What Is Your Burn Rate?

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Burn Notice - Capital Burn Rate Computation - Business Life Expectancy Calculation - Douglas E. Castle

KNOW YOUR COMPANY’S CAPITAL BURN RATE

“It is imperative that your business be operated in accordance with a realistic budget that provides for coverage, in full, of your monthly capital ‘burn rate’.”Douglas E. Castle

The basic definition of Burn Rate (from the ever-notable and perpetually-edited Wikipedia) is as set forth below:

Burn rate is a synonymous term for negative cash flow. It is a measure for how fast a company will use up its shareholder capital. If the shareholder capital is exhausted, the company will either have to start making a profit, find additional funding, or close down.

The term came into common use during the dot-com era when many start-up companies went through several stages of funding before emerging into profitability and positive cash flows and thus becoming self-sustainable (or, as for the majority, failing to find additional funding and sustainable business models and thus going bankrupt). In between funding events, burn rate becomes an important management measure, since together with the available funds, it provides a time measure to when the next funding event needs to take place.

Some entrepreneurs and investors say that part of the reasons behind the dot-com bust was the unsound management and financial investor practices to keep the burn rate up, taking it as a proxy for how fast the start-up company was acquiring a customer base.

The term burn rate can also refer to how quickly individuals spend their money, particularly their discretionary income. For example, Mackenzie Investments commissioned a test to gauge the spending and saving behavior of Canadians to determine if they are “Overspenders.”

Aside from financing, the term burn rate is also used in project management to determine the rate at which hours (allocated to a project) are being used, to identify when work is going out of scope, or when efficiencies are being lost. Simply put, the burn rate of any project is the rate at which the project budget is being burned (spent).

In earned value management, burn rate is calculated via the formula, 1/CPI, where CPI stands for Cost Performance Index, which is equal to Earned Value / Actual Cost.

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Perhaps a better working business definition of “Burn Rate” can be found in the august annals of Investopedia, an excellent resource for business definitions:

DEFINITION of ‘Burn Rate’

The rate at which a new company uses up its venture capital to finance overhead before generating positive cash flow from operations. In other words, it’s a measure of negative cash flow.

INVESTOPEDIA EXPLAINS ‘Burn Rate’

Burn rate is usually quoted in terms of cash spent per month. For example, a burn rate of 1 million would mean the company is spending 1 million per month. When the burn rate begins to exceed forecasts, or revenue fails to meet expectations, the usual recourse is to reduce the burn rate (which, in most companies, means reducing staff).

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Sadly, neither of these protracted and elaborate definitions show us the true utility for knowing your company’s burn rate. According to the Douglas E. Castle explanation, “Burn Rate” means at least two different things and has several highly useful computations attached to it.

Firstly, your company’s Maximum Capital Burn Rate is the amount of money which you have available to spend per month over a given time frame in order to accomplish financial self-sufficiency or some other objective.

The perfect example would be in the case of a newly capitalized enterprise that had acquired $1,000,000.00 [this number was chosen arbitrarily] and had establish an 18-month time frame in order to be actively engaged in commerce at a profit with its new product. In this case, the Capital Burn Rate would be equal to the capital infused, divided by 18 months, or a Capital Burn Rate (actually “Maximum Capital Burn Rate”) of $55,555.56 per month.

Looking at this same situation in reverse, suppose the company’s management knew that it required $30,000.00 per month in order to sustain itself. It could then calculate its Capital Life Expectancy by dividing $1,000,000.00 by $30,000.00, or 33.33 months, after which the capital would have run out.

Secondly, your company’s Operating Burn Rate is simply the monthly fixed costs (in the aggregate) required in order to keep the company operating without incurring a loss. If your Operating Burn Rate ( based upon experience) were $20,000.00 per month and your company’s liquidity were a declining $1,000,000.00, your company’s Operating Life Expectancy would be $1,000,000.00 divided by $20,000.00, or 50 months.

The only way to reduce Burn Rate is to reduce or eliminate unproductive fixed costs.

Douglas E. Castle

Tags, Labels, Keywords, Categories And Search Terms For This Article:
Maximum Capital Burn Rate, Operating Burn Rate, Operating Life Expectancy, Business, Finance, Capitalization, Fixed Costs, Breakeven Analysis, Douglas E. Castle

NOTE: THE INFORMATION CONTAINED IN THIS ARTICLE SHOULD NOT BE CONSTRUED BY THE READER AS BEING LEGAL, FINANCIAL, TAX, ACCOUNTING, ECONOMIC OR INVESTMENT ADVICE. NO OFFERING OF SECURITIES OR OTHER INVESTMENT INTERESTS OF ANY TYPE IN ANY ENTITY IS MADE HEREBY, NOR IS A SOLICITATION FOR THE PURCHASE OF SECURITIES OR OTHER INVESTMENT INTERESTS OF ANY TYPE IN ANY ENTITY MADE HEREBY. THIS ARTICLE IS INTENDED FOR GENERAL INFORMATIONAL PURPOSES ONLY AND REPRESENTS THE VIEW OF THE AUTHOR ONLY.

THIS ARTICLE IS COPYRIGHT 2014 BY DOUGLAS E. CASTLE, WITH ALL RIGHTS RESERVED. ANY REPRODUCTION, TRANSMITTAL OR DISTRIBUTION OF THIS ARTICLE, EITHER IN WHOLE OR PART, IS UNAUTHORIZED AND MAY BE UNLAWFUL, UNLESS FULL ATTRIBUTION IS GIVEN TO THE AUTHOR AND ALL IMAGES AND LINKS IN THE ARTICLE REMAIN INCLUDED AND “LIVE.”


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Financial Guarantees, Sureties And Collateral

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The Three Parties To A Surety Bond Arrangement - Douglas E. Castle

 

FINANCIAL GUARANTEES, SURETIES AND COLLATERAL By: Douglas E. Castle

Obligees in a business relationship (such as contractors, subcontractors and sometimes mere payers) are frequently called upon by obligors (the parties for whom they are rendering a service, even if that service is merely making payment) to enhance or further bolster the likelihood that they will perform by bringing in either a third-party guarantee or by assigning the rights to some supplemental collateral (assets which can be liquidated in the unfortunate event that the contractor, payer or other obligor is unable to either perform or pay in full on a timely basis.

In a difficult economy, small- to medium-sized businesses are being called upon to provide these assurances by those parties hiring them or financing them. The tools or arrangements that are utilized to fulfill that need for additional “comfort” are financial guarantees (issued by financially strong third parties), surety bonds and supplemental collateral, which latter may be in the form of a lien on real estate, a hypothecation of marketable securities or any other assets which are not related to or involved in the subject transaction. These are, candidly, easier to obtain for smaller transactions (and newer or smaller companies) than are surety bonds or financial guarantees.

A very select and limited group of companies provide any of these hedges against an obligor’s failure, but any one of these “enhancements” could be the difference between obtaining business or being left out.

Following is a brief treatise on financial guarantees and surety bonds:

Definition: A non-cancellable indemnity bond, backed by an insurance company, which guarantees that principal and interest will be paid in compliance with the underlying contractual agreement or promissory note. Financial guarantee bonds are used by debt issuers as a way of attracting investors. The guarantee provides said investors with an additional level of security that the investment will be repaid/obligation will be fulfilled in the event that the securities issuer is unable to do so. The bond may benefit the principal by enhancing the principal’s creditworthiness thereby lowering the cost of financing. The guarantee “wraps” the security/promissory note with the insurer’s indemnity. Because the bond represents an UNCONDITIONAL GUARANTEE of compliance/repayment, a preferred interest rate is often offered.

There are three types of ‘financial guarantee bonds’. The first category is small “finite” financial guarantee. These are essentially performance bonds with a payment guarantee

element. They may look like license/permit bonds on their face. The bonds often have a small penalty (denomination) and are underwritten like standard surety bonds, with extra emphasis on the principal’s (applicant’s) liquidity and the insurer’s ability to recover any loss paid. Examples are lease bonds and energy broker obligations. The second category is bonding of structured finance, and the third public finance.

Bond denominations within these latter two categories can be enormous. As a result of severe losses in the financial guarantee sphere New York State passed the ‘ Appleton Law’ and quickly other insurance regulators’ policies regarding financial guarantee followed suit with administrative regulations restricting financial guarantee to only MONOLINE insurers. In the U.S. market, there are very few participants. AMBAC, Assured Guarantee, CIFG, Financial Guarantee Insurance Company, Radian, RAM Reinsurance, and Syncora Guarantee carry the majority of this market. These companies specialize in the selection of financial guarantee risks and the ongoing surveillance of their principals.

With some exceptions, financial guarantee insurers DO NOT PARTICIPATE IN PRIVATE, COMMERCIAL TRANSACTIONS. If you are engaging in a person-to- person or business-to-business contract and you seek to enhance your position with a financial guarantee, you WILL NOT OBTAIN A FINANCIAL GUARANTEE INSTRUMENT THROUGH STANDARD FINANCIAL GUARANTEE MARKETS.

Your only alternative is to approach a captive or specialty insurer based outside of the regulatory jurisdiction of the United States where carriers are not hampered by mono- line restrictions. Additionally, the few markets that will entertain private financial guarantee severely limit their exposure on each risk selected.

