““We help prevent bad things We help prevent bad things

from happening to your companyfrom happening to your company””

�� Six executive consultants with extensive experienceSix executive consultants with extensive experience

�� Over $2Billion in lifetime sales collectivelyOver $2Billion in lifetime sales collectively

�� Two Crain's Two Crain's ““40 under 4040 under 40”” winnerswinners

�� Two Two ““Future FiftyFuture Fifty”” WinnersWinners

�� Two Two ““Ernst and YoungErnst and Young”” nominees and one finalistnominees and one finalist

�� Owned and or operated companies in construction, Owned and or operated companies in construction, Tier 1automotive, manufacturing, industrial Tier 1automotive, manufacturing, industrial service, consulting, commercial lending, service, consulting, commercial lending, distribution, IT, aerospace industry, and real estate.distribution, IT, aerospace industry, and real estate.

◦◦ Real world entrepreneurial executive experienceReal world entrepreneurial executive experience

◦◦ Follow our preset processes and proceduresFollow our preset processes and procedures

◦◦ Strong financial management skillsStrong financial management skills

◦◦ Strong interpersonal skills Strong interpersonal skills

◦◦ Can easily identify issuesCan easily identify issues

◦◦ Extensive turnaround engagementsExtensive turnaround engagements

◦◦ Strong relationships with lenders and their attorneysStrong relationships with lenders and their attorneys

�� Our Team has extensive experience with Our Team has extensive experience with companies in crisis.companies in crisis.

�� We understand what they are going through.We understand what they are going through.

�� We have the skill to quickly analyze, prepare a We have the skill to quickly analyze, prepare a plan, and help execute that plan.plan, and help execute that plan.

�� We have the relationships to solve their We have the relationships to solve their problems.problems.

�� Using professionals increases success.Using professionals increases success.

�� Professionals move quickly and without bias.Professionals move quickly and without bias.

�� Downsizing alone will not solve all problems.Downsizing alone will not solve all problems.

�� Volatile business environment makes Volatile business environment makes

successful, growth oriented CEOsuccessful, growth oriented CEO’’s turn into s turn into

““hesitant managershesitant managers””..

�� CEOCEO’’s are not trained to deal with crisiss are not trained to deal with crisis

�� Turnaround Professionals take over decision Turnaround Professionals take over decision

making for the company (acting as CEO, CFO, making for the company (acting as CEO, CFO,

COO etc.).COO etc.).

�� Banks trust the professionals and more than Banks trust the professionals and more than

the owners.the owners.

�� Poor Lender Relationships and PressurePoor Lender Relationships and Pressure

�� Weak Financial Performance ( Ex.cannot make payroll)Weak Financial Performance ( Ex.cannot make payroll)

�� Poor ZPoor Z--ScoreScore

�� Ineffective Management StyleIneffective Management Style

�� Poor Leadership (character issues)Poor Leadership (character issues)

�� OverOver--diversification (too many products)diversification (too many products)

�� Lack of Operating ControlsLack of Operating Controls

�� Market LagMarket Lag

�� Precarious Customer Base or high concentrationPrecarious Customer Base or high concentration

�� Family vs. Business MattersFamily vs. Business Matters

�� Operating without a Business/Strategic PlanOperating without a Business/Strategic Plan

�� Collect informationCollect information

�� Industry Benchmark AnalysisIndustry Benchmark Analysis

�� 13 week Cash Flow/Breakeven Report13 week Cash Flow/Breakeven Report

�� Management ReviewManagement Review

�� Begin Activity Based CostingBegin Activity Based Costing

�� Develop a Strategic PlanDevelop a Strategic Plan

�� Begin the Corporate Renewal ProcessBegin the Corporate Renewal Process

�� Last three years financials & tax returnsLast three years financials & tax returns

�� Interim financialsInterim financials

�� Detailed A/R & A/PDetailed A/R & A/P

�� All notes and agreementsAll notes and agreements

�� Employee agreementsEmployee agreements

�� Existing ContractsExisting Contracts

�� Work in Process WorksheetsWork in Process Worksheets

�� Any sales forecastsAny sales forecasts

�� What ratios, percentages and performance What ratios, percentages and performance levels should a company be operating at?levels should a company be operating at?

