Phoenix by jurvetson

Since the recession began, I’ve seen an increase in the number of business phoenixes. A phoenix happens when a business closes down one day, and then opens the next day as a completely new company, but with the same staff, directors and customers. You can usually tell this has happened by a slight change of name, a different bank account, and the directors looking exhausted but relieved.

Businesses usually phoenix (if we can use it as a verb) because they are in trouble and have big debts around their shoulders. Ethically, the difference seems to be that some businesses phoenix because they would not survive otherwise with their huge debts to the banks and some businesses phoenix in order to avoid paying their suppliers. You can tell the difference because the second category (the unethical ones) phoenix again and again. They’re the ones where the directors have taken all the money out of the business before closing it down – you can recognise them when the director is driving a Lexus but telling you that they can’t afford to pay your invoice.

In essence, creating a phoenix company is fairly simple. You put one company into liquidation and open a new company at the same time. The new company now does whatever the old one used to do for the same customers, with the same staff, and a very similar name and brand. Quite often you don’t notice the difference – you could be sitting next to a phoenix right now.

Pros and cons

If you’re thinking that this might be a great way to ditch some of the hassles of business life, such as that troublesome loan which the bank seems to think you will pay back, or that useless member of staff, then do think carefully.

A phoenix strategy has some things going for it, but there are also some serious disadvantages.

• A phoenix has to be done properly and legally otherwise you’ll end up still owing the money but you won’t be able to pay it back because you’ll be in prison for fraud. Get the right advice, from an accountant who has done this before (many accountants haven’t) or preferably an insolvency specialist.
• A phoenix has major long term consequences. You could have that bird around your neck for the rest of your life. If you put a company into liquidation, you are unlikely to ever get a loan again and you’ll have difficulty getting personal credit, even for small items. Some people who have been through this have had difficulty opening bank accounts or setting up online payments, even years after the event.

When you might have to

I’ve worked with three businesses in the last year who have phoenixed. They all tried everything they could to keep the original business going but, when the banks withdrew credit, the directors had no choice. The only alternative was to close down the business for good, and make everyone redundant with no severance pay and walk away. The phoenix was the lesser of two evils.

When it’s bad

A bad phoenix, like most bad actions, has a malicious motivation. When a business owner does this because they have been reckless or greedy, paying themselves big wages when the company isn’t paying suppliers, spending money on lazy, crazy marketing activities such as PR to promote the owners’ egos rather than the products or buying expensive things like cars, or in one case I saw, a giant fish tank for the office when staff hadn’t been paid that month. The company’s assets get sold to the owner’s mum for a fiver at liquidation, and you see Mr Dodgy driving his (sorry, his mum’s) sleazemobile a week later.

How you can make it better

If you’re in a bad situation, and are thinking about phoenixing, or you’ve done it and are feeling morally icky about it, there are some things you can do to make it better.

Firstly, protect the little guys. If you owe your suppliers, and can’t pay them, unless you talk to them they will hate you. Make sure you know that the small companies you owe money to know that they’ll get their money later. A client once paid me the last part of the fees she owed me a whole 5 years after I’d done the work, and I respect her for taking the trouble to do this.

Secondly, ensure that your staff know what’s going on. Staff always have a good idea of what’s going on, and if you tell the truth it will usually be better than the worst case scenario they’ve been imagining. If you’re intending to take staff with you to the new company, this is especially important as you don’t want them to jump ship.

I’ve already written about using LinkedIn for business and this article is great for people who are just starting out with LinkedIn. Now I want to talk about using LinkedIn as one of your essential tools to really lift your business, and help you make the most of your networking.

You can use LinkedIn as a business development tool in many different ways. Here are the three I want to concentrate on here:

• Developing your status as an expert and a lovely person
• Reach out with your brand
• More direct business development

Developing your status as an expert and a lovely person

I’m assuming that you have already given some thought to your profile, and that you’re keeping it up to date. Lovely photo, you look good there, by the way.