Financial guarantees for non-government issued securities, or asset-backed securities with very little worth DO NOT EXIST! If you are seeking a guarantee in the hundreds of millions of dollars, I recommend that you do not waste your time. You will not find one. Further, private financial guarantees are written with FULL COLLATERAL SECURITY. Financial guarantee insurers are not interested in promises of indemnity based on the speculation that your transaction, that your proposed project, will be successful, or on the ongoing profitability of your operation.

Financial guarantee bonds are considered to be a much higher risk than standard surety and fidelity products, therefore my due diligence must include a review of the proposed contract, the solvency and identity of the indemnitors, and the collateral that you wish to deposit to support the bond. Premiums are generally fifteen percent (15%) on face value per annum for those bonds up to one million, and ten percent (10%) on face value for those bonds in excess of one million dollars. Collateral security in the form of cash, letters of credit, or highly rated debt instruments (i.e., U.S. Treasury issues, notes, bills, warrants, and highly stable, publicly traded stock or bond issues) will be credited at one hundred percent (100%) of current market value. Unacceptable forms of collateral are REAL PROPERTY (although real estate might be considered by the obligee or lender to supplement or supplant a bond or other guaratnee in certain transactions) and ‘BLOCKED FUNDS LETTERS’.

And now a brief word about surety or financial guarantee bond “Ratings.”

When I receive requests for information about, or regarding the procurement of financial guarantee bonds, I am invariably asked about the carrier’s “rating.” To my knowledge, there are only three financial guarantee insurers with an A.M. Best rating which operate in the United States. Two of those entities are absolutely unwilling to write bonds for private contracts, one will consider them. The former two will only issue financial guarantee bonds to municipalities that collateralize the obligation with bonds or other instruments issued by that municipality, leaving only the third as a “rated” carrier from whom I receive authority.

Given the severe restrictions of financial guarantee to mono-line insurers, carriers that wish to engage in financial guarantee business in addition to other insurance lines are often forced to move to a domicile without those restrictions. Bermuda, Seychelles, the British Virgin Islands, and the Dominican Republic are currently the choice destinations for offshore captives.

There is no ‘automatic’ rating system for non-U.S. admitted carriers. In order to obtain an A.M. Best rating an insurer must ordinarily have certain ‘seasoning’ minimums during which time they are under market surveillance. The carrier’s financial statements and books must be open to the rating agency. These requirements cause problems for offshore captives.

First, by entry (admission) into the U.S. market, a carrier subjects itself to U.S. taxes, precisely one of the reasons for which insurers DO NOT enter. Second, not all insurers wish to share their financial statements with a market surveillance group. So, although I may be able to pair a principal with an A.M. Best rated carrier, you will have a great deal of difficulty identifying any other “rated” entity that will write these undertakings. Unrated carriers WILL provide audited financial statements demonstrating their solvency, and their current certificate(s) of authority.

I hope that my information is helpful in understanding this type of instrument. Please keep in mind that this market has few participants. They do not and will not deviate from the full collateral rule.

Call To Action: Understanding that neither I nor my management consulting companies provide or are licensed brokers for these types of guarantees or bonds (although we do frequently engage in arranging to provide for supplemental or substitute collateral [i.e., in the form of bank deposits, treasury securities, publicly-traded stock and real estate] with which to bring transactions into indirect or derivative compliance with the “full collateral” or “full coverage” rule, or to eliminate the need for surety or financial guarantee bonds entirely), please contact us at http://bit.ly/CASTLEDIRECT, and we’d be delighted to discuss your needs and your best choices for solutions. We pride ourselves on being creative – as we must when working hand-in-hand with small- to medium-sized client companies in this difficult economic climate.

Douglas E. Castle

NOTE: THE INFORMATION CONTAINED IN THIS ARTICLE SHOULD NOT BE CONSTRUED BY THE READER AS BEING LEGAL, FINANCIAL, TAX, ACCOUNTING, ECONOMIC OR INVESTMENT ADVICE. NO OFFERING OF SECURITIES OR OTHER INVESTMENT INTERESTS OF ANY TYPE IN ANY ENTITY IS MADE HEREBY, NOR IS A SOLICITATION FOR THE PURCHASE OF SECURITIES OR OTHER INVESTMENT INTERESTS OF ANY TYPE IN ANY ENTITY MADE HEREBY. THIS ARTICLE IS INTENDED FOR GENERAL INFORMATIONAL PURPOSES ONLY AND REPRESENTS THE VIEW OF THE AUTHOR ONLY.

THIS ARTICLE IS COPYRIGHT 2014 BY DOUGLAS E. CASTLE, WITH ALL RIGHTS RESERVED. ANY REPRODUCTION, TRANSMITTAL OR DISTRIBUTION OF THIS ARTICLE, EITHER IN WHOLE OR PART, IS UNAUTHORIZED AND MAY BE UNLAWFUL, UNLESS FULL ATTRIBUTION IS GIVEN TO THE AUTHOR AND ALL IMAGES AND LINKS IN THE ARTICLE REMAIN INCLUDED AND “LIVE.”

http://www.LinkedIn.com/in/douglascastle

http://DouglasECastleBlog.com

http://DouglasECastleConsultancy.com

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This site is the Management Consultants' and Chief Reconstruction Officers' best all-industry guide to analyzing, diagnosing, devising a strategy, creating either an Action Plan or an Emergence Plan and overseeing and monitoring the successful implementation of either in order to ensure the client organization's optimal, sustainable profitability. These plans are always made scalable to accommodate the size and needs of the client, whether it is fast-growing young company with an aggressive and ambitious agenda, or whether it is an older, larger, well-established business which is experiencing problems or which is at a crucial decision making point in its evolution as an entity, and which requires sound advice (and often implementation oversight and assertive "hands-on" assistance in the form of a powerful third-party representative agent or a an expert in the art of negotiation as its appointed "point person") regarding its next steps. In the alternative, Douglas E. Castle is expert at helping fast-track, rapidly emerging companies to growth through acquisitions, mergers, licensing, branding and both domestic and international strategic joint ventures to access better, more efficient supply chain sourcing and to open up wider global markets to dramatically increase the scope of possible new revenue opportunities.


OptumRx And United Health Group Think We’re Stupid.

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IT'S ABOUT THE NUMBERS...

OptumRx and its parent company think that they can merely pacify a few of the noisemakers and ignore the rest of the unspeakably abused herd. I don’t like when someone calls me stupid — Or worse, when they presume that I am… How about you? I’ve been assaulting them in the Court of Public Opinion, which means a great deal to me – It is marketplace justice — it is not bribed, bought or sold — and the sentence is carried out by the customers.

OptumRx has the worst customer service record of any of the firms within its industry in the entire United States! And since they do not care, we have to make them care.

OptumRx Victim Parody - Douglas E. Castle  - OptumRx Must Die

Here’s The Latest!

OptumRx Responds To Douglas E. Castle Via Twitter

@OptumRx Response To @DouglasECastle1 Dated December 21, 2013

My Response To OptumRx Is Dated January 29, 2014

THE CORRESPONDENCE RELATES TO MY POST “OPTUMRX MUST DIE

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NOTE 1: These people at OptumRx have all of the morality of monopolist-in-process Comcast (XFINITY) Cable, but in this mail in pharmaceutical racket, they are tampering directly with patient lives — literally. If you haven’t already done so, please take the Quick Survey by going to the hyperlink in the next paragraph.

NOTE 2: Been mistreated by OptumRx? Please help us by filling out a fast survey at the end of this article. http://douglasecastleblog.com/2014/01/05/optumrx-must-die-mailorder-pharmacy-monstrosity/ We need you! Thnx. #RF.  If we receive enough compelling, emotion-packed responses to our Quick Survey, I will send a petition to the leaders of all of the Regulatory, Legal And Consumer Affairs bodies having influence in such matters, and we’ll either 1) Put OptumRx up to the light of intense scrutiny and possible punishment (including the loss of the ability to conduct their feeble excuse for a “business,”, or 2) We’ll get them to mend their incompetent, fraudulent and depraved ways, and win their long-suffering customers better care and cash compensation for the hardship which they (WE!) have had to endure.

Below is the Twitter exchange between the ignominious OptumRx (and their publicly-traded parent company, United Healthcare/ United Health Group). They certainly enjoy control, and love the idea of calling a country-wide problem an “isolated Consumer Matter.

OptumRx Twitter Correspondence

It was my intention to get the full name, full title and a direct telephone line of an executive at either OptumRx or United Health Care (see above).

Instead, what I received from the cowardly, guilty pukes at United this afternoon within only minutes of my sending my Twitter terms was  simply a telephone voice mail from “Christine” (no last name, no title), from United Health Group’s Consumer Affairs Division indicating that she wanted to ‘help me resolve this issue‘, and that I could telephone her at 800-842-2656, press prompt 1, and then speak with her at her direct extension, which is 3042511. I’ll give her the opportunity to speak with me, but I smell a delaying tactic combined with a smokescreen. My suspicion is that I will have to speak with one of her titled superiors (with a last name, too), in order to settle this matter.

They are trying to insulate themselves from dealing with me directly.

I’ll not only keep you posted, but I’ll see to it that OptumRx, and its incredibly greedy, publicly-traded parent get their problems fixed an that things are made right — for all of us. And if you haven’t done it, take the Quick Survey (see the earlier part of this letter for the link) — if we get enough blood, bile and verifiable complaints — we will circulate a petition to all of the persons of influence at all of the agencies whose attention this may require.

