How Greece and the Stock Market are Conspiring Against You

If you’re a news person or you follow finance then you’re no doubt already aware of the situation in Greece. That country is a mess. It’s debt is astronomical; it has no capacity to repay; the political situation is volatile at best; there are mass protests, and nobody has any idea what to do. That’s my definition of a mess.

Let’s Help or Face the Mess Ourselves

In order to prevent some kind of catastrophic ruin that affects the governments and finances of the rest of Europe – after all, Greece is on the Euro and its economy is intimately tied to the rest of the continent – European leaders have been working on some kind of deal to manage Greece’s debt (a large part of which they’ll just dismiss or fund) and get its economy back on track.

And Greece isn’t the only European country riding this roller coaster. It’s just got it the worst right now and is in the lime light. Spain, Italy and others are also going through quite a bad spot.

With the state of the world’s economic intimacy, we’re all affected by the situations around the world. Hardly a country is free from the ripple effects dealt by other members of our global union. But what’s fascinated me recently is the degree to which that intimacy is more emotional than logical.

Up and Down and Up and Down

As I’ve watched the stock market plummet and rebound over the past month, I’ve seen that movement tied disturbingly to our reactions to Greece’s economic situation.

When news came that Greece was tanking and talks were stalled, the market dropped. Last week, as news landed that Europe had reached an agreement on how to bail Greece out, the market rallied 340 points. Yesterday, the market closed down nearly 300 points. Here’s how CNN explained it:

“New fears about the fate of the European rescue plan reverberated through stock markets in the United States and around the world Tuesday. Following European markets, U.S. stocks ended sharply lower across the board. Bank stocks were hit especially hard. The bad news was propelled by Greek Prime Minister George Papandreou’s surprise announcement that he would put his country’s participation in last week’s European debt plan to a voter referendum.”

Now, I understand that the stock market is not merely a bunch of mercurial people making decisions but an enormous number of trades made on the backs of incredibly complicated financial equations and algorithms, but when it swings so violently back and forth at news about Greece, I can’t help but think that things are getting a little ridiculous. And this is just news, mind you. Nothing is actually happening in any of these instances. A deal was reached but no money moved. A referendum was proposed but no vote actually taken. These may as well be rumors for the bearings they should have!

Don’t Be As Smart As the Last Person You Talked To

This reminds me of the business leaders I’ve dealt with who change their entire course of action every time they talk to someone. As I pointed out in my 5 Foolish Faux Pas of CEOs in Crisis, some CEOs are only as smart as the last person they spoke to. That’s what our economy feels like: as though it’s only as strong or relevant as the last thing it heard.

And I don’t want you to be this way!

Making plans and sticking to them is an important part of being a good leader and developing and growing a sustainable business. It’s especially important when you’re in a crisis. You can’t be flopping all over the place in rough times. Of course you change course when things are going wrong and you actually take the time to evaluate the situation, but if you’re changing plans after every conversation your people will lose faith in you and nothing will ever get done.

How do you keep focused when things around you get topsy turvy?

If the Shoe Doesn’t Fit, We’ll Make It Fit

We’ve all heard the phrase, “If the shoe fits…” meaning, if you’re accused of something (good or bad) and that deed fits your m.o. then it was probably you, because, well, the shoe fits.

In turnaround, the shoe rarely fits. I’ve either got a size 12 company with a size 8 shoe or a flat-bottomed foot with a big-arched shoe. Either way, the shoe doesn’t fit.

But in turnaround, we do what we can to make it fit.

We get creative with shoes. Perhaps we lop off some toes to make the shoe fit, or maybe we cut the end of the shoe off.

Whatever the case, it’s not the job of a turnaround professional to complain that what they’ve been given doesn’t fit right or work the way it should. If you like things to be neat when you arrive, don’t get into the turnaround business.

It’s our job to make the creative deals and think constructively about how to make things work that don’t appear to work. If you want to start thinking like a turnaround professional to get more working at your business than is already, remember that if the shoe doesn’t fit, you’ll have to make it fit.

Do your shoes fit?

The CEO’s 10 C’s of Borrowing

Bankers and business owners can have trouble communicating because their mind-sets are different.

