In this month's case study, we look at a start-up company that put all of its resources into one contract that cannot pay.

Daryl James had an idea.

After months of online browsing he had come to a conclusion. Company websites were suffering from a dearth of well written and designed content, and, as an English degree holder, he thought he could do something about it.

While computer literate, Daryl felt he didn't have enough IT experience to bring his idea to fruition so he invited one of his best friends, web designer Peter McCann, to come on board.

The central point of Daryl's idea was to provide content for company websites. Web content providers usually create and maintain the pages in specific parts of a website.

Peter's job would be to create a content management system which would be a template for uploading new information and keeping the site looking clean, modern and up-to-date. Peter would also make sure the sites worked with search engines, provided RSS feeds, and so on.

Daryl would work with respective clients on the content of the site and, where suitable, generate an "ezine" or online magazine, to be sent out to subscribers who wanted to keep up with new information.

Quickly realising that Peter's role was just as important as his own, Daryl offered him a partnership deal - they would own the company 50-50.

With a new registered company name, DarJam Media, and a domain name purchased, the two business partners set about looking for clients.

An old friend of Daryl's put him in touch with a managing director of a publishing company that couldn't free up any of its writers to contribute to the construction of the company website.

Taking an instant liking to DarJam's plans, the publishing mogul offered them a three-month deal to generate and design 20 pages of content.

Six weeks later and half-way through the initial job, Darjam had another two clients on its books.

Soon, Daryl and Peter began to realise they could not handle the workload themselves and would need to hire staff. Furthermore, they needed to find office space as they were working from a home office.

A week later, Daryl and Peter signed a lease for office space in Dublin city centre, costing them €1,200 per month.

Trickier was the hiring of new staff. Having no experience in recruiting, it took both men some time to find the right people. They decided not to use a recruitment agency and save money.

Eventually they settled on Sally - who had recently graduated from Griffith College with a journalism degree and had experience writing online content such as news and reviews for a pop-culture website - and Richard, who was a self-taught web designer with some experience. Because the two new hires were quite young, their salary was reasonably low. Both Sally and Richard were on €30,000 per annum.

With staff and a premises, Daryl and Peter then realised they would have to raise finance to keep the company going, pay staff salaries and keep up the office rent payments.

They would need nearly €15,000 per month for wages (including themselves) and rent, including utilities, such as light, heat and telephone/internet costs and insurance. They both applied to the bank for personal loans of €45,000 each, which would keep the company afloat for six months. The bank, impressed with the business plan and the company outlook, gave both men the cash required.

If they had of known then how things would unfold over the next six months, they probably would've asked for a bigger loan.

The publishing company job was delivered before deadline and netted DarJam €15,000.

More approaches began to flood in, but the company's heads were turned when a multinational computer manufacturer wanted to utilise their services for a big contract, paying triple their usual rate.

Daryl and Peter had a decision to make. They knew if they wanted to service the multinational company and work on all the other projects, they would have to hire more staff. In fact, it looked likely that just to work on the multinational job would mean hiring at least two more employees.

DarJam decided to work on the multinational contract and not take on any extra business until it was complete, or until they felt comfortable hiring more people and taking on other projects.

Daryl and Peter were hoping to use their previous hiring model, namely get young, relatively inexperienced college graduates, so they didn't have to pay over-inflated salaries. This time, however, finding "newbies" was proving difficult. No one seemed to fit the profile they were after or had the type of personality that would fit comfortably into the company's culture.

They eventually decided on Tara and Charles who each had two years' experience. Charles was a freelance writer and Tara was a computer-based training designer. Both had real flair and were the best candidates, but they cost more. Both Tara and Charles started on €38,000 per annum.

Word of their pay inevitably got out to Sally and Richard, who then demanded a pay rise.

Fearing they'd walk out and, not wanting to go through the process of hiring new staff, Daryl and Peter agreed to increase their salary to €35,000 with another review in six months' time.

While the bosses realised they were temporarily putting all their eggs in the multinational basket, they both knew it would pay a dividend and was so high profile that more "blue chip" clients would follow.

Three months into the contract with the multinational, Daryl rang the company to make sure the 50 per cent payment when the job was half-done was heading into DarJam's bank account.

He became alarmed when the person at the end of the phone was evasive about the money but promised to get back to him.

Two days later he opened the paper and found out that the computer manufacturer was closing down and leaving Ireland due to bankruptcy and its US parent company was being investigated for illegal accountancy practices.

After frantic phone calls between DarJam and the manufacturer, both Daryl and Peter realised the contract was dead and there was little chance of getting their money for the work already done.

DarJam were now in trouble as they had no clients and still had staff to pay. The money from previous jobs and the bank loan was running out. And they both began worrying about their ability to repay the loan.

Both men decided to revisit their bank manager, but with a credit squeeze happening in the banking markets they were turned down for another loan to help keep their business afloat.

With the economy also slowing down, a lot of companies were cutting back on spending, particularly on their IT outlay, including developing company websites.

Daryl and Peter began to wonder how they would keep their company going.

What should Daryl and Peter do to save their business? Experts' advice.