Douglas E. Castle

http://DouglasECastleBlog.com and http://DouglasCastle.com

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D.E.Castle's Daily Business Advisory Wrap-Up.
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This site is the Management Consultants' and Chief Reconstruction Officers' best all-industry guide to analyzing, diagnosing, devising a strategy, creating either an Action Plan or an Emergence Plan and overseeing and monitoring the successful implementation of either in order to ensure the client organization's optimal, sustainable profitability. These plans are always made scalable to accommodate the size and needs of the client, whether it is fast-growing young company with an aggressive and ambitious agenda, or whether it is an older, larger, well-established business which is experiencing problems or which is at a crucial decision making point in its evolution as an entity, and which requires sound advice (and often implementation oversight and assertive "hands-on" assistance in the form of a powerful third-party representative agent or a an expert in the art of negotiation as its appointed "point person") regarding its next steps. In the alternative, Douglas E. Castle is expert at helping fast-track, rapidly emerging companies to growth through acquisitions, mergers, licensing, branding and both domestic and international strategic joint ventures to access better, more efficient supply chain sourcing and to open up wider global markets to dramatically increase the scope of possible new revenue opportunities.


OptumRx Must Die! Mailorder Pharmacy Monstrosity – Quick Survey

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OptumRx Must Die. They Are One Of The Most Notorious Enterprises In The United States

Mail order pharmacies are supposed to be a more efficient way of getting medications to patients more easily, and at lower cost. They also allow the mail order firms (such as the notorious, odious, inept and malevolent OptumRx — formerly a loser called “Prescription Solutions” — later acquired by the much-maligned malignancy of a publicly-traded Healthcare Colossus known as United Healthcare) to use their best efforts to maximize their profits by sourcing all of the medicines through pharmacies located thoughout the United States which offer the lowest prices, and often the worst quality and service.

Note:  TAKE QUICK SURVEY at BOTTOM OF POST

It is safe to say that OptumRx has the worst consumer satisfaction and service record of any mail order pharmacy (or for that matter, of virtually any service business) in the history of the United States. Listing things simply, the imbeciles at OptumRx, including the first line of “representatives,” two levels of supervisors and the invisible or permanently vacationing executives:

  • Cannot ever seem to get medications delivered on time, regardless of the threat to the patient’s life;
  • Are too stupid to understand basic requests and give straight answers to direct questions;
  • Lie;
  • Threaten to hang up on customers who are irate because one of the unevolved cretins refuses (citing a non-existent law, or some cock-and-bull ‘company policy’ of convenience) to mail a refill of a controlled substance until the patient had run out of the medication totally, and then was told he’d have to wait for seven to ten days before he’d get his renewal in the mail!;
  • Tortured and tormented senior citizens who are helpless to deal for hours on the telephone between the flying monkeys operating OptumRX, their prescribing physicians, and the postal service;
  • Had people wind up hospitalized, at risk of permanent injury or death — these victimized people are primarily elderly or chronically ill and in need of constant, continuous medication, which OptumRx simply cannot or will not provide;
  • Send out the wrong medications, risking patient fatalities;
  • Fail to timely call patients when there are “difficulties” in filling their orders correctly, timely or in the necessary amounts;
  • Are never held accountable for the havoc that they wreak on the lives of the patients who must endure an endless series of phone waiting times, conversations with non-sentient creatures and their knuckle-dragging “supervisors.”;
  • Experience terribly inconvenient computer problems, outages, or upgrades when the volume of request traffic is at its peak — for example, at the beginning of the year… ;
  • Never show up as the demonic miasma that they are in the mainstream media, which is rumored to occasionally ‘bend a bit’ to accommodate Big Pharma, Big Oil, Governmental Institutions and Agencies, and [shockingly!] advertisers.

Why is nothing being done? Isn’t there an injustice that should be addressed by numerous consumer advocacy organizations, both private and government-funded (in all fairness, some are taking some action, albeit feeble), Insurance regulatory agencies (perhaps the Commissioner of Insurance), Health organizations, Eldercare advocacy groups….

Just Google search OptumRx and you’ll find a plethora of complaints, horror stories, and legal actions – one group, ConsumerWatchdog.org is sponsoring a class-action suit against OptumRx and perhaps its parent. Better still, Google (without the quotes) such goodies as “OptumRx + complaints,” “OptumRx + evaluations,” “OptumRx + customer service,” OptumRx + lawsuits,” “OptumRx + reviews,” or  “OptumRx +fraud.”  You’ll get names, telephone numbers and endless tales of woe. Following are some hints of the sentiment regarding this “wonderful, cost-saving, service-providing, polished turd bastard offspring of  United Healthcare:

http://reviews.gethuman.com/customer-reviews/OptumRx-formerly-Prescription-Solutions-Inc/

http://www.consumeraffairs.com/rx/prescription_solutions.html

“This pharmacy is horrible and lies to customers. I ordered medication for my mother on 12/20/2013 and was promised it would be delivered by Jan 2nd, 1014. I had called them after noticing their website said the order was unprocessed. Instead it is now Jan 3rd and the website still shows the order as unprocessed. I called again and after being put on hold for 5 minutes, the rep claimed that the Dr.’s prescription fax had only arrived today. This was an emergency order and I had ordered a week’s worth of “intermediate” medication for her based on the arrival date promised by Optum Rx. Do I have any authority to sue them if their inability to get medication out on time affects her health adversely?” – Carol of Seattle, WA on Jan. 3, 2014

And how about this review from an insider at OptumRx?

“Was a customer service advocate for OptumRx. The main concern in the company was numbers, not service. Doing additional work to make sure a member got his/her medicine in a timely manner was last on the list. You are not allowed to do additional follow up, which made members have to call back multiple times, which was unnecessary. I can totally relate to the irate callers and their situations.

I was terminated because of an irate caller with a situation beyond my control. Placed the member on hold after going back and forth with her about her order. Because she hung up and had to call back, complained and said I was rude. I was terminated, mind you I never had any problems with the service I provided, no attendance issues, always helping. None of that mattered. Two thumbs down for OptumRx.” – Jane of Artesia, CA on Jan. 3, 2014

Indeed, these people are receiving horrific reviews everywhere you turn. Do you enjoy charts, graphs, pictures and visual aids when it comes to ratings and performance? Sure you do! Here y’all go:

Consumer Affairs Ratings For  OptumRx

Please refer to LINKS4LIFEALERTS for more healthcare-related information.

I personally believe that we, as customers of this institution of depraved indifference to human suffering, should issue a petition citing our grievances, and upon its completion (we’d need at least 1,000 names of actual victimized patients who are registered voters) which should go to all of the following persons at the following organizations:
President Barack Obama, The White House;
The President And Members Of The Board Of Directors Of OptumRx;
The President And Members Of The Board Of Directors Of United Healthcare;
The Respective Commissioners Of Insurance Of Every State;
The Chief Information Officer Of The Federal Trade Commission
The Attorney General Of The United States Department Of Justice
The Secretary Of The United States Department Of Commerce
The Chief Information Officer Of The Department Of Health And Human Services
The Director Of The Federal Bureau Of Investigation
The Chairperson Of AARP, and perhaps some other persons in positions of influence as well as widespread publication (via release) of the petition to the printed and televised media.

I would not propose this approach if I thought that there were any other means of obtaining relief from this uncontrolled and unconscionable abuse. It will not be resolved by hordes of abused and injured individuals putting their individual stories up on the Internet.


BEFORE WE PREPARE THE PETITION, PLEASE TAKE THE FIRST STEP AND FILL OUT THE FOLLOWING QUICK SURVEY.

Please take a few moments to answer this Quick Survey. We will be posting the results to this website and to the social media at regular intervals. It is our objective to get no less than a total of 1,000 responses ASAP. After that, if my Public wants that Petition, it will be drafted and sent all over the country.

http://douglascastle.polldaddy.com/s/have-you-had-experience-with-optumrx

Douglas E. Castle

—————

Here is some additional commentary regarding OptumRx and its deplorable service, courtesy of Contextly:

https://app.contextly.com/sites/douglasecastleblog/?page_id=662&author=1&edit_snippet_id=#easyXDM_linker_channel_provider

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This site is the Management Consultants' and Chief Reconstruction Officers' best all-industry guide to analyzing, diagnosing, devising a strategy, creating either an Action Plan or an Emergence Plan and overseeing and monitoring the successful implementation of either in order to ensure the client organization's optimal, sustainable profitability. These plans are always made scalable to accommodate the size and needs of the client, whether it is fast-growing young company with an aggressive and ambitious agenda, or whether it is an older, larger, well-established business which is experiencing problems or which is at a crucial decision making point in its evolution as an entity, and which requires sound advice (and often implementation oversight and assertive "hands-on" assistance in the form of a powerful third-party representative agent or a an expert in the art of negotiation as its appointed "point person") regarding its next steps. In the alternative, Douglas E. Castle is expert at helping fast-track, rapidly emerging companies to growth through acquisitions, mergers, licensing, branding and both domestic and international strategic joint ventures to access better, more efficient supply chain sourcing and to open up wider global markets to dramatically increase the scope of possible new revenue opportunities.


Running Behind? You’re Mismanaging Time And Tasks

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The Myth Of Multi-Tasking.

