Upsize Stages: Reach out to people who can help you
HOW TO TURN AROUND YOUR DISTRESSED COMPANY
03 :: Reach out to people who can help you
by Andrew Tellijohn
ONE OF THE BIGGEST MISTAKES entrepreneurs make when their businesses start to go south is adopting a bunker mentality. Going quiet will scare trade creditors, banks and other players who truly want to see ? and can often help ? the business succeed. Instead of ignoring those phone calls, business owners need to further embrace the bankers, accountants and lawyers they?ve been using as a roundtable of advisers even more tightly when things go bad.
For one thing, they already know or will soon find out anyway. For companies with revolving credit facilities from asset-based lenders, those institutions get reports frequently enough where they likely will know a company is struggling before even the owner. Even traditional lenders who rely on receiving the monthly records will get worried if a business owner holds back those results and will be less likely to stick with that company when times do get tough.
Despite all the available technology and the new lending strategies that provide banks with information, there still are situations in which they do sometimes get surprised. But withholding that information is a mistake of judgment and it will only hurt when you need their assistance to get back on the right track. No turnaround is going to be successful without assistance from a bank.
So talk to them. It?s better that they find out from you early on than get surprised by the news when the company is too far gone to save.
These advisers have most likely seen many of the problems conspiring to hurt the business and might be able to help turn the prospects around.
Meet with bankers early in the process. If lenders see that business owners are showing integrity by talking to them about their financial situations, they?ll be more willing to restructure payments and take other steps to help companies get back on track. Provide them with a credible plan and a realistic assessment of the problems and potential solutions. Don?t over-promise and under-deliver.
These bankers will be close to turnaround specialists. If the business is in real trouble, they should be able to provide a handful of names of people they have worked with that can help you make a plan to start turning your company around.
With creditors, schedule meetings before payments are due. Be respectful, confident and strong. If you appear as though you can handle the issues, the creditors are more likely to cut you some slack and give you an opportunity to make good. If you appear as though you are over your head, creditors and lenders might panic and vendors might start refusing to make shipments.
The objective is to put a plan together that works them out of the financial ills, and that is only going to be done by involving senior lenders, banks, unsecured creditors and all players with a stake.
Beyond the group of people you?ve been familiar with from day one, the Twin Cities has a number of resources such as the Turnaround Management Association, the Service Corps of Retired Executives, and consulting firms that entrepreneurs can turn to when they need advice. It?s rare for business owners to contact turnaround specialists themselves ? generally bankers do it for them once problems have arisen. But you know your business and if you are struggling, nip it in the bud early.
Reputable turnaround companies might be on the expensive side but many specialize in specific industries and have experience in turning around struggling firms.
CHECKLIST
? Don?t stop communicating with bankers, lenders, creditors, vendors and other vested parties when your business starts to struggle.
? These partners have seen businesses struggle before and might have feedback on how to help the business turn around.
? Make a plan and meet with lenders and others to show them you are aware of the problems and working to address them.
? Seek assistance from organizations such as TMA, the Turnaround Management Association, and SCORE, the Service Corps of Retired Executives.
