What really shook him recently was a visit from some debt collectors. Williams was unprepared for how much he would be rattled by their visit

THE LAST three years have been a nightmare for Paul Williams. His business has virtually collapsed, he owes the bank money, repossession of his house is in the offing and morale and productivity at his floor-coverings company are at an all-time low.

Just before the recession started to really bite, Williams had been on the verge of selling his company for a tidy profit to a UK company interested in cashing in on the Irish building boom. He held out for a better deal and the buyer walked away. Williams has been kicking himself ever since.

The company made a lot of money when times were good and Williams, still infused with the optimism of youth, spent rather than saved. He paid himself and his staff over the odds, he dabbled in Spanish property, he bought an expensive new house on the outskirts of Cork city and even a holiday home in South Africa. His team of fitters drove top-of-the-range vehicles and Williams’s lifestyle had all the appearance of success.

For around 10 years his company was indeed very successful. Williams had started out as a fitter himself but was determined to learn the business as quickly as possible and then strike out on his own. His family had good connections in the building trade and Williams travelled widely to source unusual products for both the domestic and commercial markets. He secured a number of agencies for Ireland and the UK and began to develop quite a thriving business in Britain, culminating in several very large contracts to work on properties bought by Irish developers in London.

Williams set up an office in Britain, which is still operating and currently supporting the ailing and heavily leveraged Irish arm of the company. However, the resources there are also finite and the manager running the British business is becoming increasingly uneasy at the way Williams is running the business: by, as he puts it, “robbing Peter to pay Paul”. He has told Williams in no uncertain terms that he will resign if the situation continues. This threat has wider implications, as he has a 20 per cent stake in the UK arm of the firm.

With new building projects very thin on the ground, the company’s commercial sales in Ireland have slowed to a trickle.

Williams’s company has always focused on the upper end of the domestic market and while business in this sector is much slower than it was, homeowners are still refurbishing their properties, which is keeping the company on a financial life support. However, these homeowners with money have become more value conscious and Williams has had to drop his prices and take a reduced margin on sales.

At the height of the boom he employed 50 people in Ireland with 10 in the UK. This has been cut to 11 in Ireland while two jobs have gone in the UK through natural wastage and have not been replaced.

Williams is now wondering if he can afford to cut more jobs in Ireland without affecting customer service. He has three staff left in the office (down from seven) and they say they are struggling to cope with the workload.

Williams acknowledges that their workload has effectively doubled but he reckons they spend way too much time surfing the web, making personal phone calls and giving out about the situation.

In addition most weeks one of the three is out sick for a few days.

The situation with the fitters is not much better. They too are very disgruntled as bonuses have been cut and the opportunity to earn overtime has all but disappeared. Williams has gone against the trend by continuing to keep fitters on his payroll rather than asking them to become sub-contractors. He is now considering if it would be better if they took over the lease payments on their vehicles, which he can no longer afford. He tentatively floated the idea with one of the senior fitters a few months ago but met with fierce resistance and parked the idea.

To add to his troubles there was virtual mutiny when Williams subsequently told the fitters that their flashy vehicles would have to go. Good fitters are the bedrock of his business and not easy to find, so Williams is loath to see a mass exodus. He has managed to keep the leasing payments almost up to date (he’s running on average two months in arrears) but he is not sure how much longer that can continue. One piece of advice he has received is to make his Irish fitters redundant and replace them with cheaper labour.

What really shook him recently was a visit from some debt collectors. Williams was unprepared for how much he would be rattled by their visit, which did nothing for staff morale. At this stage staff can see the writing on the wall and Williams knows people are looking around for other opportunities.

The bank is in contact on a daily basis. He has been in to see the manager on a number of occasions and thought he had managed to convince him that the company would survive if he could have time to restructure his debts. Of late, however, he has discovered his file has been passed on from the local office and that he is dealing with new people whose only and immediate interest is the money he owes right now – and not his long-term repayment plans.

Williams is trying to sell properties in Spain and the holiday villa in South Africa but the process is taking much longer than anticipated, as he is afraid to leave the country in case anyone moves against him in his absence. He has not told his wife the extent of the problems and is petrified the family home will be repossessed.

He is living life on his credit cards, using one to pay off a balance on another but is rapidly reaching a point where several are reaching their limits. He is avoiding calls from his accountant (whose fees from last year he still hasn’t paid in full) and has fallen behind with VAT payments.

Williams is close to breaking point and, as the only person left handling sales, he is finding it increasingly difficult to muster sufficient composure to interact with clients and potential clients with all that’s going on in his head. In very black moments over the past two years he has thought about simply “disappearing” and taking his family as far away from Ireland as possible. But he knows this would be devastating for all concerned – and if he could just find a way to sort out his immediate problems he would prefer to stay and sort out the mess.

Williams is now almost paralysed by the fear of losing everything and feels he has nowhere to turn. The only way out might be to approach the UK company that had showed an interest in buying his company before to see if they might still be interested – albeit at a knock-down price. What has prevented him doing this so far is pride and the fact that he finds it extremely difficult to contemplate what he sees as the catastrophic failure of his business.

Worst of all, Willams recognises he is at the end of the line and that he needs to face up to reality.

But the gap between knowing what he should do and being able to actually do it just seems to become bigger every day.

A sense of impending doom is beginning to cloud his every waking moment and Williams fears he could be heading for some kind of mental breakdown. He is constantly in a state of high anxiety and for no apparent reason found himself sitting at traffic lights recently with tears running down his face.

How can Williams manage his problems?

A supportive network of family and friends will play a major role in helping him to cope with the stressors in his business life

THE EXPERTS' ADVICE: AS A DIRECTORof the company Paul Williams needs to consider his statutory responsibilities, particularly if the company is insolvent (given its inability to meet its obligations as they fall due, this would appear to be the case).

