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Ask HN: Clients are gone, lots of debt, what would you do?

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Re: Ask HN: Clients are gone, lots of debt, what would you do?

#41

I would go forward from where you are. Look for additional contract work and look for additional business that can leverage your assets as they are. Tell everyone you know that you are looking for work and are available to start immediately. Go back to all of your old clients and see if there is any basis to consult/contract or support them--that doesn't involve incurring additional expense in advance. Simplify your…

Good advice about not wasting time on people who want 'credit' - always check before hand how long it will take you to get paid. And don't count your money until the check clears. (though personally I'd wait two weeks, or even a month for a client if I couldn't do better.)

about selling crap:

sure, selling your video game system and TV is fine... if you have systems that are worth more than the time it takes to sell them. Right now it's pretty easy for me to get work at $80/hr... selling, say, the obsolete servers in my garage or my TV won't net me $80/hr.

I guess it might make sense if you have nice stuff, or if you can't find contract work at all. (I've been there, I've made rent by selling obsolete computer parts.

Re: Ask HN: Clients are gone, lots of debt, what would you do?

#42
talk to your tax person

You really want to pay off that debit out of pre-tax monies. (well, unless you are declaring bankruptcy, but your debit seems small for that.) Either way, a $100/hr tax dude seems expensive, but it's not as expensive as paying off that debit out of post-tax money.

Re: Ask HN: Clients are gone, lots of debt, what would you do?

#43
post #36

Yes, I once had a failed startup, and ended up with $40K in credit card debt. I assume you are personally liable for the business credit card debt. (As you generally can't get a business credit card without personally guaranteeing it). So, just to be clear on your situation, you are 30K in debt. (Regardless of what happens to the "business", you, personally, have 30K of debt). Step one is to get yourself stabilized e…

This is a really awesome write-up and lists everything I would have thought, but in a way I might not have been able to put acorss. To put it succiently, 1. Cut down expenses, right now and ruthlessly. Negotiate with everyone on everything. Everything is open for negotiation. 2. Economic stress WILL KILL creativity. Your only focus right now should be get to positive cash flow. Not debt free but positive cash flow. D…

I would take exception to "everything is open for negotiation" if it's interpreted that you don't need to honor your word and your commitments.

Also, a lot of the time economic stress forces you to make the changes in habit and self-discipline that allow you to thrive as an entrepreneur. CatDancer makes an excellent point that lack of profitability ("economic stress") is a signal to improve your business.

Re: Ask HN: Clients are gone, lots of debt, what would you do?

#44
I'm currently an entrepreneur in waiting. By that I mean my last credit card funded gig tanked (don't ever depend on people not doing what is exactly NOT in their own best interest) and I'm waiting until this 30% APR debt is off my back. I'm doing this by working a full time job and freelancing on the side. I cannot stress enough on how important it is to have that full time job. No matter what happens with my freelance gigs (I've noticed a lot of clients asking about 'payment plans' lately), my full time job has those minimum payments covered. Of course these minimum payments would disappear much faster if it wasn't for those student loans (just applied for 'Economic Hardship Deferment') so whatever you do, don't do something stupid like go back to school where you pay someone so you can do more work.

Get a job, pay off debt, and learn from your mistakes. Semper Discens.

Re: Ask HN: Clients are gone, lots of debt, what would you do?

#45
There's lots of good advice here but I want to chip in my two cents, because I was once in a very similar situation and my advice is different enough than what's already here.

Short backstory so you know I'm serious: In 02, I lost a client along with about $20k of unpaid work (long story), $15k in debt, NO money, my ex-boyfriend stole my car (worse than a stranger, ha - and no, I couldn't get it back), working all the time & money stress lowered my immune system, I caught a ridiculously bad case of mono and could barely sit up for 3 mos, leading my only paying client to threaten to sue me. My father couldn't help me at all with money and my mother is an evil bitch who had an extra car but wouldn't help me anyway. It sucked. It was by far the worst period of my life BUT there's a huge upside, too.

The first thing is: you can deal with this. You're smart, dedicated, and capable. This is just a temporary setback for you. You're already being proactive instead of wallowing in self-pity - way to go. It took me much longer to get to that stage.

As another commentor pointed out, only sell your things if the equivalent hourly rate works out. For most things, that's a "no" right now, since consumer spending is tanking. Keep your stuff. Don't pay to store it - but keep it somewhere. Unless you're like that savekaryn chick and spent it all on small, easily shifted designer purses. ;)

Second thing is: Call your credit card company(ies) RIGHT NOW and tell them "Look, it's lower my interest rate or I'm going to go bankrupt." This is the #1 mistake people in our situations make (after the racking up of debt, of course). Credit cards ARE negotiable. Allow me to repeat: CREDIT CARDS ARE NEGOTIABLE.

