The document provides information on warning signs that a business may be experiencing financial distress. It discusses why businesses fail, how failures impact the local community through supply chain effects, and operational and community hints that can indicate a business is struggling. Specific signs listed include changes in local management, lack of succession planning, declining patronage at local businesses, and visible issues like building disrepair and vacant parking lots. The document advocates setting up ongoing research on businesses in the local community to monitor for potential distress issues.

1. October 19, 2016
Mark Barbash
WARNING SIGNS OF BUSINESS
DISTRESS

2. NCIS/
How to know if your
customers are having
problems?
(Without breaking and
entering)
Big picture: Why
Businesses Fail
How business problems
impact your community
How businesses
respond to problems
Red Flags of Financial
Distress
Setting up your own
research department

3. The Big Picture:
Why Businesses Fail
• Business cycles
• Survival rates for start up
businesses
• Understanding the supply
chain
• Why businesses fail
• How do businesses respond to
problems

6. Even Big Business Can Fail

7. Business Problems Ripple Through
Communities: The Supply Chain
Business Supplier Distribution
Local
Technical
Services
Customer

10. The Honda Supply
Chain

11. The Multiplier Effect:
Increased income in a community increases spending
on local goods and services. Decreased income can
reduce spending on local goods and services.

12. Inexperienced
Management
Failure to
Keep up with
Competition
Lack of R & D /
Innovation
Shortage of
Working
Capital
Operational
Inefficiencies
Costs Out of
Control
Why
Businesses
Fail

13. How Distress Impacts Business Response?
Action Reaction
Cut Back on Salaries. Shifts, Bonuses Morale, Accidents, Absenteeism
Deferred Maintenance Building Deterioration, Accidents
Reduction in Inventory Inability to Deliver Product
Reduction in R & D Product Obsolescence
Reduce on non production expenses Admin / finance problems
Cutbacks in Training Accidents, Production Delays

14. Operational Hints of Distress
 Changes in local management (firing, replacement, etc.)
 No obvious succession plan
 Lack of industry risk profile
 Change in Company Ownership (Away from the community)
 A new “boss” or CFO brought in from “the home office”
 Shifting of work to other company facilities
 Asking the plant to complete with other company facilities for
business
 Complaints about local “business conditions”

15. Community Hints of Distress
 Declining business at local service stores (café, gas station, grocery
and hardware stores)
 Reduction in corporate contributions to area charitable
organizations
 Management not living in the community
 Changes (or layoffs) in local management
 The business is selling assets, refinancing and/or leasing assets
 Increase in business at local social service groups (ie: food banks)

16. Let’s Take a Ride

17. Look around the building
Broken
Sidewalks
Unrepaired
Fences
Broken
Windows
Landscaping Not
Tended

18. Look around the building
Roof Tiles Missing
or Broken
Empty Parking Lot
Outside Utilities
in Disrepair

19. Check out the building condition
Trash Hidden
Behind Building
Messy Designated
Trash Areas
Exits Not in Good
Condition

20. Look around the Neighborhood
Graffiti
Boarded up
Buildings
Public Roadways
in Disrepair

21. Look around the Neighborhood
Vacant Lots
Vacant Space for
Lease
No One Eating in
Local Cafe

22. If you can take a plant tour…
Unstocked
Shelves
Empty
Warehouses
No One Answers
the Phone

23. If you can take a plant tour
People Hanging
Around
Messy Desks
Closed

24. Create Your Own Research Department
Set up Google
Searches
Watch
Industry
Trends
Hang Out
Watch
Newspaper
Notices

25. Watch out for these excuses ….
• Rosy Scenarios: “Everything is fine. It’ll get better. “
• The Reasons for Failure: “It’s someone else’s fault.”
• Networking in the community: “Haven’t seen you around much.”
• Managers not living in the community: “I did it for the school system.”
• Keep an eye on lawsuits: “Don’t worry. It’s routine.”
• WARN Notices: “It’s no big deal. They require us to file it.”
• Age of Owners: “I’m gonna pass it on to my kids.”
• Location in gentrifying neighborhood: “It’s getting pretty expensive here.”
• Business vacancies in the area: “Where did my neighbors go. “

26. Final Words…
• It’s tough for a business to survive
• “Just the facts, ma’am” Joe Friday
• You know what they say about “assume”…
• A rumor goes in one ear, then out of many mouths.
• You win if the business succeeds
• You win if the business recovers from adversity

27. Thank you
Mark Barbash
Mark.Barbash@gmail.com
(614) 774-7599