In the first instance he needs to follow through on the operational restructuring and cost reduction he knows are necessary, including the sub-contracting of work to the fitters.

If he believes the business has a viable future, he needs to develop a business and financial plan to present to his bank showing how he intends to deal with the company’s debt burden and creditors. He could explore the possibility of outside investment though, given the circumstances, chances of success are slim. In the event investment is not forthcoming, the forecast plan does not show any improvement, and/or is unacceptable to the bank, he should cease trading and invite the bank to appoint a receiver, following which he should take steps to liquidate the company.

It appears the UK business is performing reasonably well. Williams should turn his attention to growing this business and stop the leakage of funds to the Irish business. This will obviously have a positive financial impact on the UK business and deal with his fellow shareholders’ concerns. It will also provide him with some prospect of a livelihood to deal with his personal debt situation.

We are not told the extent of Williams’s personal exposure to the bank and whether it includes personal guarantees in relation to the Irish company’s debt. Regardless he needs to deal with the issue head-on by discussing his circumstances with the relevant person handling his file. The fact his file has moved from the local branch to a centralised area is not necessarily a bad thing. It means it is being handled by a recovery team accustomed to dealing with distressed situations and restructuring debt. He should agree a debt restructure plan to include asset disposals and a realistic repayment schedule based on his means.

Williams’s fear that a creditor “moves against him” should be allayed by addressing the issues as outlined above. In addition there are prescribed statutory notice periods to be served in an appropriate manner before a creditor can legally take enforcement action against his assets. In the event Williams starts focusing his efforts on his UK business and relocates there it may give him options to pursue a personal insolvency process in that jurisdiction should he, in due course, find he is unable to deal with his personal debts in a manner acceptable to his creditors.

– Declan McDonald

THERE AREbenefits in business to arriving at sound decisions based on reason rather than negative emotion. For example, answer the question: "If a baseball bat and a baseball together cost €1.10 and the bat costs €1 more than the ball, how much does the ball cost?" Under the stress of time pressure most people intuitively answer 10 cents even though the correct answer is 5 cents. Business people need to arrive at the 5 cents answer when dealing with problems such as those Williams is wrestling with. Unfortunately when people are making decisions and are also experiencing negative emotions – such as fear or anxiety – they tend to make the 10 cents decision.

Negative emotions trigger pessimistic assessments. People have also been shown to be more likely to engage in risky behaviours when faced with losses rather than gains. The overriding of rational deliberation by the influence of negative emotion is also well illustrated by the behaviour of phobics who are typically aware the object of their fear is objectively non-threatening, but are prevented from acting on this judgment by their own fear.

To help him make the correct business decisions Williams needs to employ living skills that will allow him to devote most of his mental faculties to problem solving rather than having to manage his negative emotions. Freud supposedly invented the “talking cure” and it works. A supportive network of family and friends will play a major role in helping him to cope with the stressors in his business life. Mentoring, having someone to talk to whose judgment he trusts and to whom he can openly confide in, can play a very useful role here.

The techniques of “mindful awareness” can also be very helpful. Mindful awareness practices have been shown to enhance mental functioning such as stress reactivity. Just as a good diet and exercise can help to keep us in good physical shape, mindful awareness practice has been shown to play a similar role in mental resilience. For example, Google provides its employees with the opportunity to learn about this life skill (http://iti.ms/rsotWz). For an introduction to mindful awareness that anyone can practise, the MARC centre at UCLA has a very good website at http://iti.ms/uN9jjM.

The business environment Williams is dealing with is one that will trigger fear and anxiety, and therefore has to be managed in the same way as the changed market and economic conditions have to be constructively responded to. Physical exercise helps maintain good physical health and mental exercise maintains good mental resilience.

– Gerry Fahey

WHILE SUPERFICIALLYthis would seem to be a case of a company being decimated by the economic decline and it just being a matter of time before it winds down, I believe it is not necessarily the end of the road for Williams and his business.

At its peak the business funded a very comfortable lifestyle for Williams and his family. It would also appear that he paid his employees well, more than he could afford in the long term.

He is in a very difficult situation but he may still be able to salvage something. Whatever he does he must ensure the staff he has at the end of the process is motivated and willing to work hard.

It is little wonder the office staff are feeling overworked as they appear to be doing five days’ work in four days. This is an almost unbelievable level of sickness amongst office workers. He needs to start managing this issue quickly and directly. Each time a member of staff is out sick he needs to call them in and complete a return to work interview. This has been proven many times over to be an effective method of managing and reducing absence.

Paying for three people to work and only having two turning up each day will add to the pressure on Williams and the other office staff. Having done nothing about it for a long time, staff members are not taking him seriously and treating the job in a similar manner. Addressing the issue can only be beneficial.

Can he make the fitters redundant and re-employ other, cheaper employees to do the same job as he has been advised to do? While he may wish to do this, those who have advised him have clearly no understanding of Irish employment law. Letting people go and rehiring them or others to do the same job for lower wages does not constitute a redundancy.

He needs to look at what business he has on the books and to examine what he can afford to pay the fitters to do this work. Basically he has to get his wage costs in line with what he is earning. He may have to ask staff to take a pay cut and eliminate overtime premiums. Failing this, he should be prepared to make them redundant and engage self-employed fitters. If the pay cut is accepted he may wish to retain some form of bonus payment as this may help motivate staff. These changes will obviously be resisted strongly by the fitters – however, without them, business won’t survive.

He needs to talk to all staff and make them realise that without these changes the business will fold. One of the big benefits will be the amount of pressure it will take off his shoulders. This may help him sell more, which can only benefit staff.

– Jack Byron