Identifying The Need For A Workout
It is critical for the business owner to recognize the need for a workout as soon as possible. The ability to successfully accomplish workout goals will be significantly affected by the condition your business is in when you commence a workout strategy and that condition is typically on a steady decline as the business owner contemplates his options.
Here are the signs and symptoms that it is time for a workout:
1. No retained earnings.
2. No credit terms, everything is on C.O.D. terms.
3. You’re in default of payment terms to vendors and subject to collection efforts.
4. There’s no inventory.
5. You’re late or in arrears or in default on bank lines, credit cards, mortgages, etc.
6. Benefits for your employees have been abandoned.
7. You’re missing an occasional payroll or are spending the week collecting receivables as aggressively as
possible just to make payroll every week. Maybe you’re covering payroll on Mondays when the checks were
distributed on Friday.
8. You’re not taking a paycheck for yourself.
9. Marketing efforts have ceased because they are too costly.
10. You’re losing important vendors and service providers like your lawyer or accountant or product suppliers.
11. Utilities and phones are being shut off.
12. You’re defaulting on loans.
13. Trade show appearances are being canceled.
14. Employees begin leaving.
15. You’re downsizing in various ways and forms.
16. You’re reducing insurance coverage or your insurance has been canceled for failure to pay.
17. Morale is plummeting.
18. Office supplies are in short supply.
19. You’ve canceled advertising and marketing plans.
20. You, the business owner, are working endless hours.
21. Depression is setting in.
22. Vacations have been canceled.
23. Health insurance plans are allowed to lapse.
24. Credit cards have been shut off.
25. Repairs and maintenance have been postponed.
These are the signs of destruction. But, the good news here is that the patient is still breathing. There are still receivables, still production, still some economic power remaining to fuel a workout. If you wait until you have crashed and burned, you will have eroded all your cash, will have no receivables and nothing shipping and thus have limited or no resources remaining to fuel a workout or even a sale of the business.
Workouts require some cash to save lots more. A workout requires the ability to retain professionals to assist in the process. Without cash to support the workout, you will simply crash and burn and have no ability to limit the damages or create an exit plan for yourself. Eventually, you will simply have to shut the doors and go home penniless with enormous debt and no ability to pay it off or reduce it. Explain that to your family as your cars get repossessed and your home gets foreclosed on.
When the above 25 symptoms are present, it’s time to begin planning your workout strategy, hiring your professionals and securing a safe exit strategy that reduces or eliminates debt with a workout, allowing for adequate cash to make a safe transition into your next income opportunity. This way you remain in control and exit in fine condition, prepared to start your next adventure. After you have been forced to close your doors and stand there without any cash availability, you will be unable to contemplate, let alone implement, a quality workout plan that will provide you with limited or no remaining debt and enough fuel to start your next venture.
