacation days or comp time or similar they've accrued. After all, even when the doors are actually shut for good there will still be warranty issues to take care of for the next year or two for recently completed contracts. If you don't have qualified personnel to take care of things after the fact, that would open up a whole other can of legal liability worms for your owners and maybe even yourself to have to deal with.
Lastly, take care of yourself. No pep talks now about how you've played the good game, fought the good fight and things will ultimately be OK in the end. They will be, but that's beside the point. Don't deny your feelings, admit them to yourself, face them, just don't say anything to anyone you might regret later. More importantly, don't actually do anything that will cause negative repercussions later.
All the people you've worked under, for and supervised will ultimately cross paths with you again, and it's important to keep the proverbial bridges built rather than let negative actions and words burn them. Take care of yourself by letting the soon to be past go as best as you can and look ahead, not behind you. You can't control what happened in the past, but you can at least influence a little what's going to happen to you in the future.
Kent Craig is a second-generation mechanical contractor with unlimited Master’s licenses in boilers, air conditioning, heating and plumbing. You may contact him via e-mail at: [email protected].