26 October 2008

Warning Signs

Business failure are often preceded by a number of symptoms or warning signs. If identified early enough, business failure can possibly be stopped and turned around back into sustainable growth.

Businesses suffering from liquidity problems usually have excessive loan repayments, accumulated inventory (low inventory turnover), declining sales orders and declining cash inflows.

Below are some causes affecting the performance of businesses:

Macro issues - economy, industry and legal issues

Micro issues - management, policies and accounting practices

Important measures can be taken to attempt to turn the business around, such as reduced investment in inventories, greater control of overhead costs, a more rigorous receivables collection policy, and increased long term and short term borrowings within the business's capacity to service.

Important initiatives to help Turn Your Business Around:

1- Cash Flow projections
2- Receivables management
3- Inventory management
4- Good relations with stakeholders

Our Vantage Performance team is looking forward to interacting with you again.


Pedro Bueno

Vantage Performance Team
Turnaround Management Specialists

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14 October 2008

Case Study

Project Jean - Turnaround Management

Successful retail group that expanded too rapidly
Strong brand with 12 locations
Significant trading losses
Working capital crunch

Key issues
Finance covenant breaches
Cash flow crisis
Bank was "under water" and refinancing was not an option
Poor working capital management
Lack of management depth
Core business still viable

5 Phases
Stabilise the business
Strategic review and turnaround plan developed
Close unprofitable/unsustainable outlets - stakeholder negotiation was key!
Focus on core stores and "grind it out"
New growth after pruning

Cash flow crisis averted
Stakeholder relationships restored
Tracking 80% + increase in same store sales
$1.1 million improvement in net profit

Vantage Performance
Turnaround Management Specialists

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01 October 2008

Optimising Business Finance in a Slowing Economy

In this month’s post we discuss the impact of the liquidity crisis on business borrowings, and provide a case study example of how to maximize your chances of raising finance.

Despite a 25 basis point reduction in the official interest rate earlier this month, and speculation of further interest rate cuts, Australian borrowers are still bearing the brunt of the global liquidity crisis, as financiers impose tougher lending criteria and pass on their ever increasing costs of credit.

Small and medium size business surveys consistently reveal declining business activity, lower capital expenditure and a slowdown in total business debt.

This being the case, now is an ideal time for business managers to review their financial strategy and ensure their business is equipped to face the continuing challenges of a slowing economy.

Below is an example of how Vantage Performance assisted a group to restructure its existing facilities to enable the business to achieve its business objectives.

Case Study -

Project Overview

A dominant market position had led this group to become complacent, allowing aggressive competitors and industry consolidation to threaten the business.

Our assistance was sought by the group’s bank, following a series of profit downgrades and the group’s resulting inability to repay core debt.

With over $80 million in annual sales the group had more than 75% market share in its core competency areas. Management had become distracted from the core business whilst pursuing a number of unsuccessful merger / acquisition opportunities.

Project Objectives

Our scope was to undertake a strategic review of the group’s operations to (1) determine whether it had sufficient collateral and cash flow to support further restructuring; and (2) how its present strategy would cope amidst continued industry consolidation and competitive pressures.

Our Approach

Our initial objective was to assess the group’s immediate funding requirements to determine whether the bank would extend the group’s borrowings.

We determined that the group could only support the interest on existing debt until a turnaround plan had been successfully implemented. We undertook a thorough review of the group’s historic financial performance, financial forecasts and strategic positioning against industry peers to determine whether such a plan could be created and successfully carried out, or whether a trade sale or merger should be considered.

Key Benefits Delivered

Our thorough analysis and detailed report provided the bank with an intimate understanding of the group’s present operations and strategic direction. We also provided the group’s management team with a series of recommendations on how to turn the business around.

With a detailed understanding of the business, the bank was able to assess the group’s core funding requirements and restructure existing facilities to allow the group to capitalise upon its market position.

Our involvement transformed a potential crisis situation into an opportunity for the bank to extend its involvement with the company and participate in further industry consolidation.

For more information please feel free to contact one of the team at Vantage Performance.


Michael Fingland
Managing Director

Turnaround Management Specialists

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