�� With the aid of software such as With the aid of software such as Profit Cents Profit Cents or reference material such as Risk or reference material such as Risk Management Association (RMA) yearly Management Association (RMA) yearly industry performance data book, we can industry performance data book, we can determine where a healthy company in any determine where a healthy company in any industry should be operating.industry should be operating.

�� Comparing this to actual performance can Comparing this to actual performance can help to identify problem areas.help to identify problem areas.

�� A break down of all A/R and A/P into a A break down of all A/R and A/P into a

spreadsheet helps you see problems ahead. spreadsheet helps you see problems ahead.

�� Properly designed this can be a very effective Properly designed this can be a very effective

planning tool.planning tool.

�� Future sales considerations can be added to Future sales considerations can be added to

determine impact on company.determine impact on company.

�� Expenses can be modified to insure net Expenses can be modified to insure net

positive cash flow.positive cash flow.

�� Interviews with all department heads must be Interviews with all department heads must be

conducted quickly to determine who is conducted quickly to determine who is ““on on

the busthe bus”” and do they want to stay.and do they want to stay.

�� Who is capable of doing their job.Who is capable of doing their job.

�� Top four positions are CEO, CFO, COO and Top four positions are CEO, CFO, COO and

Director of Sales. (All may have to be Director of Sales. (All may have to be

replaced.) replaced.)

�� Do we have the right people doing the right Do we have the right people doing the right

things for the company?things for the company?

�� Most companies only know what they sold Most companies only know what they sold

something for and maybe, what they think it something for and maybe, what they think it

cost them.cost them.

�� ABC breaks down all actives within the ABC breaks down all actives within the

company uncovering opportunities for company uncovering opportunities for

improvement.improvement.

�� Every activity has both direct and indirect Every activity has both direct and indirect

costs. To evaluate each activity you must costs. To evaluate each activity you must

discover indirect costs and apply them.discover indirect costs and apply them.

�� Example Example ““The Music/Video StoreThe Music/Video Store””

�� Once you have collected all of your Once you have collected all of your

information, reviewed industry benchmarks, information, reviewed industry benchmarks,

created a 13 week cash flow model and have created a 13 week cash flow model and have

determined what financial modifications must determined what financial modifications must

be made in order to return the company to be made in order to return the company to

positive cash flow, then you create a strategic positive cash flow, then you create a strategic

plan.plan.

�� This is what the company is going to look like This is what the company is going to look like

at the end of the turnaround process. Very at the end of the turnaround process. Very

specific benchmarks.specific benchmarks.

�� The plan should include daily, weekly, monthly The plan should include daily, weekly, monthly

and annual goals for everyone. and annual goals for everyone.

�� Scorecard must track sales, future sales, gross Scorecard must track sales, future sales, gross

margin, net profit, revenue per employee, debt margin, net profit, revenue per employee, debt

service coverage ratio, leverage ratio, current service coverage ratio, leverage ratio, current

ratio and any other variable important to ratio and any other variable important to

company.company.

�� Line item accountability for every item on Line item accountability for every item on

scorecard.scorecard.

�� Weekly meeting times must be set and Weekly meeting times must be set and

maintained.maintained.

�� Review the strategic plan with your staffReview the strategic plan with your staff

�� Share the FutureShare the Future

�� Ask for Help & IdeasAsk for Help & Ideas

�� Develop a reward system for successDevelop a reward system for success

�� Scorecard developmentScorecard development

�� By now you have made the required By now you have made the required

manpower cuts.manpower cuts.

�� The staff you have left are going to help you The staff you have left are going to help you

accomplish your goals.accomplish your goals.

�� Every line item and activity will be assigned Every line item and activity will be assigned

the responsibility of someone within your the responsibility of someone within your

organization. organization.

�� Weekly meeting will be held with the entire Weekly meeting will be held with the entire

staff. staff.

