Company Criteria and Eligibility Issues
Building a brand new organisation means a lot of questions. Some can be answered in a technical and structured way, while other questions are extremely complex, and will need time to be discussed alongside the initial national experiences. Following interesting discussions in the EW Europe Consortium this paper deals with the issues of crisis, criteria and eligibility:

1. How do we define a ‘crisis’?
2. How do we define a ‘company’?
3. When is a company case considered eligible by EASME i.e. considered as one of the 3.500 companies that will benefit from the services offered in the pilot countries and the second wave countries?

The Psychological Definition of Being in a Crisis
In mental health terms, a crisis refers not necessarily to a traumatic situation or event, but to a person’s reaction to a situation or event. One person might be deeply affected by a specific situation while another person suffers little or not at all. Being in a crisis is a very subjective feeling, and in both EW Denmark, Dyzo and Team-U the focus is on listening to the company-owner.

But how do different experts define a crisis? Multiple approaches and definitions exist, and many focus on how a person deals with the situation rather than on the specific situation.

”People are in a state of crisis when they face an obstacle to important life goals – and obstacle that is, for a time, insurmountable by the use of customary methods of problem-solving.” (Caplan, 1961)

”… an upset in equilibrium at the failure of one’s traditional problem-solving approach which results in disorganization, hopelessness, sadness, confusuion, and panic.” (Lillibridge and Kluken, 1978)

”… crisis is a perception or experience of an event or situation as an intolerable difficulty that exceeds the person’s current resources and coping mechanisms.” (James and Gililand, 2001)

A crisis presents an obstacle, trauma, or threat, but it also offers company owners an opportunity for growth. The purpose of crisis councelling is to deal with the current state of the individual dealing with a crisis - and this shall exactly be the focus of the EW Europe organisation.

Before we explore in more depth the companies and company-owners in distress, let’s have a look at the business community in Denmark.

The business community in Denmark
In Denmark, there is a variety of legal structures from within you can do your business. The 3 most popular ones are ”A/S”, ”ApS” and ”Enkeltmandsvirksomhed”. A/S needs an initial funding of approximately 70.000 Euro and a board of directors. Some years ago ApS needed a funding of approximately 17.000 Euro, but that amount has over the years been reduced, and today you only need an initial funding of approximately 7.000 Euro. ”Enkeltmandsvirksomhed” needs no initial funding and it runs side-by-side with the company-owners private economy.

A/S and Aps are companies with their own legal status. So if you go bankrupt with that kind of company, it will not influence your private economy – unless you signed a contract stating the opposite. If you go bankrupt with a company registered as Enkeltmandsvirksomhed, you will personally be held responsible for all remaining debt.

As the newest child to the family, you can now start a limited company in Denmark for 1 Euro. This structure gives you the possibility to get going with ”a real company” from day one, even if you do not have the neccessary 7.000 Euro for an ApS. With this kind of company you are not held personally responsible for possible loss, but over the years you will have to use your earnings in the company to achieve the normal startup capital of 7.000 Euro for an ApS. In Denmark as everywhere else governments are fighting red tape, and this kind of company was born to make it even easier to be an entrepreneur in Denmark and to limit the personal risks.

Opinions about this have varied. Personally I fear it has become ”too easy” to start a company in Denmark, and that we over the next few years will see an overwhelming lot of these kind of companies closing down. I also fear, that when your own investment is only 1 Euro, you will not be as obliged to fight for survival, and maybe you will even be more inclined not to care so much about others possible loss. Due to my work in the Danish Business Authority it is important to say that this is my personal opinion and not the opinion of DBA. But I think it is necessary to mention to better understand our future discussions.

In Denmark we have also have approximately 20.000 companies called ”Zombie Companies”. That is companies that are practically dead, and have none or almost no revenue, either because the owner have lost interest, the owner speculates in keeping the company alive or because of administrative and structural deadweight. When we have done the evaluations of EW Denmark in 2011, 2013 and 2015 these companies have been cleaned out of the pool of companies to be examined.

When is a company a relevant company case?

In EW Denmark we have helped more than 5.000 companies over the last 10 years. We have seen it all, and in general we are open to everybody. But when is a company actually a company in the eyes of the Danish Early Warning Organisation?

Even though I have been part of the management of the organisation for 4 years, this is an ongoing discussion between the Danish Business Authority and the Business Development Centres, and it is also an ongoing discussion between the Business Consultants in each of the five Regional Business Development Centres in Denmark.

