Are you aware the first stage of business failure is denial? Could you recognize many of the obvious signs your company is in trouble? Are you trying to save your company by doing things that may not be the best for you and your family? Are you aware owners who recognize early signs they have more trouble than they can handle are more likely to take the steps necessary to successfully turn their company around?

1. You Know you are in Big Trouble if…
by R. Thomas Stocker
Are you aware the first stage of business area. I would like to say there are a bunch
failure is denial? Could you recognize many of them that are easier to identify as
of the obvious signs your company is in systemic when the economy is good.
trouble? Are you trying to save your However, the current economic conditions
company by doing things that may not be should not be used as an excuse. Many
the best for you and your family? Are you industries are not feeling as much pain as
aware owners who recognize early signs others. As a business gets deeper into
they have more trouble than they can handle trouble, more of these problems will be
are more likely to take the steps necessary to experienced. I’d like to say this is an
successfully turn their company around? exhaustive list, but it only scratches the
surface. There are many more.
Signs of impending business disaster do not
change, regardless of the economic cycle. Management
But in our current economic environment, • You don’t have a strategic plan
many more businesses are already deep in a • You and or your senior management
downward spiral or may be starting to see have not faced a downturn or crisis
signs of the nightmare of business failure. It before
is important for you to be aware of the signs • You are on the phone with suppliers on a
and ask for help if you see that you are frequent basis explaining why they
falling into some or many of these patterns. haven’t been paid or are negotiating for
The sooner you ask for help the less delivery
expensive it will be for you. • You are making promises to suppliers or
customers you know you can’t keep
At the same time the business is
• You are not cutting your workforce to
experiencing severe stress, the owner will
match sales
experience several emotional stages. The
• You are cutting key employees while
first is denial the business is failing and the
holding on to family members or friends
last is acceptance, with several others in
• You are delaying tough decisions with
between, including anger, negotiation and
the thought that next week, month or
maybe depression.
quarter will be better
• You are making more decisions without
If you are seeing many of the following in
seeking others’ input or counsel
your business but not yet doing anything
• You are frequently making decisions
about it, you are at best in the denial phase
that used to be made by people lower in
of your decline. This phase is the most
the organization
dangerous as it will cause you to delay
• Your decision-making process is not
making the tough decisions you need to
thorough; hasty decisions are made
make in order to save your company.
without whole organization or future
I was going to do something clever like have ramifications included in your thought
a top 10 list, but there are many more than process. Worse, decisions are made with
just ten. So, I will try to categorize them by
10 Larkspur Road, East Greenwich, RI 02818 401-451-9799 www.boardroomadvisorygroup.com

2. inaccurate or incomplete information, on • You are personally making “one time”
perception or emotion. loans to meet payroll
• Your communications with your • You are delaying payroll for yourself
management team, employees, key and or senior management
stakeholders and advisors is becoming • Using employee trust fund taxes to pay
less frequent. You may be feeling vendors or bank (illegal)
withdrawn or isolated.
Sales
• Key management and employees are
feeling uneasy and out of the loop • Revenue growth has stopped or is
negative
• Key management and personnel are
leaving the organization • New order pipeline is declining or empty
• You are doing more and more task- • Customers have slowed or changed
order patterns
oriented things you used to delegate
• More than one key customer is in trouble
Finance • Profit margins are being squeezed by
• You don’t operate with a P&L budget or new (unreasonable) customer incentives
forecast • Customers have stopped talking or are
• You don’t use cash flow projections lying to you
• Your P&L and cash flow projections are • Customer satisfaction is declining
not updated frequently or timely • Your forecasts are based on hope rather
• Financial statements are not available than reality
within 10 to 15 days of month end • You are losing share
• You don’t get usable analysis and • Your industry is having a good year
explanations of your financial results
• You are surprised by your results Operations
• Cash balances are declining • Inventory is increasing
• You continue to spend based on out of • Cost of production is rising while output
date forecasts is slowing
• Use of your credit line is increasing or it • Not enough inventory of the right parts
is maxed out • Vendors have stopped shipping to you
• Receivable collection cycle growing without COD or CIA
longer • You are using credit cards to purchase
• You are stretching your payables further inventory
than ever before • Finished goods of key products are
• You are keeping checks in a drawer, or growing
choosing not to pay some vendors • Cost of production is rising
altogether • Cycle time is rising
• You are delaying or not making tax • Not enough funds to address equipment
payments breakdowns
• Banks or other lenders are making more • Preventative maintenance is suspended
frequent requests for information • Capital improvement plans suspended
• You are distorting your numbers used • Selling inventory at discount to raise
and presented for your bank borrowing cash
base • Heat and or electricity are turned off
• You have an adversarial or no
relationship with your bank or other Owners need to understand the signs their
lenders company is in big trouble early enough to
• You are having trouble making payroll get expert help to do something about it.