�� Scorecard items will be reported by those Scorecard items will be reported by those individuals to make sure they stay on track. individuals to make sure they stay on track.

�� Daily morning huddles will be held with Daily morning huddles will be held with department managers to deals with the issues department managers to deals with the issues that pop up.that pop up.

�� All capital expenditures or payroll decisions will All capital expenditures or payroll decisions will involve a involve a Return on Investment Return on Investment calculation. When calculation. When will it pay off?will it pay off?

�� Document every process within your company Document every process within your company and make it available to everyone.and make it available to everyone.

�� Every month all processes will be reviewed to Every month all processes will be reviewed to make sure they are aligned with objectives of the make sure they are aligned with objectives of the company. company.

�� Contact suppliers about Terms & Conditions.Contact suppliers about Terms & Conditions.

�� Large vendors debts can be changed to long Large vendors debts can be changed to long

term unsecured notes.term unsecured notes.

�� Keep the channels open. Keep the channels open.

�� Find new lenders as soon as possible.Find new lenders as soon as possible.

�� Reduce debt through workReduce debt through work--out of existing out of existing

lender.lender.

�� Qualified turnaround professionals will have Qualified turnaround professionals will have

the relationships with new lenders and your the relationships with new lenders and your

existing lenders to facilitate this transaction.existing lenders to facilitate this transaction.

�� Examine every avenue of marketingExamine every avenue of marketing

�� Calculate ROI on eachCalculate ROI on each

�� Companies that have continued to market Companies that have continued to market

during down times have recognized over during down times have recognized over

240% more sales than those who stopped 240% more sales than those who stopped

marketing. marketing.

�� Be smart with your moneyBe smart with your money

�� Make it a financial decision not an emotional Make it a financial decision not an emotional

oneone

�� Weekly Cash Flow AnalysisWeekly Cash Flow Analysis

�� Monthly Profit & Loss StatementsMonthly Profit & Loss Statements

�� Sales Projections (CRM)Sales Projections (CRM)

�� Weekly MeetingsWeekly Meetings

�� ScorecardsScorecards

�� Share it all Share it all ““ It cannot hurt youIt cannot hurt you””

�� Imagine the following scenario:Imagine the following scenario:

�� You own your own Manufacturing Company You own your own Manufacturing Company

Supplying OEMs. Outatime LLC was founded Supplying OEMs. Outatime LLC was founded

by your father.by your father.

�� Sales are down 50% to $25MSales are down 50% to $25M

�� You are incurring losses and have negative You are incurring losses and have negative

cash flowcash flow

�� Trade Payables are stretched and critical Trade Payables are stretched and critical

vendors are refusing to delivervendors are refusing to deliver

�� Receivables are aging beyond the normal Receivables are aging beyond the normal

termsterms

�� Bank is exerting pressure due to collateral Bank is exerting pressure due to collateral

deficiency and poor performance. They Want deficiency and poor performance. They Want

$3.2M!!!$3.2M!!!

�� Bank did not know it was this bad because Bank did not know it was this bad because

you have failed to provide financials for over you have failed to provide financials for over

14 months.14 months.

�� You do not know if you can make payroll next You do not know if you can make payroll next

weekweek

�� $7M LOC on Receivables$7M LOC on Receivables

�� $2M Equipment Term Loan$2M Equipment Term Loan

�� $3.5M Real Estate mortgage to related Entity$3.5M Real Estate mortgage to related Entity

�� Trade payables are $1MTrade payables are $1M

�� A/R is down to $6.2MA/R is down to $6.2M

�� Long Term A/R of $600K is uncollectableLong Term A/R of $600K is uncollectable

�� Gross Margin has dropped from 32% to 21%.Gross Margin has dropped from 32% to 21%.

�� G&A costs have gone from 21% to 37%G&A costs have gone from 21% to 37%

�� You and your wife have personally You and your wife have personally

guaranteed all loans. (You have not told her guaranteed all loans. (You have not told her

about the problem.)about the problem.)

