After ten years of creating the company, one of the partners began to suspect that things were not going well on the financial side. Unfortunately, he was right. It seemed too late. The only possible solution was to sell the company; But what some buyers offered was not enough to pay all the accumulated debts.
A few years ago an agro-export company hired my consulting services, the initial objective was to carry out a Financial Diagnosis.
The company had two partners, each with 50%. One was in charge of production. Another of finance and administration.
The operating partner suspected that things were not going well on the financial side.
And it was true…
Suppliers were pushing hard for invoices with more than six months to catch up, holding the raw materials company until they received a payment. This affected production, with unfortunate consequences.
Likewise, the banks were insistently calling for the company to send the financial information that it did not finish, duly audited and supports and, of course, threatening to send the operations to judicial collection due to delays of up to three months in some installments..
Debts amounted to $ 8 million. Two million were with commercial suppliers.
Sales were less than $ 500,000 a month, and some negotiations were known to be unprofitable; Worse still, sales to Europe's top customers were on consignment.
The company did not have reliable accounting, not even up to date. There were no Financial Statements and control over the Treasury is very poor. The partners have never really received financial information that is credible and useful for decision-making and managerial control.
The results of each operation were not kept up to date. There was no cost accounting to determine whether some areas or products of the company were being subsidized by others.
It was a company, run like a small town store.
In the past, the company was very successful due to the high prices of its products in the international market. However, as competition increased, prices fell, but costs continued to rise in raw materials, labor, and fixed costs.
As with many companies, owners learn too late about a crisis. When they find out, the company quietly entered and is eating away at the foundation of the company.
The Financial Diagnosis had to be suspended halfway. It was clear that the company was facing a severe financial crisis.
The new contracted service was then a deep and intensive process of Financial Reengineering.
These processes are very painful, they affect all areas of the company and also the culture of the company. Entrepreneurs must rethink the schemes they have been using to manage their businesses, which perhaps were successful in the past; but which do not apply now due to the new economy and increasingly globalized markets and with increasingly larger companies.
As I write this article, I find myself advising another company in a very similar situation, but owned by several brothers. His company was very successful, for thirty years, however now sales have dropped, it is necessary to take control over costs and look for new markets. The most difficult thing has not been to restructure the company. The most difficult thing remains to change the culture of decision-making and the distribution of powers.
Returning to the agro-export company, the partners had to get rid of some personal assets to put them as collateral or use them as a form of payment.
The other partner proposed withdrawing from the company, charging an exaggerated amount for the shares. A reasonable sum was negotiated, given the situation the company was facing, agreed to be paid in installments by putting the shares in guarantee.
This is how the process started. Financial reengineering, of course, means having enough information about the causes, about the symptoms, and about the real problem facing the business. Depending on the problem, this is how the different causes are attacked.
The first thing, of course, is to "stop the bleeding" as this prevents any further shortfalls from accumulating in the cash flow. Then, it is necessary to analyze the results of each operation, each product, each branch or each project.
The process is intense, requires a lot of decision and character. It is a work system that is implemented step by step and covers all areas of the company.
The partner who before was only in charge of the operations, managed to take control of the company and with very painful but necessary decisions managed to get the company out of the crisis.
Credit and credibility with suppliers, with banks and also with customers was recovered, since deliveries continued to be on time and with the quality promised.
A year later, the Bank, seeing the radical change that the company had made, offered new financing with better term conditions and a more attractive interest rate. Two years later, the same bank offered new financing to buy more land that would expand production capacity.
Some time later, five years had passed, the company was a company in full growth, much more profitable, better structured. The debts were kept at eight million dollars; but now they were completely up to date.
Several offers came to buy the company. For double what they had offered in their worst moments.
This businessman did not want to sell…
This real case that I just told you about, is an example of what an intelligent, capable, able decision-maker, sure of where he wants to go, and supported by an experienced consultancy can achieve.
As a business consultant, I have been advising and accompanying hundreds of entrepreneurs in the most diverse economic activities for thirty years. I have seen the changes that a brilliant, intelligent, and decision-making entrepreneur can bring about when his great ability is enhanced by the experience of a trusted consultant.
I recommend that you consider the contribution and generation that a consultant with vast knowledge and extensive experience can add to your company. There is no waiting to face a crisis situation. Many companies find out late.
I would like to know your opinion on this topic. Have you worked with a consultant before? What do you think about hiring one to support the growth of your company?
In times of crisis and good times, a consultant with extensive experience and vast knowledge can print the equivalent of a "turbo" in your company's engine.