In Early Warning Denmark all generally agree about three things. First, if a company, a company-owner or a member of the family takes contact to Early Warning they are by definition in a crisis. A crisis is a subjective feeling, and it is not up to us to judge, so therefore we treat everybody with respect. Second, EW Denmark do not help people with private economic challenges if it is not closely related to a company. Third, we do not help companies that are considered a hobby. I Denmark as a rule of thumb this means companies with a revenue less than 13.000 Euro per year. In Denmark we have it as an obligation that the company has to be the main source of income, before Early Warning can help. Some people can live on a stone, but the company has to be the main source of income.

As already mentioned we have also had interesting discussions on these issues in EW Europe, and to reflect more on this question I have interviewed 3 different persons in Denmark, Germany and Belgium with a total of almost 25 years of experience in dealing with companies in distress in Early Warning, Dyzo and Team-U: Svend Røge, Pol Vermoere and Atilla von Unruh.

Interview Guide

To give a clear picture and the possibility to compare I asked the 3 persons the same 6 questions in the interviews. The questions were as follows:

1. When a company or a company owner takes contact to you, what are the first thing you do to make sure, that this could be a relevant case for your organisation?
2. Can you mention three examples, where you from the very beginning refused to take the case - and explain the reasons why?
3. Can you mention one example, where you started a case, but then later realized that this was not a case for your organisation – and explain what happened?
4. If you could choose freely from a personal and a socioeconomic point of view, what would in your opinion be the perfect size and type of company for your organisation, where you think you could make the biggest difference?
5. Do you do anything to target your marketing and your PR in that direction?
6. If you look back over the many years you have been involved in your organisation helping companies in distress, has there been any change in the archetypes of the companies that you are helping? If so, what could be the reason for that?

All interviews have been done without prior preparation, and all interviews have been done via mobile or skype over a period of approximately one hour. At the beginning of the interview we have talked back and forth about the concept for this paper.

Pol Vermoere – Business Consultant 2007 - 2017

Pol has been working as a business consultant in Dyzo in almost 10 years and have a lot of experience in the contact with companies in distress – digital, mobile and physical. Dyzo register all their contacts and also register almost everything about them. Dyzo calls their companies and company-owners for ”clients”, so we will also use that work in this interview, but we will not use it in Early Warning Europe.

Søren: When a company or a company owner takes contact to you, what are the first thing you do to make sure, that this could be a relevant case for your organisation?

Pol: As long as it is an existing person with a real entrepreneurial problem, it is a client.

Søren: Can you mention three examples, where you from the very beginning refused to take the case - and explain the reason why?

Pol: We cannot help companies that grows plants that can get you in jail. But we could still help people after they have done something criminal, if we are sure not to get involved.
If people ask a lot of questions, while they at the same time do not provide us with any information at all, we can’t help them. Then we could just as well give them a book.
If people lie or give false information, or if they try to manipulate us.

Søren: Can you mention one example, where you started a case, but then later realized that this was not a case for your organisation – and explain what happened?

Pol: Sometimes we experience that simply there is no enterprise, and that the things the person has been telling us simply cannot be true. And then we have to say goodbye.

Søren: If you could choose freely from a personal and a socioeconomic point of view, what would in your opinion be the perfect size and type of company for your organisation, where you think you could make the biggest difference?

Pol: Our statistics show that our companies in average have 5 employees and do bying and selling of goods. I do not have a strategy of changing that. I believe in variety.

Søren: Do you do anything to target your marketing and your PR in that direction?

Pol: Our marketing and PR has to be driven by financial considerations. After we started cooperating with the local welfare institutions, we see a lot more ”Clients” in the Danish way of understanding the word.

Søren: If you look back over the many years you have been involved in your organisation helping companies in distress, has there been any change in the archetypes of the companies that you are helping? If so, what could be the reason for that?

Pol: During the last 10 years our companies have grown smaller and deeper in distress. I cannot conclude anything about the macroecomic environment from that, but I am sure it is related to our relatively new cooperation with the local welfare institutions.

Svend Røge – Founder & National Project Manager 2007 - 2017

Svend has been in Early Warning Denmark from the very beginning of the project. Through the last 10 years he has been managing the project, and the organisation has helped more than 5.000 companies in distress. Svend has a high focus on core values, and he has arranged more than 20 big events for the volunteer mentors.

Søren: When a company or a company owner takes contact to you, what are the first thing you do to make sure, that this could be a relevant case for your organisation

Svend: The first thing I do is to ask some substantial questions immediately. Are there a company? How much is the revenue? What are they doing? How is the economic situation? And then I ask them if there is something acute that needs to be taken care of immediately.

Søren: Can you mention three examples, where you from the very beginning refused to take the case - and explain the reason why?

