Improve Your Turnaround’s Forecast

Today’s business climate poses many challenges – from increased global competition to a tight capital environment – that can hinder or even destroy a business. Companies struggling with poor cash flow, inadequate capital and weak leadership are especially vulnerable. Such companies can provide significant upside potential to the right buyers. But to turn an unprofitable company around, new owners must have an implementation plan and be ready to execute it.

Getting to the Core

If you’re a potential buyer of a troubled company, you must examine it closely for hidden values, such as untried territories or poor leadership. Then decide if these opportunities mitigate acquisition risks and potentially provide enough financial benefits.

It’s essential to understand the company’s core business – specifically, its profit drivers and roadblocks. Without a clear understanding of this, you may misread the company’s financial statements, misjudge its financial condition and, ultimately, devise an ineffective course of rehabilitative action.

Due Diligence Matters

While due diligence is an important part of any acquisition, it’s probably the most critical stage in a turnaround deal.

Buyers should use a professional business intermediary who will take the time necessary to perform due diligence, request the supporting documentation needed and perform personal audits that cross-check reported and actual data. At this stage, it is important that the source of the company’s distress (such as maturing products or overwhelming debt) is pinpointed to determine what, if any, corrective measures can be taken. You also need to determine if the business harbors significant liabilities, such as pending legal judgments, product claims or dissatisfied customers.

This is the time to find hidden flaws. But due diligence may also unearth potential sources of value, such as tax breaks or proprietary technologies. Benchmarking the company’s performance with its industry peers’ can help reveal where opportunity lies.

Hit the Ground Running

hit the ground runningGenerally, the first post-transaction step is for new owners to determine what products drive revenue growth and which costs hinder profitability. This may be the time to divest the business of unprofitable products, services, subsidiaries, divisions or real estate. Staff cuts may further be in order. Make sure you keep key players. They may be expensive, but as long as they are pulling their weight and have good relationships, they have value when retooling.

Implementing a longer-term cash-management plan and forecast based on receipts and disbursements are also critical. Owners can manage each line item of the company’s weekly or daily receipts and disbursements in accordance with:

• Profit and loss projections,
• Changes in working capital, and
• Major debt and capital expenditures.

With a strong cash-management plan and a thorough evaluation of accounting controls and procedures, buyers should be able to identify lost revenue opportunities, such as unbilled services. This plan can also help buyers determine where they might be able to cut costs.

Mapping the Future

Buyers should ensure that accounting and reporting systems are producing the data necessary to run effective management reports. If these systems don’t accurately capture all company transactions and list all assets and liabilities, company leaders will be unable to fully pursue opportunities or respond to potential problems.

One troubled manufacturing company, for example, wasn’t tracking future purchase commitments. When the new owner took charge, it prepared and circulated among managers a comprehensive commitment and contingency report that helped senior management renegotiate the terms of the customer agreements.

Because the task may seem overwhelming, it’s easy for new owners to focus only on the business’s day-to-day operations. But a strategic plan that maps the path toward revenue growth and improved cash flow is necessary. Buyers may find, for example, that the company’s best revenue-producing assets aren’t reaching customers and that their potential could be realized with a more sophisticated marketing campaign or bigger sales staff. Macro- and micro-level planning is equally important.

Return to Profitability

Only a small window of opportunity is available to realize a turnaround’s potential. To take full advantage of it, buyers must get up to speed on the acquisition’s products, departments, delivery systems, staff and overall operating systems as soon as feasible.

Insurance specialists can also be used in a risk-management role, evaluating company insurance coverage and claims. Auditors may be useful for interviewing accounting personnel and financial statements to verify their accuracy. Finally, private investigators can research the backgrounds of key executives for possible fraudulent activity and misrepresentations.

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6 Strategies to Surviving a Tight Credit Environment

Tight CreditTightened credit conditions are almost inevitable when the economy slows down. The cost of credit rises and lenders naturally become more risk-averse. There’s no way to get around the reality of tighter credit markets, but certain strategies can help your business survive – and even grow – during the downturn.