3. Sadly, far too many wait too long before your bank covenants, or worse your bank
asking for professional help, usually at the has asked you to find another bank, read my
tail end of their emotional cycle, in the article “I’m out of compliance…now
acceptance stage. Unfortunately, in many what?!?” You can find it on my website;
www.boardroomadvisorygroup.com. You
cases this is too late to make a difference.
Many may not have had to go down the path need the advice from that article.
of a distressed sale, bankruptcy or
Now more than ever, you need your team in
liquidation had they asked advisors for help
the loop. If you are spending all your time
during or soon after their denial phase. I
expediting parts, making every decision big
can’t say why they don’t ask us for help; the
or small, talking and negotiating with
three reasons I hear most frequently are
vendors, stop. You need others to do that.
pride, denial and not wanting to make the
Instead, you need to be leading your team
investment (many look at it as a cost)
and communicating your restructure strategy
needed to increase their chance of survival.
to all of your stakeholders including
There are many things that can be done if employees, creditors, bankers and
the process is started early enough. The first customers. Without their support and trust
step is to admit you need help. After you you probably have little chance of success.
admit you are in trouble, step two is to hire a
An in-depth and brutally honest situation
turnaround advisor. We will bring an
analysis needs to be done for all parts of the
unbiased view of the situation. We don’t
business. This will include an assessment of
have a political agenda and can therefore
all the resources you have and should have,
make the tough decisions needed. We also
separating all essential from the non-
bring a valuable outside perspective to your
essential. When you finish this step you will
business. We see problems (obvious to us)
have produced a formal action plan with the
that you and your team as insiders accept as
key milestones and accountabilities needed
normal. Now more than ever you are going
to execute the strategy. This includes the
to find the true value of an outside advisor.
emergency triage plan and ultimately the
We’ve done this before.
return to normalcy plan. There also needs to
Google and read everything you can about be contingency plans and proper metrics to
turnarounds. You will find many articles understand progress or needs to implement
like this one with how-to advice, triage ideas countermeasures when things aren’t going
and checklists. (All that I read recommend according to plan.
your hiring an advisor… this is not a
This is only a small piece of identifying
“turnarounds for dummies” exercise).
trouble and returning a company to good
Start using a cash flow forecast. Do it now. health. Every situation is different and no
Make sure it is accurate. Update it at least two plans are alike. There are too many
weekly and make sure you (and your dynamics to cover everything in an article
accountant) understand it. such as this.
At the same time you need to develop a The key to remember is this: if you think
restructure plan based on a sound business you may be in or heading toward trouble,
plan. You, your advisor and all key you probably are. If you are doing things
employees need to be part of this. There are just to stay afloat for another day you need
many decisions that need to be made to stop to ask for help. If you think hiring an
the bleeding now. As usual, communication advisor to help you save your business is not
will be a very large part of this to keep a good investment, what is your business
stakeholders engaged. If you can’t certify worth if it is closed?

4. To comment on this or other topics important to private business owners, visit my company
website at www.boardroomadvisorygroup.com.
About the author; Tom is a Principal of Boardroom Advisory Group, LLC, an owner advisory and consulting firm. Tom serves on the Board of
Directors for the RI Economic Development Corp’s Small Business Loan Fund Corporation (SBLFC), the finance arm of the RI EDC. He writes
a monthly article for the RI EDC’s Every Company Counts initiative. His articles focus on areas that can add significant value for business
owners. Contact Tom directly at 401-451-9799 or tstocker@boardroomadvisorygroup.com.
Boardroom Advisory Group, LLC is a business advisory and consulting firm specializing in helping business owners resolve day-to-day systemic
issues that interfere with cash flow and profitability attainment. The Firm works with both growing and underperforming small to mid-market
private companies. The Firm’s team of hands-on senior professionals find and implement solutions to improve top-line and bottom-line growth,
increase cash flow, reduce costs, improve process, structure, and use world-class metrics to keep the business on track. The team also has
extensive experience working with troubled companies through business restructures and recapitalization. Boardroom Advisory Group’s core
focus on developing strategies to drive and measure performance has resulted in a history of sustainable top and bottom line growth, healthy cash
flow and increased company value for their clients. For more information about how we can help you build a more valuable business visit our
website at www.boardroomadvisorygroup.com.
©2008-09 Boardroom Advisory Group, LLC All Rights Reserved. No part of this document may be reproduced without the express permission
of the author. All registered trademarks mentioned in this document are the property of their respective owners.
Additional articles written by Mr. Stocker include:
Start Forecasting Now! Do You Have Contingency Plans?
I’m Out of Compliance. Now What? Have You Thought About Your Future Lately?
Are you in a Foxhole? Metrics Should Be Everywhere (Part I)
Are You an Octopus? Metrics Should Be Everywhere (Part II)
What is Value? It’s All About Growth
These articles can be accessed at www.boardroomadvisorygroup.com/pages/pubs.php. You can also request to be added to his email list to
receive his latest articles on a monthly basis on the Company website. Contact Tom at tstocker@boardroomadvisorygroup.com.