“We help prevent bad things from happening to your company · sales/cash flow projection report....
Transcript of “We help prevent bad things from happening to your company · sales/cash flow projection report....
““We help prevent bad things We help prevent bad things
from happening to your companyfrom happening to your company””
�� Six executive consultants with extensive experienceSix executive consultants with extensive experience
�� Over $2Billion in lifetime sales collectivelyOver $2Billion in lifetime sales collectively
�� Two Crain's Two Crain's ““40 under 4040 under 40”” winnerswinners
�� Two Two ““Future FiftyFuture Fifty”” WinnersWinners
�� Two Two ““Ernst and YoungErnst and Young”” nominees and one finalistnominees and one finalist
�� Owned and or operated companies in construction, Owned and or operated companies in construction, Tier 1automotive, manufacturing, industrial Tier 1automotive, manufacturing, industrial service, consulting, commercial lending, service, consulting, commercial lending, distribution, IT, aerospace industry, and real estate.distribution, IT, aerospace industry, and real estate.
◦◦ Real world entrepreneurial executive experienceReal world entrepreneurial executive experience
◦◦ Follow our preset processes and proceduresFollow our preset processes and procedures
◦◦ Strong financial management skillsStrong financial management skills
◦◦ Strong interpersonal skills Strong interpersonal skills
◦◦ Can easily identify issuesCan easily identify issues
◦◦ Extensive turnaround engagementsExtensive turnaround engagements
◦◦ Strong relationships with lenders and their attorneysStrong relationships with lenders and their attorneys
�� Our Team has extensive experience with Our Team has extensive experience with companies in crisis.companies in crisis.
�� We understand what they are going through.We understand what they are going through.
�� We have the skill to quickly analyze, prepare a We have the skill to quickly analyze, prepare a plan, and help execute that plan.plan, and help execute that plan.
�� We have the relationships to solve their We have the relationships to solve their problems.problems.
�� Using professionals increases success.Using professionals increases success.
�� Professionals move quickly and without bias.Professionals move quickly and without bias.
�� Downsizing alone will not solve all problems.Downsizing alone will not solve all problems.
�� Volatile business environment makes Volatile business environment makes
successful, growth oriented CEOsuccessful, growth oriented CEO’’s turn into s turn into
““hesitant managershesitant managers””..
�� CEOCEO’’s are not trained to deal with crisiss are not trained to deal with crisis
�� Turnaround Professionals take over decision Turnaround Professionals take over decision
making for the company (acting as CEO, CFO, making for the company (acting as CEO, CFO,
COO etc.).COO etc.).
�� Banks trust the professionals and more than Banks trust the professionals and more than
the owners.the owners.
�� Poor Lender Relationships and PressurePoor Lender Relationships and Pressure
�� Weak Financial Performance ( Ex.cannot make payroll)Weak Financial Performance ( Ex.cannot make payroll)
�� Poor ZPoor Z--ScoreScore
�� Ineffective Management StyleIneffective Management Style
�� Poor Leadership (character issues)Poor Leadership (character issues)
�� OverOver--diversification (too many products)diversification (too many products)
�� Lack of Operating ControlsLack of Operating Controls
�� Market LagMarket Lag
�� Precarious Customer Base or high concentrationPrecarious Customer Base or high concentration
�� Family vs. Business MattersFamily vs. Business Matters
�� Operating without a Business/Strategic PlanOperating without a Business/Strategic Plan
�� Collect informationCollect information
�� Industry Benchmark AnalysisIndustry Benchmark Analysis
�� 13 week Cash Flow/Breakeven Report13 week Cash Flow/Breakeven Report
�� Management ReviewManagement Review
�� Begin Activity Based CostingBegin Activity Based Costing
�� Develop a Strategic PlanDevelop a Strategic Plan
�� Begin the Corporate Renewal ProcessBegin the Corporate Renewal Process
�� Last three years financials & tax returnsLast three years financials & tax returns
�� Interim financialsInterim financials
�� Detailed A/R & A/PDetailed A/R & A/P
�� All notes and agreementsAll notes and agreements
�� Employee agreementsEmployee agreements
�� Existing ContractsExisting Contracts
�� Work in Process WorksheetsWork in Process Worksheets
�� Any sales forecastsAny sales forecasts
�� What ratios, percentages and performance What ratios, percentages and performance levels should a company be operating at?levels should a company be operating at?