 

 

 

 

 

 

 

 

 

 

 

I’m guilty! I am so backlogged with tasks that my Native American name (no offense to any member of any Native American tribe actually out there in Indian Country) should be “Running Behind.” Mismanaging my time and tasks is obviously a problem from which I suffer. Just imagine if a company were comprised of individuals, just like myself who were managing their time and tasks like a bunch of weasels on treadmills? Or like a one-armed paperhanger? Or like a glassblower with the hiccups? [Had enough? Well, I’ll stop now. But remember: My blog, My rules.]

Here are my mistakes in terms of time and tasks allotted:

1) I have failed to delegate those tasks that I could have given to others. I’ve clearly taken on too much for myself;

2) I am multitasking instead of rotational tasking – in the case of the former, I use a peripheral focus on a number of things and perform very poorly – in the case of the latter, I focus on one task for a limited time (using a timer on my computer desktop), then proceed to the next task….it’s an installment approach to keeping from burnout while accomplishing everything on my to-do list;

3) I have unrealistic expectations of myself;

4) I am obsessed with control and not even interacting with other persons around me — how could I ever be an effective manager;

5) I am so enmeshed in my own personal tornado that I can’t possibly be paying any attention to the larger picture of my position in the company or project and the changes in the environment around me (a fire, a meteor shower, an invasion by an “Occupy” group.

The Solution? I’ll Sum It Up:

  • Delegate;
  • Rotate tasks – don’t multitask;
  • Switch tasks at regular intervals;
  • Take frequent brief breaks — walk around and see what is happening;
  • Stop beating yourself up if you don’t finish everything on time, or if you fail to complete all of your tasks — in industrial and behavioral psychology, we know that your general mood, your work environment, and your feelings about your own perceived “shortcomings” are more damaging to you and to the company.

If you’re not managing yourself, emotionally, physiologically and in terms of time and tasks, you will damage a precious Human Asset and Reduce the Collective Creativity and synergy that make a company’s output far greater than the sum of the respective outputs of the individuals who comprise its employees and contractors.

Jugglers Make My Best Managers - Just Kidding....

Douglas E. Castle

Some more material, courtesy of REPOST (I would, in particular, take a long, hard look at the last entry; I wonder if there might be some confusion between cause and effect:

Solo Developer Time Tracking And Invoicing System
Unique Visitors to Your… — Jul 08 2013
Solo Developer Time Tracking And Invoicing System Product Review This is a tool for solo freelance developers guaranteed to improve client satisfaction. Turn clients into repeat customers. Product…
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Trend Micro real-time threat management solutions improve breach protection, reduce time-to-discovery, minimize containment costs and combat advanced persistent threats CUPERTINO, Calif., June 29,…
New Project Management Software Integrates Scrum and Cmmi Level 5
SBWire — May 09 2011
Helsinki, Uusimaa — (SBWIRE) — 05/09/2011 — Task Trimmer has released version 4.7.6 of The Guide, a software that automates intellectual work. Version 4.7.6 contains a completely new Scrum process…
Husbands With More Masculine Chores Have More Sex
NewsLook — Jan 31 2013
Video News by NewsLook A study shows married men who spend more time doing traditionally female chores have less sex than men that don’t do as many of those chores. Jen Markham explores if the…[Author’s Note: I’d better finish up here so that I can kill a bison and drag it home to my cave so that I can share it with my wife. Red or white wine with bison? Anyone know?]
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This site is the Management Consultants' and Chief Reconstruction Officers' best all-industry guide to analyzing, diagnosing, devising a strategy, creating either an Action Plan or an Emergence Plan and overseeing and monitoring the successful implementation of either in order to ensure the client organization's optimal, sustainable profitability. These plans are always made scalable to accommodate the size and needs of the client, whether it is fast-growing young company with an aggressive and ambitious agenda, or whether it is an older, larger, well-established business which is experiencing problems or which is at a crucial decision making point in its evolution as an entity, and which requires sound advice (and often implementation oversight and assertive "hands-on" assistance in the form of a powerful third-party representative agent or a an expert in the art of negotiation as its appointed "point person") regarding its next steps. In the alternative, Douglas E. Castle is expert at helping fast-track, rapidly emerging companies to growth through acquisitions, mergers, licensing, branding and both domestic and international strategic joint ventures to access better, more efficient supply chain sourcing and to open up wider global markets to dramatically increase the scope of possible new revenue opportunities.


Horizontal Integration: Efficient Combination

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Cells With Ambition

Horizontal Integration not only can save an overly cost-burdened business, but it can be a means to rapid growth for each and all of the participants in the transaction.

Horizontal integration is simply a process where competitors (though they might not be selling the exact same product or selling into the same exact marketplace) or sellers of complementary or non-conflictory products (or services) at the same stage in their corporate development join forces through a merger or acquisition (a combination transaction) in order to collaborate and produce synergy for their mutual benefit. Horizontal integration is not only an efficiency engine, but it is also a means by which smaller companies can grow rapidly, in a sort of modular fashion, and increase their portfolio of products (or services) and greatly increase and diversify their aggregate customer base.

The analogy that I’ve heard regarding horizontal integration combination transactions (sometimes actually in either a series or a free-for-all “come together”) is that smaller, more competitive but under-evolved companies “circle their wagons to ward off the effects of recession, too high a fixed-cost hurdle, or a one-product non-diversified model.”

An explanatory picture follows, which sums up the benefits of combination versus competition quite nicely. The ironic fact is that through the process of horizontal integration, two or more marginally profitable (and barely self-sustaining) companies can combine and become a winner, not unlike connecting all of the pieces of a once-scattered jigsaw puzzle.

The one clarification required here is that the firms involved in a combination don’t have to be in the exact same business, or even in competitive positions — the key is that these combination usually involve firms at the same same stage of development and with the same areas of vulnerability….and many of the same needs.

HORIZONTAL INTEGRATION - Competitors Combine To Create Multiple Synergies - Douglas E. Castle

 

 

 

 

 

 

 

 

 

 

 

 

In sum, the two principal reasons for competitors to combine and become one larger “combination” entity (aside from the economies of scale in dealing with suppliers and in pricing goods or services out to customers to snatch up even more of the marketplace and possibly achieve a greater dollar size per combination customer order) are:

1) To increase and diversify revenues – uniting instead of fighting; and,
2) Reducing fixed costs by eliminating redundant expenditures on personnel and processes.

The tighter that credit becomes, and the more price-sensitive customers become (as in a recession), the more conducive the marketplace economy is to this combination  strategy. Competition gives way (in atomistic struggling firms) to combination, and combination ultimately can lead, if unchecked, to monopolies. But that is a subject for another day.

Horizontal integration is one of the simplest and most effective non-organic growth strategies for every company brought into the transaction.

Douglas E. Castle

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D.E.Castle's Daily Business Advisory Wrap-Up.
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This site is the Management Consultants' and Chief Reconstruction Officers' best all-industry guide to analyzing, diagnosing, devising a strategy, creating either an Action Plan or an Emergence Plan and overseeing and monitoring the successful implementation of either in order to ensure the client organization's optimal, sustainable profitability. These plans are always made scalable to accommodate the size and needs of the client, whether it is fast-growing young company with an aggressive and ambitious agenda, or whether it is an older, larger, well-established business which is experiencing problems or which is at a crucial decision making point in its evolution as an entity, and which requires sound advice (and often implementation oversight and assertive "hands-on" assistance in the form of a powerful third-party representative agent or a an expert in the art of negotiation as its appointed "point person") regarding its next steps. In the alternative, Douglas E. Castle is expert at helping fast-track, rapidly emerging companies to growth through acquisitions, mergers, licensing, branding and both domestic and international strategic joint ventures to access better, more efficient supply chain sourcing and to open up wider global markets to dramatically increase the scope of possible new revenue opportunities.


Sunk Costs: Watering Dead Flowers – Emotion Versus Business Logic

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Sunk Costs - Emotional Attachments Which Cause Us To Continue To Invest Despite The Apparent And Growing Losses.

 

 

 

 

 

 

 

 

 

 

 

 

Sunk costs are wasted, and often recurring expenditures on a purchase, program, idea or business campaign which, by all rational means is either dead (unproductive) or doomed to failure, Yet we persist in throwing good money after bad either because our emotions or egos want so badly too prove our initial ideas right, or because we have invested such a significant sum that we are irrationally thinking that a few more dollars might “turn it around” – or, as my British friends call it, the “in for a penny, in for a pound,” mindset.

Sunk costs are emotionally unaccepted losses. They represent the triumph of Human psyche over sound business policy. If you have some of theses fiscal black holes embedded in your budget you are going to compromise your subsistence, and possibly miss out on opportunities (the Opportunity Cost is the “if only we could have”: cousin of the Sunk Cost); you will need an objective outsider to identify them for you, and to help you to allow logic to triumph over fragile sentiment. In my practice I’ve disliked having to undertake this repair the most — I invariably have to be as much of a psychologist as a restructuring or strategic planning consultant.

The best way to avoid these anchors to business failure is to learn to draw two lines:

1) What is the absolute maximum you’ll spend, without exception. Limit your fiscal exposure by a rule established early in the game; and,

2) What is the maximum time that you are willing to wait to see a definable, quantifiable result.

If you can establish and live by these two parameters, you and your business will have a far better chance to survive and thrive. I would much rather establish these policy guidelines for a growing company than to have to walk blindfolded through a minefield of voracious pet projects.

