Seller Beware: 7 Lessons for Event Planners From Nortel

Caution, Caviat VenditorNortel is in the news again. (I should stop by the courthouse as the case is being heard in my backyard.)

What is particularly disturbing that executives are alleged to have falsified records to inflate Nortel's value by a hefty $.7 billion, despite the fact that they knew the company was in difficulty. Ouch!

The RCMP charges allege that the defendants....engineered an elaborate accounting fraud to mask falling Nortel sales after the technology stock bubble popped in the spring of 2000.

What are the implications for meeting and event planners organizing corporate events, retreats and incentive travel?

Before starting my own management consulting firm, I worked for a company that was, at the time, part of the same conglomerate as Nortel. Always on the lookout to forge alliances, when we were launching a particular initiative, I reached out to colleagues from Nortel and invited them to attend the pilot. They accepted the invitation and ended up doing business with the same supplier. For a long time, Nortel was one of that supplier's blue chip clients. When things started to unravel and outstanding invoices were piling up, he almost lost his house. He had to sell at a loss to avoid bankruptcy.

I vividly remember 3 conversations regarding Nortel when it was still (supposedly) a thriving multi-national corporation with a Canadian head office. This was so long ago, they can be considered in the public domain. After all, the bad and the ugly has been flashed in headlines around the globe.

Scenario: The night before a panel discussion for a major conference while I relaxed with fellow panelists, one of them mentioned that taking 4 - 6 months for Nortel to pay invoices.  While I was quite shocked but my colleague was unperturbed. I remember her saying "After all, they're Nortel." It struck me as odd that small businesses were, in effect, subsidizing a large corporation.

Scenario: I also recall a conversation with another colleague who advised me that requiring payment up front would make me look bad and cost my company business. "You don't want to appear hungry and like a fly-by-night operation." he cautioned. I replied, "I would rather look hungry than be hungry."

Years later he admitted that he had to write-off 1/3 of his invoices as "noncollectable."

Scenario: After I launched my own business in 1996, I remember receiving a request for proposal. When it came time to discuss payment terms, my contact wanted 30 day terms after the event. "We're Nortel." The message was we're big and we're good for the money. (That was just over a decade before "too big to fail.") I recalled the previous conversation, erred on the side of caution and passed on the business. I'm glad I didn't "drink the Kool-Aid."

Over the years, I've only lost 2 other pieces of business under similar scenarios. In one case, a client who made a last-minute booking just couldn't turn payment around as quickly as they wanted us to deliver service. A few months later, I read that they were in financial difficulty.

While suppliers were buying the "We're Nortel" line hook, line and sinker, the Titanic was about to hit the iceberg.

What are lessons can event planning firms and independent meeting planners can learn from the demise Nortel, Lehman Brothers, Enron, and other corporate giants?

Mandatory Latin classes were abolished long before most of us started high school but event planners, hotels, resorts, and event venues would do well to add the words "caveat venditor" to their vocabulary.

  1. No company is too big to fail.
  2. There are no guarantees and nothing lasts forever. Today's blue chip client can become tomorrow's collections nightmare.
  3. If a client consistently pays invoices in 60-90 days, it's a huge red flag.
  4. It's better to pass on some business than to be left holding the bag after putting in months of work.
  5. If the booking is on short notice, get full payment at the time of booking.
  6. For bookings with more lead time, get a substantial deposit.
  7. Ensure that the balance is paid before the event or during the event with a certified check.

When events and business meetings are over, there is no leverage to collect.

Some time ago, I helped out a friend backstage at a couple of concerts. It was great fun and I had a chance to hang out with some well-known artists. Some acts simply would not go on stage until the promoters had paid them in full. This lead to delays and a late start in some instances. While the late starts annoyed the fans, the artists were just savvy businessmen protecting their financial interests. They had learned the hard way that once the show was over, they could pretty well kiss their money good-bye.

Photo: LexnGer


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