In my years navigating business finance, I’ve seen companies of all sizes face challenges and celebrate successes. It’s a universal truth: business is as much about peaks as it is valleys. However, with the right insights and a proactive mindset, even the toughest challenges can be tackled. This isn’t just about the numbers; it’s about the drive and determination behind them. Let’s dive into strategies that can help businesses find their footing during uncertain times, armed with practical knowledge and forward-focused thinking.
Always be prepared for the unthinkable. We’ve had a tenuous twelve months and the next twelve unclear. Crisis can happen. Here are a few of our top suggestions to incorporate into your planning:
- Minimum cash reserves should be equal to three times your monthly spend. Ideally six months is preferable during times of uncertainty.
- Establish a working line of credit with a reputable lender if you do not currently have one in place.
- Inject personal funds or assets as a temporary relief measure.
- Ask for help from friends and family. They may be willing to lend money or invest in the long-term success of the business.
- Existing Debt
- If you have a large amount of existing debt, negotiate with your lenders for debt restructuring, deferred payments, or conversion to a debt equity instrument.
- Operational Review
- As long as there are not any continued challenges with your supply chain, adopt a strategy of just-in-time inventory management. Don’t suspend cash in non-moving or obsolete inventory. Liquidate inventory that is non-moving or obsolete.
- Be honest with Customers and Suppliers about the current state of your business. It will not be a shock to them, and they will be very supportive if your relationship has been strong.
- Be honest with your employees and prepare them for possible outcomes. This can be a strong strategy to gain acceptance and creativity if handled with trust and respect.
- Be cognizant of your current staffing levels. Use this time to evaluate those who are underperforming and base your future staffing levels on either training them up or managing them out through a layoff if one is needed.
- I have had multiple opportunities to be creative with professional staff cost cuts. You can keep your staff but temporarily restructure their duties, where they are working, and hours per week to temporarily reduce overall payroll burden.
- Review your Core Business Strategy
- Conduct a thorough margin review and determine where there are opportunities for improvement by cutting non-profitable sectors and/or products. Work smarter not harder….
- Focus your time and energy on your core competencies. Outsource non-core functions.
- Exit Strategies
- Does this downturn provide an opportunity to exit the business? Is there still value that another company may be interested in?
- If not now, review your exit plan strategy for the future and update for current changes in the business environment. You may have to recast and re-think your final strategy.
Experience has shown me in navigating the complexities of business finance that challenges and successes are integral to the journey. The obstacles are real, however, with strategic planning, understanding, and determination, we’ve always been able to chart a path forward. Resilience is more than just pushing through; it’s about growing, adapting, and learning from each experience. As we continue to move forward, let’s draw from our shared knowledge and remain anchored in our mission. Here’s to the progress we’ve made and the continued growth ahead.
To hear more about my experience and to contact us to find out how we can help you, email me at firstname.lastname@example.org. You can also check us out on the web at www.cefoadvisors.com or call us directly at 518.693.7446.
In today’s competive business environment, ensuring optimal financial operations is key for manufacturing companies. This paper recounts an engagement where focused financial intervention transformed the operations of a local chemical manufacturing plant.
When our team first approached this plant, it was clear that legacy systems and practices were impeding progress:
- The plant was working with an outdated QuickBooks desktop system.
- Inventory valuation posed challenges, leading to inaccuracies.
- The high costs of factoring receivables burdened their resources.
- Financial reporting was relegated to year-end processes and often contained material mistakes.
- Despite these challenges, there was ambition in the owners’ desire to construct their own plant, requiring intricate financial planning and bank negotiations.
III. Actions Undertaken
Our engagement was rooted in understanding, strategy, and execution:
- Balance Sheet Evaluation: Our primary step was to assess and cleanse the balance sheet of material misstatements, laying a foundation of trust for future financial negotiations.
- Strategic Direction: We sought to divert from the high-cost invoice factoring system, aiming for more sustainable and cost-effective financing methods.
- Projections & Forecasting: Leveraging data, we crafted a 5-year projection model predicting margin enhancements, attributing them to the anticipated efficiencies of the new plant and revised product SOPs.
- Bank Collaborations: With accurate financial records, we introduced the company to three distinct banks. Their renewed interest was a testament to our strategic recalibrations.
- Outcomes Realized
Our methodical approach bore fruit:
- Robust Financing Secured:
- $5 million for the new plant.
o A $750k equipment credit line.
o An adaptive credit line based on monthly accounts receivable and inventory.
o Discontinuation of Factoring: By transitioning from the factoring model, we unlocked substantial cost savings.
- We were successful in acquiring an IDA grant, promising: o Ten years of tax savings.
o Deductions on mortgage recording tax.
o Sales tax waivers on materials.
This engagement stands as a testament to the transformative power of strategic financial intervention. Through meticulous planning, active collaboration, and strategic foresight, we’ve ushered a local chemical manufacturing plant into a new era of financial and operational prosperity. They continue to prosper with a new equity partner supporting their efforts.