Peter Nachtwey said:
We aren't that big. We are only 25 people plus a few part time.
Sorry if that came across the wrong way Peter. The original point was that they would do the same for a 4 month old 1 man operation.
We have out grown the current building we are renting. My partner and I ( my partner actually runs the company not me ) have bought some land the size of a football field and have just got the permits to start building. The builder just got started last week. So far we have funded everything out of own pockets. We are very conservative financially but there are limits to what we can fund by ourselves.
The point is the financial crisis we are in is going to be interesting. If we don't get a loan to continue building then what? There will be some disappointed builders and we will be stuck paying outrageous rent staying where we are.
Congratulations on your continued growth! Glad to see you have done it while taking on so little debt, but we'll get back to that one.
I hate the idea of the government bailing out or regulating anything. However I do think the stock holders of companies should expect the board and senior officers of public corporations to have at least half of their wealth in the stock of the company they are controlling. In addition, an officer of a public company cannot sell his/her stock until one year has past and then is limited to 1/2 of the stock. Next year the rest can be sold. This would greatly affect the way the officers and board of a company run the business they manage. Then they would think more like a small business owner and plan for the long term.
The CEO of Washington Mutual is going to make millions for running the company for only a few weeks. I blame the board for hiring the robber. That is why I think the board should also be on the hook for their poor decisions.
The only solution is to force the board and officers to be responsible just like small business owner must be.
I really struggle with any type of government regulation of business. I believe it really stunts growth. And let's face it, the US government's idea of regulating is usually to add bureaucracy. Just look a Sarbanes-Oxley, which was the knee jerk reaction to the Enron collapse. While it MAY have helped regulate those big corporations, it put those with revenues of around $100 million at a distinct disadvantage, requiring around 2.5% of their revenue to come into compliance. During hard times that 2.5% can be the different between staying affloat and going under.
The pressure can be applied on your congressmen and also on the people that run the 104K ( I know it is a 401K but it feels like a 104K ) and the people like Fidelity, Schwab etc. Just threaten to move your money unless they comply.
I think you have just given a better solution to the problem than caps of CEO salaries and holding the board more accountable. We have had laws in effect for hundreds of years against actual criminal acts, so beyond that, you just have poor decision making. While it can be very costly and destroy lives, it's not against the law. But someone's got to be to blame right? "Let's fire the CEO". But that doesn't fix the problem. The Chairmen of the Board are the next in line, it must be their fault. But wait, who hired them? YOU DID! Anyone who is a stock holder gets their proxy vote in the mail. "Oh, but my money is in mutual funds, I don't actually own stock". You got a proxy vote for who runs the mutual fund. The whole thing is we can keep looking for someone to blame, but in the end, it is us, the stock holders, who have been irresponsible.
I selected the CEO,
I chose those big bonuses,
I caused the banking industry to collapse.
jstolaruk said:
"...If we don't get a loan to continue building then what?..."
Did I read correct? You started putting up a building without securing the funds, through cash outlay or financing, to complete it? If so, that seems to me to be a very risky play. Last building I/we put up, we secured the $3M low interest financing with the city's help of issuing municipal bonds (the city/county wanted to retain the jobs) before we purchased the land. Our out-of-pocket expenses ($300K) was the land purchase option, the interior build out, attorney and misc fees.
First Jstolaruk, I'm not saying your completely wrong, but there are other philosophies on this, and I do believe that the current market conditions are a good example of why
I would agree with Peter on his strategy, as it is the same strategy that I operate on.
Debt chains a business, especially a small one, in one direction. I witnessed debt take a very strong business out because the industry took a temporary turn for the worse after 9/11. They were profitable up until then and the industry came back, but the interest payments exhausted their operating capital before it did. That's a lot of what is happening to businesses now.
I know, I only have 1 full time employee (me) and 10 or so people who have specialties I need at various times that I contract as needed, but a friend of mine who has helped me in much of the decision making owns a 75 employee operation that operates on the same principle.
Debt is one of those overhead items that is very hard to shrink during tough times and it cuts into your most powerful asset when growing a business, your revenue. All businesses must eventually take on some debt at times to continue to grow, but only take it on as needed. If Peter's sales were take a big dip right now, he could stop the expansion temporarily to ride it through where as if he a secured funds for the full amount, he would have to continue on ,even if he knew the industry would not rebound for another year, because he had committed to making those interest payments
