Before a Personal Guarantee, Find What Is Pushing the Business

When a young business hits trouble, two out of three owners pour in their own money.

It didn't have to be two out of three. Those owners cared enough to bet their savings. Some might have kept them by first asking what was pushing the business. A control system steers against exactly that.

Picture a slow month. Sales are down. First you ask yourself what you did wrong. Then you ask how much you can move from the family account. Neither question asks what is acting on the business.

The irony: you spend a weekend comparing prices for a new oven. The cause of a bad quarter gets one guess, and then a transfer.

Your money isn't the problem. Pouring it in blind is.

The control system here is the Jirgenson Model. It is scientifically proven to work (Zenodo record). It is new, so it could not help the owners behind these numbers. Now it can help yours.

Owner loan to business: money refills the tank, not the wind

Picture a yacht that has to sail due north. A crosswind pushes it ten degrees east. Hold a heading of zero, and the yacht lands off to one side.

A good helmsman notices the drift and steers 350 degrees. The wind pushes ten degrees off, the correction cancels it, and the yacht sails north. He doesn't flail at the oars. He picks the right lever and sets it against what pushes him.

A transfer from your savings is more rowing. It doesn't touch the wind.

Here is the distinction that changes the question. Money is part of the state: where you are. A lack of money is a factor: something acting on your path. Refill the account, and the factor that drained it is still blowing next month.

So name the wind before you move a cent. Here is the tool. It takes 15 minutes.

1. Choose one goal. The one the money is meant to save.

2. Write five factors acting on the path to it. Anything that helps, hinders or pushes you aside: prices, the season, competitors, a declining industry. Include your own shortages of knowledge, time and money. A factor can come from the world or from you.

3. Mark the direction of each. Along the path, against it, or sideways.

4. Mark the strength of each. Weak, medium or strong. Where you can, put it in money a month.

5. Find one factor that carries you and one that pushes you off course.

6. Write a lever for each. How you will neutralize it, use it, or allow for it in advance.

Elena, a freelance designer, ran this list for her first online book. Here are her four factors, laid out as an illustration.

Her levers sit in her plan: what her sales page says, her mailing list, letters to former clients. Her constraint covers the third row: do not undercut on price. A lack of knowledge is a factor; training is a lever.

Alex, thirteen, is saving for a €300 bicycle. In July the neighbours go away, so odd jobs dry up. He allowed for it in advance, with a spare lever: selling his scooter.

Now strength. Measure it in money, the way it hits a coffee shop. Andrew's supplier raised prices by 8%. On €9,000 of ingredients a month, that is €720 more in costs, or 2.4 points of margin on €30,000 of revenue. A price rise of 2.4% makes up the lost profit. That sits inside Andrew's own limit of 5% in a single step. The lever is stronger than the factor.

Had the supplier raised prices by 30%, the factor would have come to €2,700 a month. Making up the profit would take 9% on prices, and some customers would leave. The lever is weaker than the factor.

That is the whole test. Factor, direction, strength, lever.

How to avoid the reflex transfer: before any owner loan to the business, write the factor that caused the gap. If you can't name it, the money has nothing to fix.

Personal guarantee: what your signature bets on

One UK owner in three has signed a personal guarantee. The house is on the line.

Some of those houses might never have gone on the line. The odds could look different if the factors had been on paper before the pen.

With a personal guarantee, the business debt becomes yours if the business can't pay it. So the signature is a bet on one arrow. Add every factor acting on the business, and you get a single resultant arrow. The guarantee bets that it points at the goal.

Draw that arrow before you sign:

1. Write the goal the loan is meant to fund.
2. List the five factors on that path, with direction and strength.
3. Find the strongest one against you. Put it in money a month.
4. Ask whether the loan, or a lever you already have, beats it.

If the strongest factor is temporary and you hold a lever for it, the loan buys time to pull that lever. If the factor is stronger than every lever, the loan buys a longer trip in the wrong direction.

The model doesn't read contracts; a lawyer does. The list tells you what to ask.

How to avoid signing blind: finish the list before the bank meeting, while you can still think in a quiet room.

Business bankruptcy: when one factor is stronger than you

After a bankruptcy, owners earn about a third less for three to five years.

Some of those lost years might have been spared. A factor that is too strong is easier to escape while there is still money to turn with.

Sometimes a single factor outweighs everything you can bring to bear. The whole industry is in decline, and your business is one part of it. Then no process inside the business will help. You are rowing a heavy raft against the current, and the current carries you downstream all the same. The model calls this offset (c).

There is no point fighting such a factor. Go with the current, or change rivers.

Spot it early. A factor stronger than you, seen in month two, is a turn. Seen in month twenty, it is a court date.

How to avoid the floor: once a month, reread your factor list. Ask of the strongest row one question: is my best lever still bigger?

Two ways to read a bad month

The same month, read two ways. Illustration.

Andrew nearly lived the first row. On his first rainy Wednesday the room stood almost empty. Without the list, he would have changed his prices. The cause was the weather, and he would have thrown away what was working.

What an uncounted factor costs in six months

Run the supplier numbers forward. An 8% rise left uncounted costs €720 of profit a month. Over six months, that is €4,320.

At 30%, the bill is €2,700 a month: €16,200 in six months. And no single price step inside the 5% limit brings it back.

Every euro of that gap comes from somewhere. Without the list, it comes from the family account, one quiet transfer at a time.

"None of this is in my control"

Some of it is. Weather, the season and the general rise in prices don't ask your permission. You can only take them into account.

Taking a factor into account is still a decision. Winter means heating, so plan the heating.

Other factors weaken under the right lever: the rudder instead of the oar, extra study, a partner. You can't stop the wind. You can stop being surprised by it.

If you need a line around what you will never risk, start there: draw that line before you sign.

Where the factor list stops

The list is one link of the loop that runs from goal to state, error, levers, plan and forecast. On its own, it treats a symptom. You stop throwing money at causes you haven't named.

The cause behind the cause remains. The list shows factors you can already see. It doesn't spot the pothole before you hit it. And it can't prove whether a factor is too strong for your whole plan.

Two further steps deal with that.

• Recognizing factors before they strike. How to foresee a factor, and who in the business does the foreseeing. Chapter 8.
• The Titanic test. The check for a factor stronger than any plan you could write, so you know when to change rivers. Chapter 11.

Without them, the list explains last month. It doesn't yet warn you about the next one.

Two choices before the next transfer

There are two choices. Move the next sum from savings and sign the next form, and hope the wind changes. Or spend 15 minutes tonight and name what is pushing the business.

Next time the bank asks for your signature, you bring a list with arrows on it.

The factor list shows what pushes you. Foreseeing factors and the Titanic test show what comes next, and when to turn.

Test the logic for free: read Chapter 1. Or get the full control system on Kindle, on Amazon. It comes as a Kindle book, with a 15-minute task at the end of the factors chapter.

Published research

It is scientifically proven that the Jirgenson Model works. The published experiment, its record and its data:

• Zenodo (DOI): 10.5281/zenodo.23964934
• Hugging Face: E5 Jirgenson Model blind test
• Kaggle: E5 blind test dataset
• GitHub: experiment folder
• Wikidata: dataset Q142022866, author Q141981336
• ORCID: 0009-0001-3034-3552