The reason revenue stability is relevant to the topic of sheltering business relationships and personal asset protection is because when you shelter a relationship, your goal is to protect it from a bankruptcy court.
The word “relationship,” in this case, and with respect to the bankruptcy court, refers to assets that can be tangible or not so tangible. Suppose that you have spent 20 years building a safety supply business (you sell hats, goggles, fire extinguishers, gloves, etc), and during that time you have established relationships with the very best vendors in the business. You know the best vendors to purchase safety products from and the right person to talk to at those vendor businesses to get the best deals.
You have established personal relationships with all the right people in these businesses. And suppose that you have never created any purchasing contracts, so nothing is in writing. Suppose that if you had to start all over developing these excellent relationships, it would probably take you 10 or 15 years to do it all over again.
And suppose that if you had to start all over, you would immediately lose 20% from the bottom line because you would not be able to get all those great discounts. If your bottom line is 3 million then those relationships are worth $600,000 per year, and that could be huge. It is huge, percentage-wise, for any business.
And these numbers are realistic. In fact, vendor relationships can be so important that losing them could lead to the complete failure of a business.
The key here is that these relationships are worth money. These are assets to the business (and to you personally), and since these relationships are an asset, the bankruptcy court can take them away. And this is especially true if you have a file cabinet full of purchasing contracts or customer contracts. If this is the case, it is possible that these contracts could be seized by a bankruptcy court and sold to another safety supply company. However, these relationships are more difficult to convert into money. In any case, knowledgeable business persons understand the inherent value of business relationships.
To learn more about Business Turnarounds, Commercial Debt Reduction, or Business Management and other related topics, order Andre’s books directly from Amazon.com, or get details here: Andre Larabie
Andre Larabie is a published writer and successful business coach. Get a free excerpt from his book on commercial debt reduction at: http://www.AndreLarabie.com
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