Douglas E. Castle

 

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This site is the Management Consultants' and Chief Reconstruction Officers' best all-industry guide to analyzing, diagnosing, devising a strategy, creating either an Action Plan or an Emergence Plan and overseeing and monitoring the successful implementation of either in order to ensure the client organization's optimal, sustainable profitability. These plans are always made scalable to accommodate the size and needs of the client, whether it is fast-growing young company with an aggressive and ambitious agenda, or whether it is an older, larger, well-established business which is experiencing problems or which is at a crucial decision making point in its evolution as an entity, and which requires sound advice (and often implementation oversight and assertive "hands-on" assistance in the form of a powerful third-party representative agent or a an expert in the art of negotiation as its appointed "point person") regarding its next steps. In the alternative, Douglas E. Castle is expert at helping fast-track, rapidly emerging companies to growth through acquisitions, mergers, licensing, branding and both domestic and international strategic joint ventures to access better, more efficient supply chain sourcing and to open up wider global markets to dramatically increase the scope of possible new revenue opportunities.


Objectivity And The Business Turnaround

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Can You Identify The Turnaround Consultant - Douglas E. Castle

 

Evaluating a business’ situation and what should be done to further its best interests requires dedicated time, objectivity, emotional detachment (those latter two are different  — objectivity comes from clear vision, and a grand, experienced perspective while emotional detachment comes from not being emotionally constrained from sacrificing any sacred cows, or offending anyone), and the experience and expertise of someone who has lived through a large number of these types of situations previously.

You need a tactical and strategic specialist upon whom you can truly rely. And you are already frightened that a stranger will compromise or destroy things which you have emotionally invested in. Interestingly, this very fear and attachment are the factors that keep leaders from leading the great businesses which they’ve built in moments of either crisis or critical decision.

Your business is in dire straits. You don’t know quite when it happened but your business is hurting: cash flow is very then, both fixed and variable costs seem to be on the rise, and your regional managers no longer seem motivated beyond their biweekly paycheck. You wish that you could stop everything that you’re doing and spend a few weeks examining the business in detail, but you are 1) too busy and involved in the business process and 2) not at all objective. You lack time and objectivity — and to top it off you are too emotionally involved with the business to make the changes that might have to be made. You and your attorney conferred with me, and came to the conclusion that you needed a Turnaround Consultant, and asked if I had an interest in the engagement. I am at your offices this morning, because as good a visionary, leader and hands-on manager as you are, you lack time, objectivity and the emotional detachment necessary to be effective in doing what must be done.

It requires time, objectivity and emotional detachment to do what has to be done for a business at any critical point in its evolution: whether that is averting financial disaster; contemplating adding a new product or service; thinking about outsourcing or using virtual office services to cut your staffing requirements (and the expense which comes along with having a full-time employee — now close to 37% on average of the employee’s base salary in most corporate cases); contemplating developing a virtual export or import division; evaluating a merger opportunity with a competitor in your industry who is significantly larger than you are; evaluating combining your business with you largest supplier; thinking of recapitalizing through either a private placement of equity interests, a public offering of securities, a deal with a private equity firm; a “guaranteed” public offering of your company‘s common shares through an investment banking firm; or, signing on for a large line of credit at seemingly good terms with an overseas firm out of the Middle East which only wants a 7% equity stake in your company.

When a business is at a critical inflection point in its evolution, life cycle or critical path, the key individual cannot necessarily trust or confide in anybody except for his or her lawyer or his or her accountants — but these professionals are limited in their scope of practice and expertise.  The person whom you seek is usually referred to you by your legal counsel or perhaps by your independent accounting and auditing firm — and he will have those attributes necessary to guide you past that inflection point that we spoke of earlier:

It’s at these times, whether the decision involves avoiding a disaster or acquiring another firm in order to make a giant step in your business volume and diversification (not to mention the increase) in revenue sources that I feel delighted to be needed.

Thank you for reading me, and for circulating my posts through your ever-growing social media channels.

Douglas E. Castle


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Perspective Is Wisdom - Large
D.E.Castle's Daily Business Advisory Wrap-Up.
Skim It. But DON'T MISS It.
This site is the Management Consultants' and Chief Reconstruction Officers' best all-industry guide to analyzing, diagnosing, devising a strategy, creating either an Action Plan or an Emergence Plan and overseeing and monitoring the successful implementation of either in order to ensure the client organization's optimal, sustainable profitability. These plans are always made scalable to accommodate the size and needs of the client, whether it is fast-growing young company with an aggressive and ambitious agenda, or whether it is an older, larger, well-established business which is experiencing problems or which is at a crucial decision making point in its evolution as an entity, and which requires sound advice (and often implementation oversight and assertive "hands-on" assistance in the form of a powerful third-party representative agent or a an expert in the art of negotiation as its appointed "point person") regarding its next steps. In the alternative, Douglas E. Castle is expert at helping fast-track, rapidly emerging companies to growth through acquisitions, mergers, licensing, branding and both domestic and international strategic joint ventures to access better, more efficient supply chain sourcing and to open up wider global markets to dramatically increase the scope of possible new revenue opportunities.


Cure “Cash Crunch”: Increase Cash Flow And Liquidity

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Cash Flow's Thin - Feeling Boxed In - Douglas E. Castle - DouglasECastleBlog.com - cash crunch

A temporary cash crunch situation is something that occurs in the ordinary course of business in most every organization, especially when the business is of a seasonal nature or when the businesses is in a rapid stage of growth, i.e., inundated with purchase orders but without sufficient cash to fill them and to also pay recurring expenses. But if a cash crunch situation is chronic, a diagnosis of the reason must be made, and appropriate actions must be taken. This article will give you the ability to do both.

Bear in mind that when I speak of revenues, I mean total sales, both as computed on the cash basis and the accrual basis, but when I speak of expenses, I actually mean cash outflows of every nature. Throw away the accounting and auditing textbooks for just a bit so that we can deal with bare bones economic reality. Also by current, I mean as either generated or paid in the ordinary course of operations.

Preliminary Feasibility Analysis:

Most every enterprise experiences a period or periods of cash crunch, especially if those businesses are either seasonal or rapidly-growing companies which are generating purchase orders, but do not have adequate cash to fill them while still meeting their obligations, such as payroll, occupancy and the like. There are remedies for both of these situations because they are either predictable or can be financed with short-term debt to enable them to either withstand the “tight season” or to let their cash flow catch up with their market demand.

If cash crunch is chronic, and is an ongoing problem, there is something wrong with the business on a fundamental level. Either revenues are too low, or current expenses (outflows — remember that we’re using lose terminology here) are too high.

If the expenses or outflows are not truly for operations but payable to a lender in the form of , for example, a short-term self-amortizing debt where the payments are large and swollen with principal, the lender may be negotiated with to arrive at an interest-only loan with a provision for a rollover of the principal at the end of its term (optimal for maximizing utilizable cash flow), or possibly a longer amortization period where the payments are lower, conserving more cash flow for operations.

Sometimes a business is improperly capitalized and it requires equity to be infused in order to retire debt. Many businesses which have good fundamentals need to de-leverage themselves by retiring existing debt with equity. This is appropriate unless the equity is used to cover current expenses.

The test is this: If you deduct the debt payments from the total current outflows, and you subtract the number obtained thereby from the revenues, the resulting number should be positive. This means that the business is not properly capitalized, but is probably fundamentally sound. These companies are good candidates for refinancing.

If the number obtained is still negative, then it is highly likely that the business is fundamentally unsound, either due to its core purpose, mismanagement or some improper assumptions which have gone uncorrected for too long. Revenues can be increased by increasing sales through better marketing and sales, or by increasing prices if the market will tolerate this.

When certain food or beverage prices are suddenly increased, a restaurant may hike up its prices  and say, for example that “due to the increase in the cost to us of coffee, we are sorry to have to raise the price per cup to $2.25. If the market tolerates this it is a wonderful strategy, especially if done in steps, or if accompanied by a re-packaging or the product or service to somehow differentiate it from what it was previously. The perception of added-value tends to justify an increase in price.

The other possibility is more difficult, and the prospects less pleasant: You may have to negotiate with your employees (or terminate some of their positions), cut back on the use of your contractors, or re-negotiate costs with your vendors. Vendors can often be persuaded to reduce their charges by 1) indicating that the situation is temporary, and that they’ll receive a premium after you’ve reached a certain sales level or after a certain amount of time has passed or 2) an incentive wherein the vendor participates in either your revenue when you’ve reached a certain threshold, or in you company’s ownership (this is an example of a partial vertical integration strategy).

The acid test of  the fundamental soundness of any simple business model is this: If debt service is eliminated, do revenues exceed current expenses. Put more realistically, without considering debt, do your revenues (where the earnings process is complete and they are either in the form of cash or accounts receivable) consistently exceed your ordinary current operating outflows including product (inventory purchases as required) or service purchases? If not, can they be restructured to fit the aforementioned  parameters? If the answer to both questions is “no,” your business model is fatally flawed, and that must be dealt with — we’ll discuss this at another time.

If you increased your sales volume, increased your prices to customers, eliminated any idle personnel, negotiated with your suppliers, and gotten your bank loan replaced with equity, then you still may be suffering because your customers are not paying you on a timely basis, while you’re paying your vendors promptly.

If your average days to payment on your accounts receivable is 55, and your average days to payment of your current expenses is 35, that 20-day discrepancy can be killing your business, depending upon your profit margins. Sadly, you can’t pay your vendors with your receivables. There are two things to be done to eliminate that 20-day discrepancy:

1) Collect the receivables faster; and

2) Pay your vendors more slowly.