The next thing to do is to develop a good number of testimonials on your LinkedIn profile page. I just had a look at a handful of my LinkedIn contacts, and they averaged 3 recommendations, which is not enough to form a decision on. 3 recommendations looks a little half hearted. Potential clients will be looking at your LinkedIn profile, and trying to decide if you’re the person they should work with. So you need to make sure that other people are telling them that they should give you lots of money. LinkedIn is the perfect place to get people to write good things about you.

Remember that you want a good handful of recommendations, don’t be one of those people that have hundreds of recommendations as no one will ever read them, and it’s either going to look like complete overkill, or like you’ve spent your life asking people to recommend you. I have 20 on my page, which is more than enough to tell you that I’m one of the good guys.

Reach out with your brand

You want people in your network to remember you, understand what you do, and think well of you. That way, they will recommend you, buy from you and create opportunities. And LinkedIn can be a fantastic tool for reminding people of who you are, and getting a chance to get your brand in front of some new people.

If you’ve only really been using LinkedIn as an online cv, and a way of collecting some contacts, you’ll probably have missed some of the great new features they’ve been adding. Have a look around at some of the LinkedIn groups and work out which ones apply to you, and are relatively active. By joining up, you’ll be able to see what other people are up to, and learn what’s going on. It’s better to lurk a little first to get the hang of things, and then start joining in debates or helping out with referrals and advice.

More direct business development

One of the things I often recommend to clients is to put together a hit list of the people they want to work with – your target clients. I’ve just done this with a client who wants to sell to businesses based in Brighton who do business outside the city, for example. We’ve now got a spreadsheet of names to start contacting. Now, I wouldn’t advise using LinkedIn to contact these people – you need to be a lot more subtle than that in your hunt. However, LinkedIn is invaluable in finding the people you want, and getting lots of interesting information about them.

Maybe you know that you want to sell something to Giraffe Ltd. You know from their website that Mr Frog works there. So you look up Mr Frog on LinkedIn, and find out that he used to work for Hippo Ltd, and where your friend Ms Lioness still works. So not only do you know exactly what Mr Frog and Giraffe Ltd do, and that he is the right person to talk to, you can also ask Ms Lioness to either introduce you, or if this isn’t appropriate (maybe Ms Lioness doesn’t know him that well) she can give you some more really valuable information, such as does he like phone or email, or where does he hang out.

This approach only works well if you’re looking for high value business to business sales, but in this area LinkedIn can be a remarkable tool.

Although I work with many different types of businesses, there are several issues which clients experience time and time again, and I’m going to share these with you so you can apply them in your business.

Sometimes I’ll find myself saying this one several times in one day to different people.

“You might find it helpful to set some targets for your business.”

Now of course this sounds completely obvious (like many things I find myself repeating) but it surprises me how many businesses have only the vaguest targets.

Without a set of targets, you’ve no idea whether you’re doing well or not.

If you haven’t aimed for something, you don’t know if you’ve hit the right thing. Imagine a darts player just throwing the darts at the wall of the pub, with no dartboard. You’d imagine that he’s a madman, just throwing darts randomly – surely that’s dangerous?

There’s something strange about the act of setting targets for your business. When you set a target, as long as it’s realistic, you’re pretty likely to achieve it. Some people who have discovered this effect have thought that there’s something magical about it, something caused by the power of thought. But there’s nothing magical about it –

You’re more likely to achieve an explicity target if it looks like you’re not going to reach the target, you’ll do something about it.

If you’re selling shoes and you’ve been told that each day you need to sell £500 worth of shoes, and by 2 o’clock in the afternoon you’ve only put £65 through the till, you’ll know that you’d better be nice to the customers and sell some shoes. You’d pay attention. But if you think of your job as just standing around and making sure that no one steals the Jimmy Choos, it will be a different story.

Setting targets focuses your attention on what you need to do.

If you know that you need to do more networking, set yourself a target for how many networking meetings you’re going to go to each month, and how many catch up coffees you’re going to have with people who might send business your way. If you know that you need to get more clients of a particular kind, make that your target. If you have something which consistently gets pushed out of the way because other things are more important, then make sure it’s on your target list.

I’ll write another, more technical, article soon about how you set targets, and how to monitor them, but get thinking about what targets your business needs to set and reach.