Svend: Normally I do not experience that. I think we have a brand now, so that when people contacts us, they know that we are there to help through a crisis. But I have one good example. Recently I was contacted by a woman who went bankrupt in 2007. The bankruptcy left her with a huge tax dept at that time, and now she asked for help to get out of that. We had to refuse to help in that case, because there was no longer a company, and instead she should contact another organisation or private consultants.

Søren: Can you mention one example, where you started a case, but then later realized that this was not a case for your organisation – and explain what happened?

Svend: Yes, we have tried that many times during the years. The typical case is that we look at a company with very poor revenue, but when we visit the company-owner, he lives in a very expensive house. We then get suspicious and maybe we find out that he cheats with tax and v.a.t. These are cases we close down as soon as possible, if the company-owner is not showing any interest to make a change immediately.

Søren: If you could choose freely from a personal and a socioeconomic point of view, what would in your opinion be the perfect size and type of company for your organisation, where you think you could make the biggest difference?

Svend: Then I think we should keep on doing what we are doing: Helping all the small companies and the company-owners that work hard every day, because nobody else is helping them. They have been let down by the established business development system, and we should be there for them.

Søren: Do you do anything to target your marketing and your PR in that direction

Svend: Yes indeed. We do mainly 3 things: We use storytelling in local media to explain again and again that crisis is a natural part of doing business, and we print stories where people can see themselves in the cases. We call the small business-owners the true heroes. And we brand ourself as an organisation, where people feel welcome nomatter their situation.

Søren: If you look back over the many years you have been involved in your organisation helping companies in distress, has there been any change in the archetypes of the companies that you are helping? If so, what could be the reason for that?

Svend: If I look back over the last 10 years the most obvious indicator is that the companies have gotten older. I think it is mainly because of dynamics related to the financial crisis. By coincidence EW Denmark started almost the day before the financial crisis, and in the beginning a lot of small young companies went down really fast. But in the later years we have seen larger and more robost companies asking for help.

Atilla von Unruh – Founder & Business Consultant 2007 - 2017
Atilla is the founder of Team-U, and he has experienced a bankruptcy himself. Team-U runs the concept of self help groups and they always try to see things from the entrepreneurs perspective.

Søren: When a company or a company owner takes contact to you, what are the first thing you do to make sure, that this could be a case for your organisation?

Atilla: We use open questions and try to have a normal conversation with small talk about the weather and the like in order to build up trust from the beginning. We ask about their situation to get a picture. We also ask for the reason for their call trying to understand their situation. And then we ask them if there is anything we can do to help.

Søren: Can you mention three examples, where you from the very beginning refused to take the case - and explain the reason why?

Atilla: 1. Cases where they wan’t specific information, but won’t give us any information. 2. People that are calling us in a demanding way giving us orders like a servant and showing no respect. 3. Cases that are not really a company crisis, but for example a person who want’s to hide money from his wife or play other “tricks”.

Søren: Can you mention one example, where you started a case, but then later realized that this was not a case for your organisation – and explain what happened?

Atilla: It happens when we get the feeling of no engagement form the company owner, and when we experience they are not “into it” anyway.

Søren: If you could choose freely from a personal and a socioeconomic point of view, what would in your opinion the perfect size and type of company in your organisation, where you think you as a business consultant and your network of volunteer mentors can make the biggest difference?

Atilla: For me it is not so much about the size of the company – but about the personality of the entrepreneur. My wish would be to always work with entrepreneurs that have the potential to get back at their feet again. And I would like companies to contact us early enough leaving potential for a turnaround.

Søren: Do you do anything to target your marketing and your PR in that direction

Atilla: We adress the early stage with positive keywords, and we focus on teamwork. We try to shoft the awareness to be realistic at this point.

Søren: If you look back over the many years you have been involved in your organisationhelping companies in distress, has there been any change in the arketypes of the companies that you are helping? If so, what could be the reason for that?

Atilla: In the beginning it was a “one-man-show”, and we used to reach self-employed and consumers. Now we reach bigger companies and step by step we have adressed SME’s. We are now a netowrk of people with expertise, and it is more attractive to call us.

As you can see the interviews with founders and business consultants result in complex answers to the same questions. With this in mind, let’s go on to look at the companies and the company-owners in distress.

When is a Company in Distress?
If we combine the theory and the interviews above, there is no doubt, that a company-owner is in distress, when the company-owner is experiencing loosing ground and running a company in distress. Being in distress is a subjective feeling. Nevertheless, there are also some objective criteria that should always be taken into consideration.

