Saving a freelance business from going bankrupt

Hi there Toytowners, I am new to this site and do not reside in Munich I live near Frankfurt, I was pointed to this site by another ex pat.

I need a little advice on the best way to proceed to try and save mysef from bankruptcy.

Some background: I have been living in Germany for 6 years and was originally working for a multimedia company. I decided to go freelance 2 years ago and started a little business Authoring DVDs, Editing, DVD/CD Copies and printing. Everything was going well but the problem is that most of my work came from one company, he acted as a sort of middle man, he had the contacts got the jobs I did the work and he took his cut.

The way this worked was his company charged the customer and I charged him.

This worked fine for the first year plus I was in receipt of überbrückingsgeld for the first 6 months. The problem started in the later part of 2005 The guy who was the middle man started having financial problems and couldn't pay my bills. Being a sympathetic guy and obviously not cut out to be a business man I gave him time to pay. This is the problem now he is nearly Bankrupt, still can't afford to pay me, I have not received any payment for bills in 2006 thus far. There is still work coming in but it is still going through him and I cannot get the customers to come direct through me. (I guess they trust him more than me) this leaves me with the problem of deciding whether to quit, try to get my own contracts, or continue to work through him and hope that he can start paying my bills.

As I said i'm obviously no businessman, any advice no matter how little would be greatly appreciated.

If you have no problem eating sympathy sandwiches for however long it takes the middle man to gets his finances straightened out then keep doing work from him, otherwise I would start looking very carefully for new customers that you can deal directly with.

Ahh, you put all your eggs in one basket...

I would stop working for this guy. There's no point working for him if he's not going to pay you. Withdrawing your services may also encourage him to pay his outstanding debts, as he is obviously profiting from your work.

It's vital that you find new customers. Create a website if you don't have one already. It needn't be big or expensive; you can design a basic one using Microsoft Office, while GoDaddy offer cheap domain names and hosting. Advertise on Google AdWords. I work as a freelance proofreader and found the bulk of my customers through AdWords. Now I rarely need to have the ads up because of repeat business.

I would also talk to the company that you ultimately have been working for. They may be prepared to work directly with you if you make clear that you're the one who's been doing all the work. Bear in mind, however, that your middle-man may be bankrupt because this company hasn't been paying him...

Eventually you'll need to think about getting the money owed to you from your middle-man, but that's not something I can really advise on.

Good luck.

Just get out. It will not get any better. A company went bankrupt on me owing me money. I thought I'd been hard on the guy and got caught for 2 months money, others up to 6 months money. Business "friends" will say whatever it takes to see they themselves come out alright. YOU however are just a casualty of his problems and he won't give a monkeys toss about you.

What you can also do is tell the end customer that you haven't been paid for x amount of months work and that the contract between you & your customer states that all unpaid work remains your property. Try to get payment from them for the unpaid work. It's then up to them to decide what to do. they may pay you off(unlikely) or make you an offer. At best, you do a deal with them, they stop paying the "middle man" and you'll work for them direct. Everyone's happy

(This worked for me once AND I got 70% of unpaid money too) ....

Thanks for the advice, it's worth a try, to be honest anything is worth a try now.

Are the numbers here really enough to make you go bankrupt? I would certainly not perform any further work for these people for 2 reasons:

1. To apply pressure for your outstanding invoices.

2. So that you do not waste any more time on unpaid projects.

Use the spare time to develop new business contacts, contact the clients direct, and plan a financial strategy to avoid bankruptcy. Depending on who you owe (supplier/banks/landlords etc) most will give you extended payment terms rather than see you go bankrupt. You can also negotiate the equivalent of an "IVA" whereby you only pay a percentage of your debts.

Regretfully it sounds unlikely that your middle-man will recover if he has got this far (although he might be bluffing you). Either way you need to plan for worst case scenario.

Maybe i'm just panicking too much, Probably won't file for bankruptcy but my biggest fears are:

. Can't pay my umsatzsteuer bill for this quarter (due next week)

. Have to start doing my steuererklärung for 2005 pretty soon

. Overdrawn at the bank.

. All monthly bills due i.e krankenkasse, miete, etc ( I know from experience if you miss these then they add gebuhrungs on top) silly can't pay in the first place so they add another charge on top.

If I can get some money out the other guy I can breathe a sigh of relief for another month but this has been ongoing for 6 months now it's like being drip fed, just getting enough to keep the wolves from the door.

This is obviously a bigger issue, but in terms of the tax issue you should try to get yourself an extension. That's generally not that difficult to do.