That gap between average days that your business waits to collect its receivables, and the average days its takes to pay its vendors must be reduced to zero, or to a negative number.

You can collect your receivables faster by offering some of your less creditworthy customers less credit, and giving some of your better, faster-paying customers more credit. You can offer early payment incentives or cash payment discounts. You can collect partial payments in cash. Use some imagination. Any of these approaches alone or in combination will cut that 55 days significantly if you focus on achieving this.

You might even get a line of credit up to some percentage of your “acceptable” accounts receivable,  factor your receivables, or utilize single invoice financing in order to get that number down a great deal further. Often the real cost of factoring or similar arrangements is about equal to what you might sacrifice if all of your customers took advantage of a discount for paying in less than 30 days.

To eliminate turning a simple article into a doctoral dissertation, suffice it to say that slowing down payments to your vendors requires some diplomacy, some negotiation, and some creativity — but then, if you are in business in these times, you must have an abundance of creativity.

Quick, Easy Metrics:

1) Your average collection days on your receivables (it’s a weighted average) should equal or exceed your average payment days on your current bills;

2) Your average collections days on your receivables divided by your average payment days on your current bills should be equal to or (hopefully) greater than 1.0;

3) The value of all of your cash and all of your receivables divided by the amount of your current bills should always be significantly greater than 1.0 (i.e., no contribution margin). While this is not a measure of cash availability, it is a measure of your gross profit on sales. The bigger the dividend produced by this computation, the greater your basic profit margin and the greater the contribution of your sales to ultimately cover fixed overhead.

The idea is to avoid a cash crunch (assuming that your basic business concept is fundamentally sound) by collecting and hoarding as much cash as you can, and holding off on the payment of bills as long as you can. Remember:  If you business is sound, a cash crunch crisis is a phenomenon only created by bad timing. And it’s quite curable.


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This site is the Management Consultants' and Chief Reconstruction Officers' best all-industry guide to analyzing, diagnosing, devising a strategy, creating either an Action Plan or an Emergence Plan and overseeing and monitoring the successful implementation of either in order to ensure the client organization's optimal, sustainable profitability. These plans are always made scalable to accommodate the size and needs of the client, whether it is fast-growing young company with an aggressive and ambitious agenda, or whether it is an older, larger, well-established business which is experiencing problems or which is at a crucial decision making point in its evolution as an entity, and which requires sound advice (and often implementation oversight and assertive "hands-on" assistance in the form of a powerful third-party representative agent or a an expert in the art of negotiation as its appointed "point person") regarding its next steps. In the alternative, Douglas E. Castle is expert at helping fast-track, rapidly emerging companies to growth through acquisitions, mergers, licensing, branding and both domestic and international strategic joint ventures to access better, more efficient supply chain sourcing and to open up wider global markets to dramatically increase the scope of possible new revenue opportunities.


Restructuring Debt In A Business Turnaround

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Amortization Hourglass - Because Time Is Money - Turnarounds And Restructurings - DouglasECastleBlog.com -

 

As part of the Action Plan in any business turnaround, or in any plan of emergence from Chapter 13, reduction and restructuring of debt will play a key role, provided that the business involved in the emergence or “rescue” effort is inherently profitable by its nature  — in other words — has an otherwise viable business model which was just mishandled or mismanaged in its execution. If debt can be reduced or eliminated, that is optimal; however, the second alternative which is more palatable to most lenders involves debt restructuring.

You have two restructuring objectives in dealing with lenders or bondholders – one is to defer the payment of the principal (the “balloon”) of the debt and to try to pay it on an interest-only basis for a business recovery period; the other, which is far more popular and easier to negotiate is to restructure the debt amortization or payment schedule. This second alternative permits you, as the acting Chief Business Restructuring Officer, to offer your creditors an option where the debt can be paid in a self-liquidating schedule, but simply over a longer time. In fact, if the length of the loan payoff schedule is sufficiently lengthened, you may even offer the creditors a small sweetener, such as a slightly higher interest rate on the loan or bond principal amount as a risk premium for their patience. Even after doing this, your payments to retire the debt in full may still be substantially lower than they would have been at a shorter (i.e., more rapid) amortization schedule.

Let’s see how this rescheduling of amortization works, Mr. Turnaround Expert:

Firstly, we’ll assume that the remaining principal amount of debt on one of our client’s loans is $80,000,000, and that at present, the client is paying off the loan at an interest rate of 8% over a five-year amortization period, fully self-liquidating. This means that the client’s monthly debt service due on the loan is approximately $162,211.

Going further, let’s assume that the client’s Chief Restructuring/ Turnaround Officer has projected (conservatively) that the cash flow available to service the loan will be approximately $175,000. This gives us a narrow margin for error. If we calculate the debt service ratio [divide the available cash flow by the the monthly loan payment obligation], it comes out to be a very, very uncomfortable 1.07884. As a lender, I would much rather see a debt service ratio that approaches 1.50000… that would make me quite comfortable, assuming that the available cash flow projections are reasonable.

If our Chief  Restructuring/Turnaround Officer is a very good negotiator, and convinces the lender to reschedule the amortization of the remaining balance over a nine-year term, with a rate of 9% (our turnaround expert has given the lender an extra 1% as a risk premium for lengthening the amortization timeline), the monthly debt payments would now be $108,343.27 — we’ve cut $53,867.73 from our monthly fixed debt payment by doing this. Our new debt service ratio (assuming the $175,000 cash flow available to service the debt is the same, as it should be) will be 1.615236 instead of 1.07884. I now have a debt service ratio which exceeds the 1.50000 standard.

You can verify these numbers and experiment with other possibilities by clicking on The Loan Amortization Table.

Amortization gives you the opportunity to stay alive longer, but yet to generate sufficient cash flows to pay off this debt, simply by changing its associated amortization schedule. We have restructured the debt brilliantly, assuming no other changes in terms on the part of the creditor, and no additional concessions to the creditor (with the exception of the 1% risk premium) on the part of our turnaround advocate, The Chief Restructuring Officer. Note that he might have chosen to cal himself the Chief Turnaround Officer, but that is too obvious and is on the edge of being Politically Incorrect. “Restructuring” sounds more positive than “Turnaround,” which conjures up images of the grim reaper following the client company’s president around.

This has given us additional cash flow margin (for coverage of other expenses of more than $53,000 per month.

Why would the creditor (a bank, represented by the officer who approved the original loan and who is responsible for handling the relationship with the client) agree to this?

Our negotiator simply took the bank officer aside and apprised him of the following facts and conclusions, gently but firmly:

1. If the client company were to go out of business and liquidate (Chapter 7, perhaps), the proceeds left to pay the bank would be less than 50% of the remaining loan principal. That would mean a substantial loss to the bank attributable directly to the officer’s decision to extend credit;

2. The foregoing could be very injurious for the officer’s career objectives, or perhaps the ability to remain employed by the bank at all;

3. If the client company remained in business, there would be no write-down or loss relating to the loan (the principal would be paid in full), and the officer would have made a good financial and career decision. His decision to allow the rescheduling of the loan has made it possible for the client company to stay in business and pay off the loan in full. Plus, the officer can speak about how “good a deal maker he was” by adding a loan premium of  1%, increasing the bank’s yield on the loan;

4. The client company keeps its deposits, its payroll account, all of its 100 or so employees have consumer loan, credit card, car loan or lease, deposits, checking or other business with the bank, all of which will now will definitely stay intact due to the officer’s “goodwill gesture to keep the company in business and everyone employed”. Interestingly, the officer also gets a credit for funds supplied to the bank (i.e., deposits — especially to demand deposit accounts (i.e., business checking), and this client has kept an average total balance in the bank of close to $1.5 million, all of which the bank earns interest on (this is called in the banking trade “playing the float”) while the client, who receives no interest waits for funds to “clear” and the bank puts this money out on overnight interest-bearing transactions with its under-reserved or slightly illiquid brethren;

5. It becomes apparent that the Chief Restructuring Officer can make the bank officer (with his own stationery, business cards, lapel pin and pens) look like a clever, prudent potentially promotable businessperson in the eyes of the client and his superiors in the bank, whom the Chief Restructuring Officer has promised to speak with (in laudatory terms) in his behalf.

The theme is not only that amortization is like fiscal alchemy — it is also that if  a focal point of a turnaround Action Plan can be addressed with everyone emerging benefited (or at least not damaged as much), it can be negotiated.

Debt restructuring is a crucial part of most turnaround operations. Now you’ve gained a better insight.


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If Detroit Were My Turnaround Client

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IF DETROIT WERE MY TURNAROUND CLIENT

If only Detroit were one of my Turnaround Business Clients (sigh), either the bankruptcy might have been avoided, or its method of conducting its “Municipal Business” might have been radically changed some time ago.  There should have been much more oversight, checks and balances in all aspects of management, and operation, financial and forensic audits by a competent independent third party firm on a short notice basis. But then, the sad aspect of the public sector is that is by no means as accountable, or as interested in its investors (the taxpayers), as would be a simple medium-sized company.

When you combine poor accounting (and a lack of individual accountability), a lack of variance analysis, a lack of integrity in leadership, the absence of a formalized budgetary review process, the informality of fiduciary authority and a plethora of useless contracts for services and purchases that were not of benefit to the client [in a business they either call that “Other People’s Money” (OPM), which doesn’t really have to be accounted for directly if there’s enough of it (and who is keeping count as the nectar pours through the sieve? And more importantly, who knows what the total available capital for expenses and expenditures actually is?), or, in the worst case breach of fiduciary duty, fraud and embezzlement.

