A Tale of 3 CEO's
As we all know, things have changed and we are all coming to grips with the new reality of business post-2008.
My friend is meeting with his bank later this month to renew his business's line of credit. His results are improved-to-steady and his strategic acquisitions in 2009 have paid off handsomely for his business. No problem right? Well, his former tenant also had a line of credit with the same bank - which they lost earlier this year. Notice I said "former" tenant. These good folks were caught off guard and didn't have a Plan B developed. My friend is smart, he has a Plan B developed and won't lose his business even if the bank refuses to renew his line of credit.
Another CEO was just told; "We want our money back in 90 days" by his friendly neighborhood bank. And, oh by the way, they want him to sign over all remaining unpledged personal assets as well. Do I need to mention that this company is un-bankable anywhere else?
This unfortunate CEO is just as smart but he didn't have a Plan B developed and is now scrambling to get one in place. That's where I step in, our firm would develop the plan, gain commitment from all stakeholders and then rapidly restructure the business and find new lenders. All in the 11th hour. That's what we do but I can assure you, it is more expensive than having a well thought out Plan B in your back pocket.
And believe it or not, some folks simply do nothing. That always leads to the worst possible outcome. Case in point, another situation I am involved in; the high-end manufacturing company chose to ignore bank demands and just keep doing the same wrong things over and over. Next week they'll be receiving notice of the lawsuit and foreclosure being filed by their bank.
So please be the smart CEO and think through your Plan B financing options. It's the least expensive and safest thing you can do to save your business.
Jeff Sands is a Director with Dorset Partners LLC (www.DorsetPartners.com) which helps companies Revitalize in the face of serious economic challenges. Dorset Partners has recently published its Business Health Test which is a diagnostic that several CEOs have used to spot trouble early and make changes to avoid serious problems. The Business Health Test is available as a free download on their website.