Is This Your Story?

This week I heard three nearly identical stories from three new financially distressed clients. Based on the questions I asked in the initial interview, they all thought I was clairvoyant. Does this sound like your story?

1. All three companies were relatively young, founded in the last three to five years.
2. The founders excel at what they do. Their companies showed strong growth and healthy margins.
3. They needed liquidity to support their growth, first investing personally and then raising capital from friends and family.
4. It wasn't enough, so they started using their credit cards to purchase merchandise. They knew the carrying cost was high but were amazed at the size of the credit limits they were given (one credit card company even told them "no pre-set spending limit").
5. Cash flow was getting tight and they were late with a few payments. The credit card companies cut their credit limits and demanded substantial monthly payments to bring the balance down.
6. Not having the resources to pay down the credit cards, they turned to MCA lenders, still thinking their high profit margins would cover the cost. No one warned them these companies weren't regulated like banks and routinely charged fees exceeding thirty to fifty percent.
7. They continued to go backwards and soon needed to borrow more to cover the MCA loan fees, so they started stacking MCA loans with no exit in sight.
8. On the business side, their growth slowed because they had difficulty keeping inventory in stock. Pricing became more competitive while costs were inflating. Margins began to fall.
9. Each of them had recently crossed a line where they could no longer pay all of their vendors and lenders on time. They weren't sleeping at night.
10. They all realized that if they didn't do something soon, they might end up in bankruptcy and some had begun speaking with bankruptcy attorneys.
11. Each founder said they are good at what they do but had limited experience with finance, accounting, borrowing money and managing cash flow. They all regret not bringing a strong business advisor on board early who could have helped them better navigate the financial side of our business.
12. The conversations ended with "We're in trouble. Can you help?"

Fixing a financially distressed company isn't complex, but there are many moving parts and typically a limited amount of time to get it done. Solutions range from aggressively renegotiating with all of your creditors to a formal court-based restructuring. As you would expect, the earlier in the down cycle you attend to it, the less time and money it takes to complete.

Often overlooked, it also takes a critical reassessment of a company's operations to align the workflow with its cash flow and resources. By combining the restructuring and operational improvements with more traditional bank financing (made possible by the turnaround), you can return to growing your business and sleeping at night.

About Gary Nacht and Synergy Advisory Services

Founded in 1995, Synergy Enterprises, LLC is a boutique advisory services firm specializing in acquiring distressed and underperforming companies across a wide range of industries, including retail, distribution, manufacturing, pharmaceuticals, construction, trucking and professional services firms.

In the fall of 2013, we launched Synergy Advisory Services to focus on helping underperforming early-stage and small to mid-sized companies return to positive cash flow and profitability as well as strategic and tactical mentoring for business owners and senior executives. In order to maintain the highest level of personal customer service and support, we frequently limit the number of clients in our portfolio at any given time.

For more information, visit synergyllc.net or call Gary Nacht at (732) 406-0377.