Consider these six strategies:

Keep lenders in the loop. Communicate proactively and frequently with your lenders, instead of waiting until you have an urgent need or problem. Keep them abreast of your company’s strategic plans and share your successes. But also let them know as soon as possible about potential issues. Your lenders are likely facing increased scrutiny themselves, and will feel more comfortable knowing you’re keeping them in the loop about how your company is doing.

View the full business article here.

JoAnn Lombardi | How to Approach Selling Your Business

How to Approach Selling Your Business

Article by JoAnn Lombardi, Pres. VR Business Sales

When a business owner makes the decision to sell, the goal of selling a business remains the same, maximizing what you receive from the sale.

When the decision is made to sell the business, there are some pointers to follow in making sure the transaction is successful.

Standing by the Process

Deciding the Point Person for the Sale

Establishing Deadlines

Communicate with Your Landlord and Banker

Readying for Buyer Due Diligence

Determining what should be Included in Letter of Intent

For more details read full article here How to Approach Selling Your Business

 

JoAnn Lombardi | Being Aware of Deal Breakers in a Business Sale

Being Aware of Deal Breakers in a Business Sale

Article By JoAnn Lombardi, President VR Business Sales
When the time is approaching when the business sale is near, both buyers and sellers can jump the gun, resulting in complications.

At VR, we advise you on paying attention to every step of the process.

There are a few factors that can cause a deal to collapse, which you should know:

Undisclosed Information Surfaces

Asking for Additional/No Collateral

Lack of Buyer and Seller Rapport

Inability by Buyer to Raise Necessary Capital

The Seller Backs Out

For more details read full article here  Being Aware of Deal Breakers in a Business Sale

 

To learn more about avoiding these and other types of deal breakers, contact your local VR business intermediary today.

 

 

 

JoAnn Lombardi – Deciding to Position Your Business for Sale

Deciding to Position Your Business for Sale

By JoAnn Lombardi, Pres. VR Business Brokers
When a business owner decides that the time is right to sell the business, regardless of the reason (burnout, retirement, new aspirations), it is imperative to do so the right way so the optimal sales price can be obtained.

As a business owner, it is easy to have concerns when contemplating whether to sell your business; especially when you start to see that the process of selling your business doesn’t give that flexibility that you need to make the best deal.

It’s important to start planning early on toward the time when you decide to sell your business.

You want to look at building long-term value, not only making a profit in the short term.

Read full article here  Deciding to Position Your Business for Sale

 

Contact VR at 1.800.377.8722 for assistance toward planning to sell your business.

 

JoAnn Lombardi – Restriction Clauses When Selling A Business

When to Apply Restrictions and Prohibitions in the Business Deal

By JoAnn Lombardi, President VR Business Brokers

It’s important for both Buyer and Seller to protect themselves by including the proper terms and conditions in the Business Sale Agreement.

The fact is the buyer is going to have concerns about the seller possibly taking away the goodwill that they’ve created.

The seller will want to know what activities that they will be able to engage in without the threat of legal action.

There are also important factors to understand and cover in the agreement such as “Competition” versus “Solicitation”

Other important points include Express Provisions in the Sales Contract  and Course of Action.

Read the full article here  When to Apply Restrictions and Prohibitions in the Business Deal

 

JoAnn Lombardi – Preparing Your Business for a Buyer’s Visit

Preparing Your Business for a Buyer’s Visit

By JoAnn Lombardi, Pres. VR Business Brokers

 

A buyer’s visit has to be taken very seriously for a number of reasons if you want to move closer to a deal to sell your business.

A visit from a buyer is an opportunity for him or her to meet not only with you but with your management team as well as tour the company’s offices and other facilities.

The buyer will ask you specific and in depth questions about your business to determine what are the benefits and risks.

On the other end, you should be asking questions to make sure that the buyer has the financing to even proceed with the purchase.

Be sure to assemble current financial statements and other essential documents that will be helpful.

And last but not least, keep your business visually appealing to make a good impression.

Read full article here Preparing Your Business for a Buyer’s Visit

 

Contact VR at 1.800.377.8722  for full assistance in preparing your business for all aspects of a successful sales transaction.