Guillermo was born with all the gifts to be a great merchant. Before he was eighteen years old, he worked in agricultural work, washing buses and charging like "shit" when you had to go from seat to seat, with the coins ringing in one hand and a tightrope walker skill. I know because I did it sometimes too. Later, Guillermo worked as an assistant in mechanical workshops, in agricultural work and in rectification and painting workshops. A simple operator. He also worked for a long time as a surveyor's laborer, paving the way between farms to draw up cadastral plans.
But Guillermo had dreams of greatness.
He became a merchant. He sold everything: from cigarette lighters, to used vehicles, to cassava and bananas that were planted in the most remote areas of his country. It was there that he found his place, he was in his element.
It became one of the largest merchants of cassava, banana, watermelon, melon, pineapple and other products in the region.
Its growth was immense. From a merchant he became an entrepreneur, but he did not achieve the necessary control of his business.
Five years ago, Guillermo was about to lose everything.
He had debts that exceeded eight million dollars, of which only two were with commercial suppliers with invoices that were months past due. The company had terrible negotiations with clients and a very low profitability. She realized that her company was unable to pay its debts.
The pressure from the banks was very strong, and he had lost all his credibility with them. The worst thing was the pressure from commercial suppliers, many times they came to look for him from the business in groups to demand his payment. It was also very stressful to collect biweekly payments for a payroll of almost two hundred workers.
Guillermo was among those when I was recommended for a Financial Diagnosis. It generally takes me three months to do this for medium-sized companies, but in less than four weeks, I knew the company had no "blood" to go on. I mean, it wasn't making a profit and the problems were too great. It had no working capital and was not generating cash flow. He was in the red, practically bankrupt.
I spoke with Guillermo and his partner Erick. There was no point in continuing with the Financial Diagnosis. I proposed an intensive process of Financial Reengineering. I had the support of the general manager, who had arrived two months ago and had recommended me to this company. He had known me doing something similar in some Venezuelan companies a year before.
Guillermo was a young man, forty years old, energetic and positive, ambitious and confident. Erick was a bit older, insecure when making decisions, fearful. He had been in charge of the financial and administrative part for years, as well as the negotiation with clients.
With the approval of both, I prepared the work plan and we began an intensive Financial Reengineering process that was going to take at least six months.
When you are in a bad financial situation, the "profiteers" start to arrive and, with the right entrepreneurial spirit or opportunity, they offer to buy the company, often at ridiculous and even offensive prices. Guillermo and Erick signed a purchase-sale option for 11 million dollars. If the business was sold, they could pay off all their debts and start over.
But the option to buy and sell expired and two more weeks were granted; however, they never came with the money. In the meantime, we continued to work hard with the program.
A PRF (Financial Reengineering Process) involves changes in all areas of the company:
- It begins with the financial and accounting part. It is necessary to know the reality of the company, the exact financial situation and the results of the business. You have to know the profit margins that the operation has and the size of the fixed costs. The administrative part of the business must be restructured, starting with the headquarters and administrative staff. You need to know who you have and who you don't. You have to start standing up to suppliers and banks, make concrete offers, speak clearly with them. You have to improve negotiations with clients, see the product portfolio, measure the margin. of profit of each one. And many other tasks that imply a total change within the company.
The hardest of all was telling the suppliers that for six weeks they would be paid absolutely nothing, but that the company needed them to keep shipping raw materials. Some accepted, others did not.
With the numbers clearer, we began to visit the suppliers again and offer them payments according to the real capacity of the company and that they could be met. Sometimes it was sad to come to offer a supplier with whom you had a debt of one hundred thousand dollars that you were going to pay five hundred a week, plus the bills that were ordinarily due. With others, the payment arrangements were 1.10 or 1.25. That is, if they billed us $ 1,000, we would pay them 1,100 or 1,250.
Partner Erick couldn't bear the pressure and left the ship.
Then, Guillermo had to face the situation alone and begin to dispose of personal property to use it as a means of payment to the suppliers who put the most pressure or as collateral guarantees to accept the proposals.
Meanwhile, it was necessary to try to be as punctual as possible with the payment to the banks. It was almost a hundred thousand dollars being paid each month, and it was being paid late.
Five months later, we visited the operations manager of the bank, with whom they had the largest debts. The experience was thankless, but necessary. The bank did not believe in the company, did not trust its ability to run the business or to pay debts. The financial information came to him months late and he did not believe in it, but having stood up and told what had already been achieved opened space for the bank to begin to believe that something had changed in the company.
Things were beginning to improve. The company had achieved better negotiations with customers, and suppliers were beginning to see money every week.
The six months of the Financial Reengineering Process passed, but there was more to go.
The company needed more capital to continue investing. The banks were not willing to lend more, but they did agree to readjust the debts and extend the grace period, and that lowered the monthly fee that had to be paid for those debts.
Other banks supported the purchase of machinery and equipment, also some working capital, but in small amounts.
All the changes and decisions helped, like pieces of a great puzzle that is taking shape little by little.
Today, the company sells more than six hundred thousand dollars a month. It has three hundred workers, has doubled its production capacity, and owes the same $ 8 million as five years ago, but is twice as large.
They have offered to buy it for more than twenty million dollars. Guillermo is not yet willing to sell it.
I continue to advise Guillermo in his company. He has new challenges for next year and new risks. It is an impressive and valuable story.
Guillermo and many other businessmen like him have gone through dramatic situations. Not once, in some cases up to two or three times. Before having impressive successes, it seems that it is necessary to go through these tests.
The fact of having overcome a stage as difficult as the one that Guillermo went through with his company does not mean that it will not happen again. Circumstances change and the risks are greater when you are growing. The employer must always be attentive to the signs.
Guillermo's story is a true story. It's not a fairy tale, so I can't end by saying "it was happily ever after." Guillermo has taken on new challenges and today he is making a millionaire investment to double the production area and production capacity again. You will have very difficult months, you take a great risk. Of course, he hopes to start recovering that investment within a year and a half.
In what situation is your company now? Do you know the reality of your business? Do you know if it is really generating profit and if it is financially healthy? I invite you to leave your comments at the end of this article. If you go through a situation similar to Guillermo's, write to us, we can help you to succeed and take your company to the next level of growth.
