Lessons for Death
5. Bankruptcy has little to do with you.
If you’ve struggled with Special Assets and not made significant progress in turning the business around, now your last option to save some jobs and some semblance of your company is to file bankruptcy. You must understand it will no longer be about you. Bankruptcy takes a business process and makes it a legal process. Bankruptcy is about your senior creditors protecting the remaining assets of your company so that they can recoup their loan. Your family, your community, and your storied history only have value if they can make the new owners a profit.
Task: Take some time to get fully educated on the bankruptcy process. At this point, your business will survive without you for a little time. It’s in shock mode—it will be frozen for a little while. Take a few days or a week to read everything you can about bankruptcy and speak with bankruptcy attorneys and bankruptcy financial advisors. Try to learn about the entire process before it begins. Digest it. Prepare for it.
Before you file for bankruptcy, develop a communication plan with your legal and financial advisors. This communication plan should be delivered to all of your stakeholders as soon as you file. They need to know the truth and the plan. Don’t leave it up in the air; if you don’t control the message, the message will control you. Plan a meeting with all of your important customers and suppliers. Be prepared to show them the DIP (Debtor in Possession) budget, which will show them that there is adequate funding to ensure the business will keep running smoothly throughout the process.
Understand that all of your suppliers and creditors will be very upset. Most, if not all, will be unsecured. If you can reorganize the business or sell it at a premium, they will get their past-due bills paid. The chances of that happening at this stage are very small. Sorry; that’s just the factual reality. Less than 5% have this success. So, accept that they will be angry. Let them vent. Your problems became their problems. After the steam has left the room, focus on what remains. The reality is that they still want your business. They don’t want your business to fail. If you can’t run it, they want someone to run it, so they will continue to work with you or anyone who can help them.
Your customers won’t be as angry, but they will be concerned about interrupting their own business. Show them the budget and show them that the products or services are funded for the duration of the business. The vast majority will stay with your company throughout the process. Some may make plans to find new suppliers.