�� When you where twice the size you had 70 When you where twice the size you had 70

employees. Now at half the size you have 50 employees. Now at half the size you have 50

employees. employees.

�� You think it is your bankYou think it is your bank’’s fault ( What were s fault ( What were

they thinking lending me that money?)they thinking lending me that money?)

�� Obama gave all that money to the banks, I Obama gave all that money to the banks, I guess he forgot to tell them to lend it to me!guess he forgot to tell them to lend it to me!

�� Sure its slow, isnSure its slow, isn’’t it slow for everyone? t it slow for everyone?

�� What do they expect?What do they expect?

�� No one is buying cars! It is not my fault.No one is buying cars! It is not my fault.

�� If they want this place, they can have it!If they want this place, they can have it!

�� Bank agrees to fund $250K over formula on Bank agrees to fund $250K over formula on the Line of Credit.the Line of Credit.

�� Interest rates are going up immediately.Interest rates are going up immediately.

�� Owner must sell boat and put proceeds into Owner must sell boat and put proceeds into company. Owner to reduce rent to mortgage company. Owner to reduce rent to mortgage payment levels.payment levels.

�� Owner to reduce pay by 50%.Owner to reduce pay by 50%.

�� Owner agrees to maintain turnaround Owner agrees to maintain turnaround consultant onconsultant on--site for the entire six months site for the entire six months to help facilitate turnaround process and to help facilitate turnaround process and assure bank of proper reporting.assure bank of proper reporting.

�� Company agrees to seek alternative financing Company agrees to seek alternative financing

as soon as possible.as soon as possible.

�� Any deviation from plan will result in Any deviation from plan will result in

immediate escalation of agreement. immediate escalation of agreement.

�� Company signs forbearance agreement and Company signs forbearance agreement and

possibly several other documents that will possibly several other documents that will

give lender more control if continued give lender more control if continued

floundering.floundering.

�� 12 month format12 month format

�� Encompasses every aspect of companyEncompasses every aspect of company

�� Every company should use a detailed 13 week Every company should use a detailed 13 week sales/cash flow projection report.sales/cash flow projection report.

�� 12 month cash flow breakeven report should also 12 month cash flow breakeven report should also be developed and tied to 13 week version. be developed and tied to 13 week version.

�� Executive Management must be able to lead a Executive Management must be able to lead a team. Demagogue will not work. team. Demagogue will not work.

�� If you don't have a strong CFO or controller get If you don't have a strong CFO or controller get one. Financial Data is your friend.one. Financial Data is your friend.

�� Activity Based Costing should be utilized in Activity Based Costing should be utilized in evaluation and decision making processes.evaluation and decision making processes.

�� Scorecards must include all important Scorecards must include all important benchmarks to company. benchmarks to company.

�� Open book management should always be Open book management should always be

practiced.practiced.

�� Every process needs to be documented, Every process needs to be documented,

reviewed and shared with everyone.reviewed and shared with everyone.

�� All decisions must return a value to the All decisions must return a value to the

company.company.

�� You need everyone's help in the company to You need everyone's help in the company to

make it successful.make it successful.

�� These best practices should be utilized by all These best practices should be utilized by all

companies not just those in trouble. companies not just those in trouble.

�� A Turnaround engagement will result in one A Turnaround engagement will result in one

or more of the following:or more of the following:◦◦ Sale of the company or assetsSale of the company or assets

◦◦ Merger with another companyMerger with another company

◦◦ Debt is restructured and existing management Debt is restructured and existing management

team continues to run and operate company team continues to run and operate company

moving forward. moving forward.

◦◦ Bankruptcy Chapter 7 or Chapter 11Bankruptcy Chapter 7 or Chapter 11

�� ExperienceExperience

�� Ethics & ProfessionalismEthics & Professionalism

�� Reputation with CreditorsReputation with Creditors

�� Managerial SkillsManagerial Skills

�� Fee StructuresFee Structures

Member of the Turnaround Management AssociationMember of the Turnaround Management Association

Member of Michigan Banking AssociationMember of Michigan Banking Association