Goodness, if taxpayers realized that they were really shareholders, with the right to demand an accounting, a reconciliation, and an explanation of any ‘treasury leakage’ either through negligence or through political favors paid for at the expense of the populace. — DEC at 1Turnaround.

What follows is my curating and rather extensive and opinionated commentary regarding an article which I found in my inbox from Scoop.It!, a wonderful source of excellent articles and opportunities to really get a grand view of the topics which interest me, and are of crucial importance to my clients.

       

Editorial: What Detroit’s crisis can teach others Avoiding bankruptcy requires confronting crises early, focusing on taxpayers and making realistic promises

                                                                   From [original article source]                                                                                               www.thesilentmajorityus.com                                                                                       –

Detroit News: Detroit’s fall into bankruptcy is being pitched as a cautionary tale for governments at every level. And while there are extraordinary circumstances unique to the Motor City, there are…

Douglas E. Castle’s insight, as Curator:       

I am in full accord with the writer’s point of view as it concerns Detroit, specifically, and as it concerns all businesses and organizations which have fiduciary responsibilities. Sadly. election politics as well as organizational office politics tend to bring out some unsupported or unsupportable promises which ultimately will become perceived as lies. In any business or organizational structure (For-Profit and Not-For-Profit) you cannot make empty promises, as they will cost you all of your negotiating power (based largely in credibility), and possibly your career when the truth comes out.

Let’s assume that we are following a sensible business protocol, and that we are responsible to the Board, our colleagues, our employees, our customers (or constituents), our creditors and our investors. A methodical approach must be undertaken — it is sad that these politically-oriented individuals don’t examine the financial position and projections of the governments or businesses which they are trying to get the opportunity to lead prior to embarking on their campaigns.

A general rule to start with is that you cannot ever make a promise which is unconditional, especially if it is dependent upon the promises of others (grants, investments, lots of new business revenues, a technological breakthrough and the like). Make fewer promises of good and plenty, and more commitments to fixing problems at their source to ensure safety, stability and success.

Aside: Not to ridicule anyone at the federal government level, but you can’t make inferences to “getting out of debt by increasing borrowing,’ or balancing the budget and helping businesses by increasing taxes on the poorer and middle classes and reducing services to them as well!

Never make a commitment that you do not intend to keep, and that you do not have a plan (a method) to keep. Exaggerate costs and the length of estimated completion or delivery time frames – it makes it easier to be a hero.

In terms of examining, monitoring, course-correcting and maintaining or improving the  enterprise (whether it is government or non-government, For-Profit or Not-For-Profit), the protocols are universal.

Of course, in the case of all-too-many governmental subdivisions and entities, there is tremendous complexity, inadequate supervision, and labyrinthine accounting, authorization and record keeping. There’s too much capital, and too many persons with access to it, without proper oversight. A large number of seemingly trivial expenses and expenditures can eventually accumulate into a cavernous loss. This waste (being kind with my choice of terminology) is taxpayer money — in private enterprise, the shareholders would be taking the company’s management to court for this type of abuse. They would be speaking of breach of trust, breach of fiduciary duty, diversion of funds, fraud and possibly embezzlement.

I believe that Detroit is the first host organism to fall victim to an epidemic , and that municipal bankruptcies will be hooping up like crocuses in early springtime. And we’ll get closer to the truth about the extent of the federal deficit and the value of the U.S. dollar, fresh off of the press. That’s a scenario for The Global Futurist Blog to paint.

But then, I’ve gotten off of my focus. Let’s return to a standard fiduciary management protocol where each individual in the chain of command or hierarchy structure is responsible — truly responsible — at every level:

1) If a responsible individual sees or suspects a problem, it must be reported immediately to the appropriate persons of supervisory authority;

2) That person of supervisory authority should follow through with vigilance and persistence to see to it that the problem is solved before it wastes any more money and before it worsens;

3) The problem must be expediently fixed, and noted as such – after all, every minute of loss is a drain on profitability and solvency;

4) If there are too many systemic problems, and the organization’s current financials as well as its proformas (always have worst-case, realistic-case forecasts handy; they should be created frequently as assumptions and conditions change; they are a powerful management tool, and an early warning system) are not looking good, senior management must gather the right experts, both from inside of the organization and from senior management’s “A” list of outside professionals, and;

5) Re-examine the organization’s entire business model in terms of S.W.O.T. analysis, critical path dependencies analysis, and possible displacement (or antiquated assumptions) analysis. Look to prune your sunk costs and nonproductive recurring costs;

Note: From this point forward in my discussion, I’ll address this issue as if the business (even if it is the business of running a municipality) were yours, and that you were the executive ultimately in charge.

6) Reconstruct the organization’s business model with the help of the assembled expert committee, create a realistic, turnaround reconstruction plan, promulgate it to all of the involved and affected individuals, as well as to all other parties doing business or trade with the organization. Let them know of the changes, what the time frames really are, what sacrifices or compromises they will have to make lest the team effort fail (Note: If you’re a charismatic, credible, strongly committed leader, you will convince every individual, from the board room down to the janitorial staff that they are each, and all, partners in the the success of the business, and that necessary sacrifices may have to made to bring stability and better results for the benefit of all). Take a serious tone, especially when asking for sacrifices and compromises. Make everyone feel like a stakeholder and an employee or an agent of help;

7) Work the new plan to the letter, diligently, faithfully and without deviation. Report to all of your “partners” frequently as results come in and new forecasts are made. Your diligence, conscientiousness and candor in terms of reporting frequency and transparency will be appreciated and might make potentially hostile parties feel more like allies in a group project and a united effort. That latter is the effect for which you should strive – it justifies the sacrifices and compromises…and to make it even more potent, be certain that the C-Suite occupants, senior executives and the directors make visible meaningful sacrifices as well. You don’t want to look like a “too-big-to-fail” company that the U.S. government just bailed out [grin];

8) Demonstrate by variance analysis (projected versus actual results) how you are actually achieving the goals set forth in your turnaround business plan, and how you have converted waste and losses to a positive, potentially distributable fund balance;

9) From that positive pool of hard-won cash, reward all of the parties who have cooperated in the effort (at a sensible level,and not just to the senior most executives and directors, but to all of the participants, sacrificers and compromisers who have made it possible. Everyone enjoys a participatory celebration of success and a feeling of having participated in a victory…everyone! The object:

Demonstrate in distributable dollars and cents that the tough cuts have paid off in terms of solvency, stability and a positive cash flow. A great leader (as opposed to a basically attired career politician) rallies his forces for a job successfully done, reminds them that their efforts need to continue, and also reviews the victorious results of the variance analysis — show them how inflows have increased and how outflows have decreased. Make them all feel like stakeholders.

10) Promise to continue on course, and to remain vigilant and practical, as well as honest and tough. Continue to restructure and turnaround the business periodically with a “no sacred cows” and a zero-based budgeting approach. These techniques and tools work.

Douglas E. Castle  http://DouglasECastleBlog.com

Contact The Curator  https://getglobaledge.wufoo.com/forms/k7s0a7/

View DOUGLAS E. CASTLE’s profile on LinkedIn at   http://www.LinkedIn.com/in/douglascastle  ;

Follow @DECastleAdvisor on Twitter http://twitter.com/DECastleAdvisor
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This site is the Management Consultants' and Chief Reconstruction Officers' best all-industry guide to analyzing, diagnosing, devising a strategy, creating either an Action Plan or an Emergence Plan and overseeing and monitoring the successful implementation of either in order to ensure the client organization's optimal, sustainable profitability. These plans are always made scalable to accommodate the size and needs of the client, whether it is fast-growing young company with an aggressive and ambitious agenda, or whether it is an older, larger, well-established business which is experiencing problems or which is at a crucial decision making point in its evolution as an entity, and which requires sound advice (and often implementation oversight and assertive "hands-on" assistance in the form of a powerful third-party representative agent or a an expert in the art of negotiation as its appointed "point person") regarding its next steps. In the alternative, Douglas E. Castle is expert at helping fast-track, rapidly emerging companies to growth through acquisitions, mergers, licensing, branding and both domestic and international strategic joint ventures to access better, more efficient supply chain sourcing and to open up wider global markets to dramatically increase the scope of possible new revenue opportunities.


Turnarounds,Restructurings,Bankruptcies:Checklist

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There are all types of tools, terms and radical actions used to describe techniques, protocols or proceedings at law for businesses that are troubled, and these terms tend to be tossed around loosely in a crisis management panic mode; the most popular ones are turnarounds, restructurings, bankruptcies [actually protection pursuant to Chapter 13 of the Federal Bankruptcy Code] trustees, “Chief Restructuring Officer/Advisor” [a title which is becoming increasingly popular and that I increasingly wear], bulk asset transfers, immediate cutbacks (or summary firings, usually of the wrong individuals).

The first step to undertake if you are a concerned party – a possible litigant, a person or fund who/which stands to lose, even an employee labor organization (formal or otherwise) which has a vested [no pun intended] interested in being able to permit its members to provide for their families’ basic needs. The air is filled with tension and fear. Clear thought is rare.