�� With the aid of software such as With the aid of software such as Profit Cents Profit Cents or reference material such as Risk or reference material such as Risk Management Association (RMA) yearly Management Association (RMA) yearly industry performance data book, we can industry performance data book, we can determine where a healthy company in any determine where a healthy company in any industry should be operating.industry should be operating.
�� Comparing this to actual performance can Comparing this to actual performance can help to identify problem areas.help to identify problem areas.
�� A break down of all A/R and A/P into a A break down of all A/R and A/P into a
spreadsheet helps you see problems ahead. spreadsheet helps you see problems ahead.
�� Properly designed this can be a very effective Properly designed this can be a very effective
planning tool.planning tool.
�� Future sales considerations can be added to Future sales considerations can be added to
determine impact on company.determine impact on company.
�� Expenses can be modified to insure net Expenses can be modified to insure net
positive cash flow.positive cash flow.
�� Interviews with all department heads must be Interviews with all department heads must be
conducted quickly to determine who is conducted quickly to determine who is ““on on
the busthe bus”” and do they want to stay.and do they want to stay.
�� Who is capable of doing their job.Who is capable of doing their job.
�� Top four positions are CEO, CFO, COO and Top four positions are CEO, CFO, COO and
Director of Sales. (All may have to be Director of Sales. (All may have to be
replaced.) replaced.)
�� Do we have the right people doing the right Do we have the right people doing the right
things for the company?things for the company?
�� Most companies only know what they sold Most companies only know what they sold
something for and maybe, what they think it something for and maybe, what they think it
cost them.cost them.
�� ABC breaks down all actives within the ABC breaks down all actives within the
company uncovering opportunities for company uncovering opportunities for
improvement.improvement.
�� Every activity has both direct and indirect Every activity has both direct and indirect
costs. To evaluate each activity you must costs. To evaluate each activity you must
discover indirect costs and apply them.discover indirect costs and apply them.
�� Example Example ““The Music/Video StoreThe Music/Video Store””
�� Once you have collected all of your Once you have collected all of your
information, reviewed industry benchmarks, information, reviewed industry benchmarks,
created a 13 week cash flow model and have created a 13 week cash flow model and have
determined what financial modifications must determined what financial modifications must
be made in order to return the company to be made in order to return the company to
positive cash flow, then you create a strategic positive cash flow, then you create a strategic
plan.plan.
�� This is what the company is going to look like This is what the company is going to look like
at the end of the turnaround process. Very at the end of the turnaround process. Very
specific benchmarks.specific benchmarks.
�� The plan should include daily, weekly, monthly The plan should include daily, weekly, monthly
and annual goals for everyone. and annual goals for everyone.
�� Scorecard must track sales, future sales, gross Scorecard must track sales, future sales, gross
margin, net profit, revenue per employee, debt margin, net profit, revenue per employee, debt
service coverage ratio, leverage ratio, current service coverage ratio, leverage ratio, current
ratio and any other variable important to ratio and any other variable important to
company.company.
�� Line item accountability for every item on Line item accountability for every item on
scorecard.scorecard.
�� Weekly meeting times must be set and Weekly meeting times must be set and
maintained.maintained.
�� Review the strategic plan with your staffReview the strategic plan with your staff
�� Share the FutureShare the Future
�� Ask for Help & IdeasAsk for Help & Ideas
�� Develop a reward system for successDevelop a reward system for success
�� Scorecard developmentScorecard development
�� By now you have made the required By now you have made the required
manpower cuts.manpower cuts.
�� The staff you have left are going to help you The staff you have left are going to help you
accomplish your goals.accomplish your goals.
�� Every line item and activity will be assigned Every line item and activity will be assigned
the responsibility of someone within your the responsibility of someone within your
organization. organization.
