Believe that bankruptcy will never happen to you? That’s great, but businesses large and small that have survived the recession shouldn’t let their guard down just yet, advises Susan Tose Spencer, an entrepreneur, lawyer and former minority owner, general manager and vice president of the Philadelphia Eagles football franchise.
Having participated in a number of businesses over the last 25 years—which included heading up her own companies and facing $1 million in debt with one failed meat packing venture in New Jersey—Spencer is familiar with the financial toll and emotional beating that goes along with trying to save a company on its last legs.
“If you are a small business owner that is still in business after the most recent economic downturn, that doesn’t mean you are out of the woods,” says Spencer, author of a book titled, "Briefcase Essentials: Discover Your 12 Natural Talents for Achieving Success in a Male-Dominated Workplace." “There are many telltale signs that you need to consider, face the facts about the health of your business, and then come up with a strategy.”
Here are five tips from Spencer on how to make the best out of a negative situation:
Tip 1: Face the Truth
- Is your company running a negative cash flow on a regular basis?
- If the answer is yes, it’s time to consider your options.
- Are you prepared to put more personal money into your business?
- If the answer is no, you probably will not be able to arrange a loan from any conventional sources and unless you can quickly turn around your cash flow you might run out of gas.
Tip 2: Maximize Your Cash Management
- Can you stretch your payables further by negotiating longer payment terms?
- Can you speed up collection of your receivables?
- Can you reduce your operating expenses and furlough or convert employees to part-time workers?
Tip 3: Look Objectively at Hard and Soft Assets, and Customer Lists
- If you have been in business a few years, it is likely you have transferable assets with real value (actual and intangible) to a competitor.
- Examine your unique systems, formulas and operating procedures that can add value to another company.
- Take a thorough inventory of everything the company possesses.
- Examine your customer list one customer at a time and consider how each customer would fit in with another similar company and whether you could convince them to make that transition.
Tip 4: Identify Competitors That Might Be Interested in Your Company
- The most positive solution to closing a business is to find another company that will benefit from what you have and will pay money (or assume debt) for it.
- Select no more than two potential targets( your best picks) because if the word gets out that you are selling your company you might lose customers and employees before you can work out a suitable transfer
- Remember this is a “beauty contest,” so plan every detail before you approach a competitor and keep it 100% positive.
- Before you pitch a competitor, know what you want out of the deal.
- Keep your activities under the radar screen for maximum benefit.
Tip 5: Know What You Are Selling and Have Facts and Figures Ready
- Make sure you exchange confidentiality agreements before you start.
- Give your best sales pitch on how your competitor will benefit by adding your company and its customers.
- If there is real interest walk away with an agreed-upon outline.
- Follow up quickly and try to wrap up the transfer in 30 days—max.
- Close the deal and take a long sigh of relief that you can walk away with something to show for all your effort and then move on!
Read ‘7 Tips for Couples on How to Achieve Money Happiness’ at AdvisorOne.com.