Page 97 - Paulisms: Gold Nuggets for Small Business

At one stage, I was involved in supplying products to the building industry and some of those were for big projects. In that kind of situation, you’re dealing in a minefield. Sooner or later, some of those construction companies or developers are going to go through (go into liquidation); you know you will be hit, and history repeats. You must minimise and manage your exposure – hence the title of this chapter – to help you minimise your losses.
3.4.1 Credit application form
Let’s first talk about business-to-business.
It starts with setting a base. If you’re dealing business-to-business,
you’ve got to know who you’re dealing with. Throughout my career, as much as possible when dealing with other businesses, I put a credit application in place, and as often as possible would have a personal guarantee (PG) signed. This is not always achievable, as I know myself – I always tried to cross out PGs.
Most people in business have their assets in trusts (or should do!), not in their own name, and don’t own anything personally. Often, they will sign a PG knowing companies won’t go after them if there is a debt problem. However, no one wants to go bankrupt.
I had a client who I ended up chasing for about $20,000, and he would not pay. If people communicated on debt, I used to look after them. But if they didn’t, then I would come down hard on them. We had a PG. What I offered this client was: ‘Okay, you can’t pay us. Give us $10,000 and we’ll both walk away.’ He wouldn’t accept $10,000 and then we couldn’t get a hold of the guy. This was the first time I had to