As someone who began his career as a banker and who has spent the last 30 years doing interim-CEO turnaround management, I understand the banker’s mindset while having profound insight into what makes businesses run successfully from the top. Most of my day is spent playing “Let’s Make a Deal:” negotiating with lenders, creditors and bankers in order to get CEOs and their businesses new terms that allow continued operations.

In my experience, it’s particularly difficult for these two groups – business leaders and bankers – to understand each other because they’re coming from such different places and have seemingly different priorities.

Part of the process is helping both sides see that they’re in a partnership. Both bankers and business owners want to see the business continue to run because that’s the most likely way for the bank to recoup its loans and eventually see profits, and its the only way that the business will turn from debt to profit.

Thus, as a business owner, you should strive to understand how your banker thinks – and why he thinks that way. This can have a positive effect on your relationship and make it easier to get money when you need it. I present to you, then, “The CEO’s 10 C’s of Borrowing,” which will help you become a better borrower, enhance your relationship with your banker and make money more available when your business needs it most.

1. Character is of the utmost importance to bankers.

Bankers need to know you’ll do the right thing when your company is in distress. If they can’t trust you, they can’t put money in your hands. That doesn’t mean fake good character – it means have and demonstrate good character.

2. Carelessness comes down to poor record keeping.

Carelessness can also hurt your bank by causing it to write-off loans needlessly or even lose its federal loan insurance such as SBA Guarantees. Run your shop well, which includes good book-keeping practices, regular audits, competent comptrollers, and mixing up your monitoring practices. Not being careless also means verifying for yourself the details of your business’s financial situation.

3. Complacency is not an asset.

Banks are interested in how you react to tough situations. Don’t just tell them what you’re legally required to when they ask; keep them updated to avoid surprises. Bankers hate surprises. This is all a part of the larger principle of being proactive rather than reactive. Proactive business owners keep their banks apprised of the situation, which makes their banks more likely not to react to unfortunate circumstances by demanding payment on loans.

4. Contingency Plans are key for orderly succession if something happens to you.

Bankers value stability, and even though many business owners think they’re invincible, history has proven otherwise. If your bank knows what will happen in the event that something bad happens to you – like disability or death (God forbid) – that’s comforting to them. If they know what will happen to your business in the event of various catastrophes, they’ll continue to work with subsequent leadership. It’s also wise to introduce your banker to the future generation of leaders at your company. Have contingency plans. Nothing works out like your spreadsheets suggest.

5. Capital is your net worth (assets minus liabilities).

Bankers want an extra cushion of equity so they can be more flexible with your company in case it has a bad year. A CEO and a banker need to balance one another’s needs in order to maintain sufficient capital. I sometimes find that telling entrepreneurs, owners and CEOs to keep extra capital around is like telling a dog to save part of his dinner for later, but if you can show your banker that you’re capital-wise, he’ll be more likely not to call your loan after a bad year.

6. Collateral is a bank’s leverage and makes bankers feel more comfortable.

Collateral does not repay a loan, as many entrepreneurs think when they pledge their assets, but again, it does ease the banker’s mind.

7. Capacity is your ability to repay.

Bankers check to see if you have champagne tastes but a beer wallet. If you seem like you can repay what you’re asking for – which is to say, a reasonable sum and not your dream loan – you’re more likely to see the money. Shoot for the stars in life, but a bank loan is a different matter.

8. Competition works to your advantage.

Banks are concerned about their competitors’ interest rates, collateral packages and guarantees. You can use this to your advantage by doing your homework when seeking a loan and making that clear to your banker (though no one likes to feel threatened, so be courteous about this). Knowing about your bank’s competition can also let you prepare for a quick capital search should your banker pull out.

9. Controls are your built-in monitors.

Bankers want to know about your company’s controls. Do you have checks and balances for payroll clerks, controllers, CFOs, and inventory personnel? Do you watch the back door? Outline the steps you take in your plans and conversations with your banker; ask for his recommendations. If you find an issue, correct it and then update your banker that you’ve fixed the problem.

10. Communication is essential.

Almost every one of these tips hinges on communication. Don’t keep things from your banker. If he knows what’s happening he can work with you instead of against you. Work with your banker for the best relationship.

With “The CEO’s 10 C’s of Borrowing” in mind you’ll be better equipped to understand where your banker is coming from and not get frustrated when things don’t seem to go your way. Talk with your banker and try to understand him. It will only be to the benefit of your business.

Which of these have you found useful or true in your experience? Let us know in the comments.