And right now, CC banks are especially vulnerable because of the shit economy and that means YOU, an actual customer who intends to make good, is GOLDEN to them. If you tell them you have no other option, they WILL lower your APR, which will do HUGE things for you.

If they don't respond to your approaches, try another (male?) friend or family member who can pretend to be you - who isn't feeling beaten down & can be assertive. If that fails, get a (reputable, genuine) debt counselor or lawyer. It's WELL worth the investment - it will return way more than 30% on your money.

Third thing is: pay off your debt quickly but DON'T KILL YOURSELF DOING IT. If you eat only ramen and work 18 hour days, you're going to be unmanageably unhappy (read: depressed, beaten down, and totally burnt out) and possibly physically ill, too. I tried both approaches, and the overworking one nearly landed me back in bed.

I got a f/t job - my first ever after being a freelancer since a teen, that's how low I had sunk - and that helped a lot because it greatly reduced my feeling of uncertainty. However, my first job was shitty and I was only able to stand it for 3 mos - by the end of which I'd lined up a better job and jumped to that seamlessly. Again, this falls under the category of "don't shit all over yourself just to pay off a debt." Better to go bankrupt, in my mind.

Fourth thing is: Hustle. I got my job by hustling. I got my second job, the better job I stayed with for a year to pay off my debt, by hustling. And I made extra money by hustling. What's hustling? Not anything illegal. But you've got assets, so work em!

What has the company gotten you? Software you developed? Know-how? SELL IT.

Ask EVERYONE you know if they have work for you - and, most importantly - if they know anyone who might have work for you. Refine your pitch, give people as concrete examples as possible. Stretch your skills to fields where you hadn't worked before.

Ask everyone you meet who is at least tangentially related to your work - politely - if they could use you, or know someone who does.

There is NOTHING wrong with this. People are reluctant to do it because it seems sketchy or exploitative, but that all depends on how you do it.

I got every job I ever had by asking, mostly people I had barely just met (last job paid me about $180k/yr so this is not just for small fish). You HAVE TO ASK, because most people - even ones who really could use your help - don't think about the possibilities until you do. And for the people who know you best, trust best, ask them to help you figure out ways to hustle better.

Now, for the rest of the know-how, consider training other people to do what you do. Consider writing an ebook or something, once you get on your feet. Your knowledge is valuable, and if you do a cursory look into the world of self-published niche topic ebooks, you'll find tons of people are making a couple extra hundred bucks a day doing it.

Remember that your time IS worth something - and probably quite a bit. Remember that what you do today with your time is like investing or spending your future income, too, not just for this month. This year or two or three of your life that you're going to take paying off your debt, you don't want to look back and have nothing at all to show for it but, well, less debt.

Invest in yourself and your future where it makes sense.

If you pay off your debt a bit more slowly, but stay sane and have built something that can help you in the future (an ebook or teaching web site, say), that's almost surely worth the extra interest. You just have to be sensible.

Also, pro tip from a girl who knows: never, ever, ever work for anybody again who won't make a 30-50% advance payment. Put kill clauses in your contract, so you keep those deposits. Otherwise you're "putting yourself on sale" and letting everybody know it.

Oh, and that upside I mentioned earlier? It's this: this is probably the worst personal situation you will ever have to deal with. And you WILL deal with it just fine. And after that, you'll realize A) how unimportant money is to your overall happiness, which paradoxically makes making money that much easier because you have its number (so to speak), and B) if you can conquer this, you can conquer ANYTHING.

Cheers and best of luck.

Amy

Re: Ask HN: Clients are gone, lots of debt, what would you do?

#46
My best advice would (if you have okay credit) get a line of credit from your bank or a loan and pay off as much of your credit cards as you can. The interest rates from a line of credit are MUCH lower than the 10,20,30% interest your credit card company is charging.

You'll still need to come up with a minimum payment each month, but you'll pay less in the long run. If you're in good standings with your bank and your credit isn't terrible, you should be able to get one. Now, I'm not sure about how banks are lending with the financial crisis, but it's worth a try.

Re: Ask HN: Clients are gone, lots of debt, what would you do?

