Key Tactics: Reinvigorating and Recharging Your Business

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Key Tactics Reinvigorating and Recharging Your
Business

• Alan Wink Amper, Politziner Mattia
• John Yoler- Sun National Bank
• Rothman Institute Family Business Forum
• September 23, 2009

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What Does it Mean to Reinvigorate and Recharge
Your Business

• Is the recession really over?
• Unease with small business right now. Business
  owners are nervous, retrenched and cautiously
  hopeful.
• Reports have shown small business optimism to be
  at its lowest level since the 1979 oil embargo.
• Small business is very often at the mercy of
  larger businesses and larger economic forces.
• Today small businesses need to keep hustling for
  business and wring out a little more savings by
  tightening the belt.
• These are indeed tough times for small business,
  but there are options that we would like to
  discuss.
• Reinvigorating and recharging your business means
  searching for strategies for success in lean
  times.

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Setting the Stage Is the Worst Behind Us?

• The current 2007 2009 recession while quite
  severe is no where near the severity of the
  1929-1932 or 1937-1938 depressions.
• We are experiencing a 3.8 decline in GDP,
  compared to over an 18.2 decline in 1937-1938.
• We are also experiencing today unemployment in
  the 9.7 range , compared to 25 unemployment in
  1932 and 20 in 1937-1938.
• The 2007-2009 economy is characterized by
  long-term unemployment, mounting real estate
  foreclosures, healthcare costs rising out of
  control, and an aging worldwide population
  driving government spending through the roof.
• No one really knows if the recession is over ,
  but there are reasons to be optimistic -
  Recessions historically set the stage for future
  growth Equipping more people with higher
  education and better technology has increased
  humanitys ability to solve difficult problems.
• Tough economic times tend to stretch the
  boundaries of entrepreneurialism. Half of
  todays Fortune 500 companies were founded
  during a recession or bear market
• Bloomberg example.
• Optimistic approach can help you and your company
  seize the opportunities that lie ahead.

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Cost of Capital

• Senior Debt 4 - 7
• Mezzanine Debt 15 - 22
• Equity 25 - ?

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Balance Sheet Strength Becomes Critical in Lean
Times

• Definition
• Lenders Rules of Thumb
• Collateral
• History of Profitability
• Management/Succession Planning
• Examples (Weak/Strong)

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Easy Money Can Hurt Your Business

• Once I was out of cash, I had to get back to
  doing business the right way Servicing clients
  well and working hard.

Fortune Small Business October 2009
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Lenders Rules of Thumb

• Background of business
• Business lines /products sold
• Management/ownership
• Customer base/concentrations
• Competition
• Suppliers
• Plants/facilities
• Significant events

• Banking Relationships
• Credit requested
• Balance sheet/leverage
• Collateral
• Trends
• Cash flow/debt service
• Strengths and weaknesses
• Owners personal financial strength/personal
  leverage

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Some Interesting Current Statistics

• 55 of CEOs surveyed in Q2 expect business
  conditions to improve in the next six months.
  This is up from 17 in Q1.
• Optimism Index developed by YouGov and RT
  Strategies based on US public opinion and daily
  economic and market forecast statistics on jobs,
  the stock market and economic growth predict the
  worst is behind us.
• Rail freight traffic is down, but the decline is
  easing.
• Median number of weeks unemployed decreased by
  almost 2.5 weeks since June.

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Strategies for Success in Lean Times

• It is still about Blocking and Tackling
• Grow the top line PROFITABLY
• Improve operational performance
• Reduce operating costs
• Involve and engage your people
• Reduce leverage on your balance sheet
• Opportunities for acquisitions of weaker firms

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Simple Financial Statement

• Sales
• Less Cost of Sales
• Gross Profit
• Less Operating Expenses
• Operating Income (EBITDA)
• Less Depreciation/Amortization
• EBIT
• Less Interest
• Income before Taxes
• Taxes
• Net Income

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Government Stimulus Can Create Opportunities
for Companies

• 787 billion stimulus program trickling its way
  down to the middle market.
• Stimulus dollars finding its way to NJ companies?
• Small businesses still need to balance S/T
  project needs with L/T business goals.
• Growth can be the great destructor of business.
• Firms sometimes rush to grow too quickly and
  build infrastructure and business models on sales
  projections that never materialize.
• Stimulus dollars are only temporary, so hiring
  decisions should be done cautiously.
• Stimulus is a short-term answer and businesses
  need to develop a long-term strategy.
• Consider investing profits from stimulus projects
  back into the business, to develop new products
  and services that might create more stable
  demand.

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Business Growth Matrix
Existing customers New customers


Existing Products/ Services
New Products/ Services
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Revenue Growth Strategies

• Look for new clients
• Spend more on advertising, PR, business
  development, buying leads, sales training
• Treat existing clients really well/Customer
  service
• Add line extensions
• Explore government contracts

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Reducing Operating Costs

• Zero based budgeting/elimination of non-value
  added activities
• Streamline , simplify and standardize
• Accountability /tracking of performance
• What gets tracked gets done
• Performance incentive programs
• Renegotiating costs with all vendors and
  landlords
• Review all vendor agreements for cost reduction
  opportunities
• Empower your managers with an across-the-board
  reduction in operating expenses (ie. 20)
• If you must cut employee benefits, cut those
  benefits least valued by your employees
• Reduce officers compensation
• Eliminate unprofitable business/product lines

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Retaining Good Employees in Tough TimesEmployee
Retention Strategies

• Engaged employees positively impact customer
  satisfaction and profitability.
• Empower employees to influence positive change
• Make staff feel involved and part of the
  decision-making process
• Continue professional development activities
• Increase the focus on team performance
• Key Understanding your employees motivation

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Reducing Leverage on the Balance Sheet

• Grow assets/shrink liabilities
• Infusion of equity capital/improvement in debt
  ratios
• Reduce debt through superior operating
  performance
• Reduce debt by lowering owners compensation
• Inventory turns/A/R turns
• Sell off parts of business repay debt
• Operating leases

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MA Opportunities

• Acquire competitors
• Acquire Gross Profit/Eliminate SGA
• EBITDA multiples are down/Sellers struggle with
  valuation
• Opportunity for acquisitions to be accreative
  immediately
• Everything is for sale at a price

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How Are Companies Represented Here Today
Performing?
UP DOWN FORECAST 2010
REVENUE
HEADCOUNT
DEBT LEVELS
ADVERTISING / MARKETING EXPENDITURES
CAPITAL EXPENDITURES
LOOKING FOR ACQUISITIONS
OUTSOURCING ACTIVITIES
Bullish or Bearish on the Economy?
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What Steps Has This Group Taken to Reinvigorate
and Recharge Their Business?

REVENUE GROWTH
REDUCTION IN OPERATING COSTS
EMPLOYEE RETENTION
REDUCING LEVERAGE
ACQUISITIONS / DIVESTITURES
TAKING ADVANTAGE OF STIMULUS
The material contained in this presentation is
for general information and should not be acted
upon without prior professional consultation.