�� Weekly meeting will be held with the entire Weekly meeting will be held with the entire
staff. staff.
�� Scorecard items will be reported by those Scorecard items will be reported by those individuals to make sure they stay on track. individuals to make sure they stay on track.
�� Daily morning huddles will be held with Daily morning huddles will be held with department managers to deals with the issues department managers to deals with the issues that pop up.that pop up.
�� All capital expenditures or payroll decisions will All capital expenditures or payroll decisions will involve a involve a Return on Investment Return on Investment calculation. When calculation. When will it pay off?will it pay off?
�� Document every process within your company Document every process within your company and make it available to everyone.and make it available to everyone.
�� Every month all processes will be reviewed to Every month all processes will be reviewed to make sure they are aligned with objectives of the make sure they are aligned with objectives of the company. company.
�� Contact suppliers about Terms & Conditions.Contact suppliers about Terms & Conditions.
�� Large vendors debts can be changed to long Large vendors debts can be changed to long
term unsecured notes.term unsecured notes.
�� Keep the channels open. Keep the channels open.
�� Find new lenders as soon as possible.Find new lenders as soon as possible.
�� Reduce debt through workReduce debt through work--out of existing out of existing
lender.lender.
�� Qualified turnaround professionals will have Qualified turnaround professionals will have
the relationships with new lenders and your the relationships with new lenders and your
existing lenders to facilitate this transaction.existing lenders to facilitate this transaction.
�� Examine every avenue of marketingExamine every avenue of marketing
�� Calculate ROI on eachCalculate ROI on each
�� Companies that have continued to market Companies that have continued to market
during down times have recognized over during down times have recognized over
240% more sales than those who stopped 240% more sales than those who stopped
marketing. marketing.
�� Be smart with your moneyBe smart with your money
�� Make it a financial decision not an emotional Make it a financial decision not an emotional
oneone
�� Weekly Cash Flow AnalysisWeekly Cash Flow Analysis
�� Monthly Profit & Loss StatementsMonthly Profit & Loss Statements
�� Sales Projections (CRM)Sales Projections (CRM)
�� Weekly MeetingsWeekly Meetings
�� ScorecardsScorecards
�� Share it all Share it all ““ It cannot hurt youIt cannot hurt you””
�� Imagine the following scenario:Imagine the following scenario:
�� You own your own Manufacturing Company You own your own Manufacturing Company
Supplying OEMs. Outatime LLC was founded Supplying OEMs. Outatime LLC was founded
by your father.by your father.
�� Sales are down 50% to $25MSales are down 50% to $25M
�� You are incurring losses and have negative You are incurring losses and have negative
cash flowcash flow
�� Trade Payables are stretched and critical Trade Payables are stretched and critical
vendors are refusing to delivervendors are refusing to deliver
�� Receivables are aging beyond the normal Receivables are aging beyond the normal
termsterms
�� Bank is exerting pressure due to collateral Bank is exerting pressure due to collateral
deficiency and poor performance. They Want deficiency and poor performance. They Want
$3.2M!!!$3.2M!!!
�� Bank did not know it was this bad because Bank did not know it was this bad because
you have failed to provide financials for over you have failed to provide financials for over
14 months.14 months.
�� You do not know if you can make payroll next You do not know if you can make payroll next
weekweek
�� $7M LOC on Receivables$7M LOC on Receivables
�� $2M Equipment Term Loan$2M Equipment Term Loan
�� $3.5M Real Estate mortgage to related Entity$3.5M Real Estate mortgage to related Entity
�� Trade payables are $1MTrade payables are $1M
�� A/R is down to $6.2MA/R is down to $6.2M
�� Long Term A/R of $600K is uncollectableLong Term A/R of $600K is uncollectable
�� Gross Margin has dropped from 32% to 21%.Gross Margin has dropped from 32% to 21%.
�� G&A costs have gone from 21% to 37%G&A costs have gone from 21% to 37%
�� You and your wife have personally You and your wife have personally
guaranteed all loans. (You have not told her guaranteed all loans. (You have not told her
about the problem.)about the problem.)