#47
post #23

Yes, I once had a failed startup, and ended up with $40K in credit card debt. I assume you are personally liable for the business credit card debt. (As you generally can't get a business credit card without personally guaranteeing it). So, just to be clear on your situation, you are 30K in debt. (Regardless of what happens to the "business", you, personally, have 30K of debt). Step one is to get yourself stabilized e…

Boy...I was ready to vote up this comment, but then I hit the part about not worrying about the $30k in credit-card debt. Instant down arrow. Absolutely TERRIBLE advice. Whatever you do, you really must pay down the debt . Minimum payments aren't going to cut it -- this is revolving debt that you're talking about, and if you don't make more than the minimum payments, it's only going to get worse. People routinely go…

>Whatever you do, you really must pay down the debt. Minimum payments aren't going to cut it -- this is revolving debt that you're talking about, and if you don't make more than the minimum payments, it's only going to get worse.

If you stop using the card, you will slowly pay down the debt by making minimum payments. You will end up paying a lot more in interest than you would if you paid it down faster, but it won't spiral out of control.

Re: Ask HN: Clients are gone, lots of debt, what would you do?

#48
Hi,

Sorry to hear it's not working out. I hope things start to get better for you. You've done the absolute right thing by cutting your cost base down as much as possible. CatDancer and co have offered some really good things to think about so I won't repeat what they've already said.

The 600$/month till the end of January, check your contract. If there's no way out I would talk to the hosters (talk to an organ grinder, not a monkey) if you can't make the payments. Depending on how/where you incorporated you might be able to get out of it easier. I imagine you're looking at a worst case of $1800 till end of contract? If you can't get out try to negotiate an upfront early termination at a reduced cost.

The stuff with the Austin marketing guys - how long would it take and how much of your time would it take before you see a return? Is this going to be full time?

If your immediate stress is caused by a lack of funds and that your clients have evaporated then I suggest you find a way to make short term cash. If you can do this with a short term contracting gig then it's worth considering. You're not necessarily looking at paying off that 30k, you're looking at bringing up your own personal cash levels to a level where you can think clearly and work out what to do next.

Don't liquidate all of your assets if you think that you'll reuse them in your next venture unless the value of those assets will make a material difference to the way you live. You should be able to sell them to your next venture at a cost lower than buying new or reused assets elsewhere. Once you know what you're going to do you'll have a better idea of what to sell and what to keep.

Re: Ask HN: Clients are gone, lots of debt, what would you do?

#49

There's lots of good advice here but I want to chip in my two cents, because I was once in a very similar situation and my advice is different enough than what's already here. Short backstory so you know I'm serious: In 02, I lost a client along with about $20k of unpaid work (long story), $15k in debt, NO money, my ex-boyfriend stole my car (worse than a stranger, ha - and no, I couldn't get it back), working all th…

It's not a good idea to say the word "Bankruptcy" on the phone with a credit card rep. I'm told it triggers all kinds of Bad Stuff behind the scenes.

Not to mention, they want to negotiate with you. They have an obvious incentive to do so. You don't actually have to say the B-word - everyone understands the consequences of financial distress.

Re: Ask HN: Clients are gone, lots of debt, what would you do?

#50
post #36

Earlier quoted context omitted.

This is a really awesome write-up and lists everything I would have thought, but in a way I might not have been able to put acorss. To put it succiently, 1. Cut down expenses, right now and ruthlessly. Negotiate with everyone on everything. Everything is open for negotiation. 2. Economic stress WILL KILL creativity. Your only focus right now should be get to positive cash flow. Not debt free but positive cash flow. D…

I would take exception to "everything is open for negotiation" if it's interpreted that you don't need to honor your word and your commitments. Also, a lot of the time economic stress forces you to make the changes in habit and self-discipline that allow you to thrive as an entrepreneur. CatDancer makes an excellent point that lack of profitability ("economic stress") is a signal to improve your business.

I don't think that is what he implied by "everything is open for negotiation".

What it does mean is that this situation makes you lose any bit of your laziness or ego or threat of embarrassment. Where as previously you may have been shy to tell your hosting company you can only pay $100 instead of $600, now you may have NO OTHER OPTION but to pay $100 instead of $600.

Of course the hosting company can refuse and pursue another route such as collection. But from my experience, most small businesses aren't looking to pick a fight if you talk to them genuinely and explain your situation. In hosting, this is even more true because it is a high margin business. ie. the $600/month you are paying may only be costing the provider $50/month.

We have weathered similar situation on more than one occasion in last one year. What has usually worked for us is to go "broke": tell the folks you need to pay that you cannot pay until x date or that you can only pay $y/month. Most vendors will work with you especially if you have been doing business with them for some time.

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