Our Firm’s Experience In Guiding The Leaders Of Companies From Their Financial Breaking Point To Recovery

Our Firm’s Experience In Guiding The Leaders Of Companies From Their Financial Breaking Point To Recovery

Key Takeaways:

  • Attorney Dunn has helped his client-businesses through extremely challenging financial circumstances, often during extremely difficult financial times. His ultimate mission is to help client-companies make sound decisions based on their actual goals.
  • During re-structuring and reorganization, it is essential to pay attention to, validate, and remain transparent about the wants and needs of the owners and decision-makers. This will facilitate the process.
  • Generally, most companies fail within the first few years of operation. However, smaller, family-owned or closely held businesses—even those that have been operating successfully for years—tend to fail when the owners are faced with adverse life events.
  • Many small businesses fail because of problems with cash, customers, and/or employees. In small businesses, this sometimes happens when founders/owners who are very good at one thing (i.e., sales, marketing, technical skill, finances, management) are not as good at the other elements necessary to run a business.

Over the last 20 years, we’ve worked with dozens of businesses of all sorts, including businesses of various different sizes. However, most of our clients have been small-to-mid-size companies that are either closely held or family-run.

We have helped our client companies through some of the most challenging financial circumstances they’ve experienced – during the most difficult financial periods in recent history.

Sometimes these companies are facing macro events, like the economic recession of 2008. Sometimes they are facing more localized events specific to the company itself, like the death of the owner, or even the death of a board member. While something like the death of a board member may seem relatively small, it happens more than a lot of people think, and its impact can be far-reaching. Some of our client-companies have faced widespread repercussions upon the death of a board member, including a drop in their credit ratings and banks pulling their lines of credit, which are necessary lifelines for these companies.

In the end, we have literally dealt with many of the varied scenarios that could face a business, particularly a small-to-mid-size, closely held/family-run business. Our team has been able to give sound advice to our clients that help them make sound decisions based on what their actual needs are.

Why Did You Want To Write This Book On This Particular Topic, And Who Is It Intended For? What Do You Want Your Readers To Get From These Pages?

Over the last nearly 20 years, we have learned a few basic things.

One of the things we’ve learned is that in addition to bringing our expertise and advice to the table from a legal perspective, we can also approach our clients from a numbers-driven perspective. – the financials tell a big part of the story.

We’ve also learned that it is absolutely critical to any successful reorganization and re-structuring to understand the decision-makers involved, and to understand the mindset of those decision-makers.

Essentially, the business is something that they have poured themselves into. They are the founders, or the people that were put in charge by the founders (which is usually the case for second-generation owners). In any case, there are emotions attached to the business for them, and without their full participation and their willingness and ability to manage those emotions, there can be no reorganization or re-structuring.

Unmanaged emotions on the part of a founder or decision-maker in a company can completely derail what would otherwise be a successful reorganization. Exactly how this may manifest during a reorganization or re-structuring depends on the decision-maker in question. It could be something as simple as one thing that is so extraordinarily important from the decision-maker’s subjective perspective that they can’t let it go, and it brings the entire company down.

So, I would stress the importance of being transparent about the feelings of the decision-makers and allowing those feelings to be validated. This can help conserve and facilitate an environment that lends itself naturally to a more successful reorganization or winding down, depending on what the needs of the owners are.

How Common Is It For New And Existing Businesses To Fail, In Recent Times Especially?

If you investigate the statistics related to the lifecycle of small businesses, you will find that most companies actually fail within their first couple of years. There are several different reasons why this happens.

Even companies that have been operating successfully for years tend to falter or fail when faced with adverse life events. This is especially true when the companies involved are small companies.

When we’re talking about small-to-mid-size businesses, especially those that are held by just a few investors or a few family members, what you begin to see is an intertwining of the owners personal lives with the flow of the business.

With smaller businesses, there isn’t as much of a separation as you have in, say, multinational firms, or other large cap businesses. The sensitivity of the small-to-mid size business makes it more prone to failure in the face of adverse life events, depending on the needs and issues of the owners.

Why Do You Think Or See That These Businesses Are Failing Or Struggling? What Are The Most Common Reasons?

Today, I would say that one of the biggest reasons that businesses fail or struggle is cash flow.

Most often, what we typically see from a founder’s perspective is that they tend to be people who may have great technical expertise, or they have great sales expertise, or they may have great financial expertise, but they do not have all the necessary expertise and experience and capacity to track and keep up with all of the areas of the business that need to be tracked and kept up with.

As a result, they run out of one or more of the following things:

  • Cash
  • Customers
  • Employees

Often, cash flow problems go on to create problems with customers, as well as problems with employees. These are problems that tend to be interconnected, and that feed into each other and snowball out into larger issues.

Generally, people are specialists, and founders—especially of smaller companies—are asked to be generalists.

For example, you may have someone who’s excellent when it comes to technical things, and who understands their business very well—but that person might not have any clue about how to manage people or might not even have the right temperament for it. The opposite could be true just as easily.

Sometimes you have a financial wizard who can work magic with cash flow and profitability, but who has absolutely no clue on how to sell or market a product to save their life.

Sometimes you have an extraordinarily gifted people person who could sell water to a fish, but they don’t understand their numbers, soon the financial ratios for the business start to spin out of control and the business begins to crack under pressure. Before they know it, they’re looking at tremendous sales, but they’re not collecting their revenue as they should, and they run out of cash.

These are some of the more typical scenarios that we’ve seen.

For more information on Business Law In Michigan, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (248) 246-1166 today.