�� When you where twice the size you had 70 When you where twice the size you had 70
employees. Now at half the size you have 50 employees. Now at half the size you have 50
employees. employees.
�� You think it is your bankYou think it is your bank’’s fault ( What were s fault ( What were
they thinking lending me that money?)they thinking lending me that money?)
�� Obama gave all that money to the banks, I Obama gave all that money to the banks, I guess he forgot to tell them to lend it to me!guess he forgot to tell them to lend it to me!
�� Sure its slow, isnSure its slow, isn’’t it slow for everyone? t it slow for everyone?
�� What do they expect?What do they expect?
�� No one is buying cars! It is not my fault.No one is buying cars! It is not my fault.
�� If they want this place, they can have it!If they want this place, they can have it!
�� Bank agrees to fund $250K over formula on Bank agrees to fund $250K over formula on the Line of Credit.the Line of Credit.
�� Interest rates are going up immediately.Interest rates are going up immediately.
�� Owner must sell boat and put proceeds into Owner must sell boat and put proceeds into company. Owner to reduce rent to mortgage company. Owner to reduce rent to mortgage payment levels.payment levels.
�� Owner to reduce pay by 50%.Owner to reduce pay by 50%.
�� Owner agrees to maintain turnaround Owner agrees to maintain turnaround consultant onconsultant on--site for the entire six months site for the entire six months to help facilitate turnaround process and to help facilitate turnaround process and assure bank of proper reporting.assure bank of proper reporting.
�� Company agrees to seek alternative financing Company agrees to seek alternative financing
as soon as possible.as soon as possible.
�� Any deviation from plan will result in Any deviation from plan will result in
immediate escalation of agreement. immediate escalation of agreement.
�� Company signs forbearance agreement and Company signs forbearance agreement and
possibly several other documents that will possibly several other documents that will
give lender more control if continued give lender more control if continued
floundering.floundering.
�� 12 month format12 month format
�� Encompasses every aspect of companyEncompasses every aspect of company
�� Every company should use a detailed 13 week Every company should use a detailed 13 week sales/cash flow projection report.sales/cash flow projection report.
�� 12 month cash flow breakeven report should also 12 month cash flow breakeven report should also be developed and tied to 13 week version. be developed and tied to 13 week version.
�� Executive Management must be able to lead a Executive Management must be able to lead a team. Demagogue will not work. team. Demagogue will not work.
�� If you don't have a strong CFO or controller get If you don't have a strong CFO or controller get one. Financial Data is your friend.one. Financial Data is your friend.
�� Activity Based Costing should be utilized in Activity Based Costing should be utilized in evaluation and decision making processes.evaluation and decision making processes.
�� Scorecards must include all important Scorecards must include all important benchmarks to company. benchmarks to company.
�� Open book management should always be Open book management should always be
practiced.practiced.
�� Every process needs to be documented, Every process needs to be documented,
reviewed and shared with everyone.reviewed and shared with everyone.
�� All decisions must return a value to the All decisions must return a value to the
company.company.
�� You need everyone's help in the company to You need everyone's help in the company to
make it successful.make it successful.
�� These best practices should be utilized by all These best practices should be utilized by all
companies not just those in trouble. companies not just those in trouble.
�� A Turnaround engagement will result in one A Turnaround engagement will result in one
or more of the following:or more of the following:◦◦ Sale of the company or assetsSale of the company or assets
◦◦ Merger with another companyMerger with another company
◦◦ Debt is restructured and existing management Debt is restructured and existing management
team continues to run and operate company team continues to run and operate company
moving forward. moving forward.
◦◦ Bankruptcy Chapter 7 or Chapter 11Bankruptcy Chapter 7 or Chapter 11
�� ExperienceExperience
�� Ethics & ProfessionalismEthics & Professionalism
�� Reputation with CreditorsReputation with Creditors
�� Managerial SkillsManagerial Skills
�� Fee StructuresFee Structures
Member of the Turnaround Management AssociationMember of the Turnaround Management Association
Member of Michigan Banking AssociationMember of Michigan Banking Association