Even though EW Europe intends to have a holistic approach, we should also remember to keep our focus on companies in financial distress. Therefore the initial phone call shall at the very least include questions about:

• Turnover
• Liquidity
• Debt
• Company structure and management
• Acuteness of the problems

Depending on the answers to these questions the business consultant will quickly be able to decide if a face-to-face meeting is relevant.

In general EW Europe will only help if a company is in financial distress. But there can be exceptions to that rule. Sometimes we can be contacted by companies that have a solid equity, they are in control of their financing and they are earning money on products and services, and they have an operating profit. But around  and closely related to the company there can be:

• Sickness
• Disagreements among the owner
• External threats

In these cases we should often consider to accept the case, if we estimate that these events can be severe for the company within a short to middle long timeframe. Early Warning is exactly the name of our organisation, because we are supposed to discover the threats, before they turn into insurmountable problems.

Navigating EW Denmark

While managing EW Denmark Svend and I have followed up on budgets and the regional amount of companies every three months since the beginning of 2013. On top of that we do a yearly status, where we walk through every budget line and discuss the development. In addition, we have quarterly coordination meetings, where Svend and I meet with one business consultant and one volunteer mentor from each Danish region. These 12 people serve as a form of advisory board for the programme. At the meeting we always have a regional status on the agenda. Here the business consultants present the developments in their respective region since the last meeting. Facts and budgets are discussed openly, and combined with the justifications from the business consultants, and the management use them to navigate and make decisions for the future activities.

In 2017, EW Denmark has received 520.000 Euro to cover expenses for the whole year, and for that amount the organisation can help around 400 companies in distress. Each business consultant has on average 10,0 man hours for each company. On top of that he has 200 yearly hours for project management and regional marketing and PR. We have no limit on man hours for the involvement of the volunteer mentors -  they can work as many hours as they want, but we try to limit the timeframe for involvement to 6 months.

What we do have though is a contract with the business consultants to hand over at least 40 percent of the cases to a volunteer mentor. Why 40 percent could you very well ask?

40 percent of the cases should be handed over to the volunteer mentors for three reasons:

1. To be a cost-effective program the business consultants in Early Warning has 10,0 man hours per company. The tight budget relies heavily on the mobilisation on the volunteer mentors
2. The volunteer mentors in Denmark has a number of well qualified and specific skills that the business consultant does not necessarily cover. The benefit for the companies in distress will in most cases be bigger by receiving help from both the business consultant and the volunteer mentor.
3. The volunteer mentors should receive 1-2 cases per year to keep up-to-date in the organisation. 40 percent out of 400 means 160 cases spread among 80 volunteer mentors.

Off course there can be exemptions to the rules, but all of these numbers can be justified in our budgets and our evaluations, so very good arguments will be needed to deviate from that.

When is a Company Considered Eligible to EASME in EW Europe

The budgets in EW Europe are structured in approximately the same way, and after the start-up of the programme in all the 4 target countries by the end of September 2017, budgets, hours and development will be discussed every 3 months at the Steering Committee Meetings.

The company needs to meet the following minimum criteria to enter the programme:

• The company is active (not closed down or involved in bankruptcy proceeding
• The required assistance primarily concerns the financial situation of a company i.e. not the financial situation of a person
• The company owner is working full time in the company i.e. it is not a ‘hobby company’
• Clear indications of financial distress

But when is a company considered eligible as a company case in EW Europe. To answer that question, we will have to ask ourselves “at what point will there be a real effect of our intervention”?

The answer is short and precise. The case is considered eligible to EASME, when a diagnosis has been carried out and a follow-up meeting has been done after 3-6 months. What is important is the intentions of the interventions to have a real effect on society.

A diagnosis of a company or a company-owner in distress will typically be formed in the following way within the first 1-2 weeks:

1. A company-owner takes contact to EW Europe via email or phone
2. The business consultant answers the company-owner and talk to her on the phone
3. The business consultant and the company-owner agrees to have a formal first meeting (psysical if possible – skype or mobile if necessary)
4. The business consultant and the company-owner agrees on handling over material to each other
5. The business consultant and the company-owner meet on a second meeting (physical, mobile or skype) and the business consultant makes a diagnosis of the company and the company-owner. On this basis the company owner can be referred to relevant support activities combined with a counselling procedure to further assist the company owner.
6. Follow-up meeting 3-6 months after the diagnosis.

This process will take the business consultant 3-5 man hours depending on location and complexity of the case. What happens after that can differ from company to company and can involve new meetings, match meetings with volunteer mentors, handling over the case to a lawyer, etc.

The main point is that we always look from the company-owners perspective, and that we never do anything without having a strong focus on impact – for the company, and for the society.