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.
Regards,
Pedro Bueno
Vantage Performance Team
Turnaround Management Specialists
www.vantageperformance.com.au
26 October 2008
Warning Signs
14 October 2008
Case Study
Project Jean - Turnaround Management
Background
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
Outcome
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
www.vantageperformance.com.au
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.
Regards
Michael Fingland
Managing Director
www.vantageperformance.com.au
Turnaround Management Specialists
10 September 2008
Case Study
Project Drott - Turnaround Management
Background
- Earthmoving contractor that decided to expand into construction
- The first two contracts incurred losses of $500k
- Severe cash flow shortage
Key issues
- Business unable to refinance to another bank
- Financial covenant breaches & cash flow crisis
- Bank was "under water" after reviewing security statement position
- Poor management of working capital and other KPI's
- Restoration of bank relationship essential
- Back to basics mentality required
3 Phases
- Stabilise the business and assess short and long term cash flow requirements
- Strategic review and turnaround plan to maintain bank support
- Implement and monitor turnaround strategy
Outcome
- Debtor finance facility used to extinguish bank overdraft
- Turnaround plan implemented concentrating on their core business
- Overhaul of working capital, financial and operational reporting structure
- Crisis averted and bank relationship restored
- 97% increase in revenue in 12 months
- Turnaround in profit from a loss of (7%) to a profit of 6% of revenue
16 July 2008
Credit Crunch Carnage
Fallout from the US sub-prime market collapse which spread throughout Britain, France, Germany and Japan has now reached our shores.
Much of the credit offered by Australian financial institutions has traditionally been sourced offshore, so it is with interest that we look at the recent write-downs by international lenders, and consider the impact on our own economy.
During the last six months, international lenders who had carried assets at inflated values for many years have been forced to mark to market their balance sheets, resulting in significant portfolio write-downs.
The significance of write downs to date is showing current year write-downs in excess of US$337bn. Of particular interest is the inclusion of blue chip banks, including Citigroup US$69bn, UBS US$45bn, Merrill Lynch US$38bn and Morgan Stanley US$23bn.
With their balance sheets eroded international banks are protecting themselves against further losses by imposing tougher lending criteria on borrowers and by increasing the cost of credit via higher interest rates.
The fallout from the subprime credit crunch continues to be felt by Australian borrowers with three of the big four banks increasing interest rates beyond RBA official increases again in the past week.
Already showing signs of slow down following four successive interest rate increases by the RBA, the latest un-official interest rate increase is certain to have a further dampening effect on business and consumer sentiment which will inevitably translate into further reductions in discretionary spending, increased mortgagee auctions, corporate liquidation and higher unemployment.
Australia’s economic slowdown has increased the need for specialised corporate turnaround advice.
For more information please feel free to contact one of the team at Vantage Performance.
Regards
Michael Fingland
Managing Director
11 July 2008
Business Development on a Friday Afternoon
Good Afternoon Australia,
I guess most of your team is checking the clock and counting down the hours to start their weekend after a long busy week. Am I right?
Why don’t you change that and invite your entire staff to drop what they are doing and join the management team to brainstorm about business development in the boardroom.
The results of this session might generate a bright idea towards the benefit of your company out of a long lasting Friday afternoon.
Nothing better than see your whole team engaged in developing your business.
What is your say on that? How would you react if your manager suggested it to you?
Our Vantage Performance team is looking forward to interacting with you again.
Have a great weekend,
Vantage Performance Team
Turnaround Management Specialists
www.vantageperformance.com.au
What if your cash position starts to tighten?
Good Day Australia,
Last weekend I went to a friend’s birthday and kept hearing how everyone has been suffering with the current market situation and how cash is king again. So I thought of writing about cash flow issues in our turnaround blog today.
When times like these where expressions such as "Credit Crunch", "Day of Reckoning", "World Crisis" and so on are part of our day to day and on top of that your Financial Controller seems more stressed than usual maybe your cash flow position should be re-analysed.
Cash position tightening due to negative trends on sales, increase of cost of good sold and other costs such as wages can lead to a dangerous road.
The shocking fact is that many businesses still not have a cash flow forecast to be able to predict if the business is "bleeding cash" and soon might be out of it. Does your business have a Cash Flow Forecast?!
It might the case of cancelling a few meetings to be able to concentrate and fully commit everyone to put a cash flow forecast up and running. Be concise about all your inflows and outflows, once the cash position is under control, start thinking of the next step: Growth.
Have you had a negative cash flow before? How did you manage to turn it around?
Our Vantage Performance team is looking forward to interacting with you again.
Have a great day,
Vantage Performance Team
Turnaround Management Specialists
www.vantageperformance.com.au
09 July 2008
How to make your workplace a desirable work environment
I always think that where you spend most of your time through out the years has to be a place of joy, friendly people and a health environment. So why not make your workplace another one as you spend at least eight hours a day, five days a week, 12 months a year.
Every year Fortune 500 magazine puts together a list of the top companies around the globe that people vote for best companies to work for based on what they do to boost employee satisfaction.
The reality is that the best incentives are non cash based where people appreciates the most. It can range from gym membership, trips to the coast, day spa, restaurant vouchers, day care, health insurance, casual Friday etc…
On top of that, employees also appreciate respect, good communication, feedback, mentoring, career opportunities, flexibility, balanced work and personal life.
Go ahead, make a change, be creative.
How is your workplace environment? What would you like to change in your workplace?
Our Vantage Performance team is looking forward to interacting with you again.
Have a great day,
Vantage Performance Team
Turnaround Management Specialists
www.vantageperformance.com.au
What if your staff is not engaged with you?
Good Day Australia,
Vantage had the end of the financial year lunch at an Asian restaurant in Brisbane. The food was great but what really caught my attention was how every single staff from the restaurant was fully focused and engaged to serve us best. We could feel the appreciation of being looked after with continuous customer service.
Having your whole team working together, communicating and fully engaged is a strength that every business must desire.
How to do it? How to keep it? Questions that pop up and it is probably easy to answer but hard to have it.
Quite often we all know the answers but the x factor is having this fully committed team in a day to day matter.
Letting others that remain silent to speak or ask them every time they remain silent in a meeting or in a discussion room might instigate those that feel out of the team to “step up a knot” towards your business growth.
Eight hours a day full of meetings, daily commitments, networking and planning. Does that sound familiar? Are you able to stop and have a chat with everyone on your floor and listen to them for a couple of minutes?
You might notice that those team members that have been underperforming should start showing more thoughts related to your business. In the end of the day, everyone likes to work in a friendly and constructive environment.
How do you engage your team on a day to day basis?
Our Vantage Performance Team is looking forward to interacting with you again.
Have a great day,
Vantage Performance Team
Turnaround Management Specialists
www.vantageperformance.com.au
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