Before getting to the Checklist, be certain to do the following, as an involved person and as a key decision maker:

1) Think things through quietly and with complete focus;

2) Engage in financial triage – prioritize — assess the possible extent of the damage (be pessimistic in your estimates), and what five measure must immediately be taken to stop the situation from worsening. Don’t look at cause and effect or shaming and blaming; you haven’t the luxury of either time or immaturity;

3) Do not take action yet;

4) Assemble your core team or “kitchen cabinet” an advise them, in confidence, that a crisis is has occurred (and is still occurring);

5) Arrange an emergency meeting with your attorneys and accountants, as well as your core team. Then explain the situation in plain, noninflammatory language, appoint or hire your Chief Restructuring Officer and have him or her chair the meeting, wherein you review the points or topics set forth hereunder:

Strategic Positioning

Business Crisis Management

Negotiations with Stakeholders

  • Cost and Expense Reduction
  • Analysis of Creditor Rights
  • Liquidation Analysis
  • Dispute Resolution
  • Equitable Treatment of Classes

Profit (Cash Flow) Improvement

  • Revenue Enhancements
  • Cost and Expense Reduction

Insolvency and Bankruptcy

Litigation Support

  • Forensic Accounting
  • Lost Profit Analysis
  • Damage Calculation
  • Contract Auditing
  • Expert Witness Testimony
  • Deposition Support
  • Cause Analysis
  • Acquisition Due Diligence
  • Post Acquisition Integration

Mergers and Acquisitions

  • Acquisition Due Diligence
  • Post Acquisition Integration
  • Vertical Integration
  • Horizontal Integration
  • Conglomeration Or Other Business Combinations Of Expedience

The Chief Restructuring Officer now has to coordinate the efforts of the team for optimum, timely performance and corrective action.

As always, thank you for reading me, and for turning around (deliberate, contrived but funny choice of term) and sharing my articles with your colleagues, connections and topical groups through your social media platforms using your ever-expanding arsenal of social media sharing tools.

Douglas E. Castle


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This site is the Management Consultants' and Chief Reconstruction Officers' best all-industry guide to analyzing, diagnosing, devising a strategy, creating either an Action Plan or an Emergence Plan and overseeing and monitoring the successful implementation of either in order to ensure the client organization's optimal, sustainable profitability. These plans are always made scalable to accommodate the size and needs of the client, whether it is fast-growing young company with an aggressive and ambitious agenda, or whether it is an older, larger, well-established business which is experiencing problems or which is at a crucial decision making point in its evolution as an entity, and which requires sound advice (and often implementation oversight and assertive "hands-on" assistance in the form of a powerful third-party representative agent or a an expert in the art of negotiation as its appointed "point person") regarding its next steps. In the alternative, Douglas E. Castle is expert at helping fast-track, rapidly emerging companies to growth through acquisitions, mergers, licensing, branding and both domestic and international strategic joint ventures to access better, more efficient supply chain sourcing and to open up wider global markets to dramatically increase the scope of possible new revenue opportunities.


Established Companies As StartUp Incubators.

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Established companies with existing infrastructure, whether doing extraordinarily well or due for a restructuring or a turnaround, generally have some additional capacity, knowledge, personnel and perhaps some available cash sufficient to incubate and assist in accelerating the growth of a start up or seedling enterprise, if properly inspired and advised of the incentives, i.e., possible rewards, which can make the symbiosis powerfully rewarding for both parties. In many cases, established companies may make the best startup incubators of all.

In the illustration above, a large, established company is merely investing some of its extra capacity (and perhaps some significant expertise and mentoring) in the seedling which it has fully absorbed. While the benefits to the seedling are obvious, the benefits to the established host may not be. In summary, these may include: equity or profit-sharing; a new revenue stream, an influx of unbridled, undampened creativity; a possible product line from the guest or license relating to the same; a hedge against the very real risk of displacement of their market position due to disruptions in technology, consumerism and other variables.

In Example A, the incubatee is embedded within the very body (womb) or the incubator. This gives the incubating entity more control, but a greater scope of responsibility. In Example B, the incubatee is further removed as more of a joint venturer with the incubating entity, sharing in only some of the obligations and rewards. This gives the incubatee significantly more independence and control.

One of the reasons for the failure of established business to remain profitable can be (aside from mismanagement, poor product profitability analysis, high culturally-embedded fixed costs, supply-chain problems, and the like) the growing or radical technological obsolescence of a service or product [think of the printing industry]. Part of a defense against being squeezed out of your traditional market is to expand and diversify the demographics of your market/s and your offerings.

It is my strong belief that these alliances, and their potential reciprocal benefits might work well for both the CrowdFunding and venture realm, and for the established but less-than-vigilant established business who would otherwise be in need or a radical restructuring or a turnaround.

To carry this analysis one step further, think of the the jobs saved and new jobs created by uniting the established (but suffering from a paucity of creativity and market vigilance) with the up-and-coming visionaries who will create disruptions and sea changes.

Established companies acting as start up incubators might be a culturally-enriching means of stimulating our difficult economy. Young start ups might have some tremendous advantages over new market entrants who were sustained through the impetus of crowdfunding, and their respective “real world” incubators might just get an overdue infusion of flexibility and creativity at only a nominal expense.

Thank you for reading me, and for sharing my articles with your colleagues, connections and contacts across your broad new band of social media.

Douglas E. Castle


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This site is the Management Consultants' and Chief Reconstruction Officers' best all-industry guide to analyzing, diagnosing, devising a strategy, creating either an Action Plan or an Emergence Plan and overseeing and monitoring the successful implementation of either in order to ensure the client organization's optimal, sustainable profitability. These plans are always made scalable to accommodate the size and needs of the client, whether it is fast-growing young company with an aggressive and ambitious agenda, or whether it is an older, larger, well-established business which is experiencing problems or which is at a crucial decision making point in its evolution as an entity, and which requires sound advice (and often implementation oversight and assertive "hands-on" assistance in the form of a powerful third-party representative agent or a an expert in the art of negotiation as its appointed "point person") regarding its next steps. In the alternative, Douglas E. Castle is expert at helping fast-track, rapidly emerging companies to growth through acquisitions, mergers, licensing, branding and both domestic and international strategic joint ventures to access better, more efficient supply chain sourcing and to open up wider global markets to dramatically increase the scope of possible new revenue opportunities.


Business Restructurings, Turnarounds And Remobilization Of A Nation’s Economy

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In industrialized nations, particularly the USA, the prevailing attitude is in either 1) the instant success or in 2) the disposable item. That disposable item can be a small to medium-sized business which is experiencing some financial turmoil and might well be on the road to Reorganization pursuant to Chapter 13, and more often than not, to a Chapter 7 liquidation proceeding.

The terms and notions associated with business “repairs,” or outright cures such as turnarounds (i.e., turnarounds leading to sustainable solvency with a healthy and consistent positive cash flow), restructurings, negotiations, workouts, re-amortizations, debt-equity conversions, debt-service coverage increases, re-budgeting, a Re-Emergence Plan,  creditor settlements,  investor arrangements, employee buy-in /buyout plans, and management buy-in/buyout plans. [Please feel free to look under the DEFINITIONS Section in this blog’s navigation bar if any or all of the foregoing terms seem or seems unfamiliar to you.]

The calculus of this focus on start-ups to the extent that troubled businesses have become neglected or stigmatized as “corporate raider targets (Dell Computer, anyone?) or “extinct” simply because they are not genesis centers for new technologies, or because they do not have venture capital curb appeal (anyone interested in saving a ball bearing or paper clip manufacturing business? – I can hear your deafening silence as I watch [I can’t literally look at you through your computer or device, but I like to be as fearsome and awe-inspiring as possible] you look down in shame at the floor).

You don’t have to be a calculus superstar to visualize that a small start up entity might create five jobs this year, and fifteen next year, and perhaps a number more (if they are not bought up by Google, in which case, some of those jobs will likely evaporate into a consolidation), while saving the Cruddleston Corrugated Packaging business [fictitious, but which would possibly be located in in the “Rust Belt” of the USA or near Newark, New Jersey] might conserve 80 existing and productive jobs, and might create new employment (perhaps another 10 – 20 permanent full-time positions as well as some precious student internship training.

Perhaps the bloom is off of the proverbial rose when it comes to manufacturing and industrial businesses in the small ($1 million up to $100 million in sales revenues) to medium-sized ($100 million up to $500 million per year in sales revenues) sectors. Part of the difficulty is that these businesses cannot necessarily be fixed and set on the right trajectory without investing some serious analytic, planning and implementation time. Negotiations, correspondence, restructuring and a multitude of changes, some of which will be painful but which are necessary, will have to be implemented and monitored. This usually requires the retention of an outside specialist, in additional to legal counsel — there are a plethora of law firms, but very, very few positive-minded, tough turnaround advisors (or business leaders of this age in general) who understand that 1) not every business problem can be cured by throwing bundles of cash at it, and 2) that it is not pre-ordained by any “Higher Authority” that because a business has problems that they must be fatal.

If these prospectively viable turnaround clients fail (and it isn’t a failure which is based upon technological obsolescence or a colossal and uninsured legal judgment or settlement) it is because they were convinced that they could never recover, and that the path most frequently taken is either directly to Chapter 7 or being on Chapter 13 “life support” – with the expectation of a fatality so no restructuring and Re-Emergence Plan is even hinted at. Working to save the company and its jobs is definitely the road less traveled. Death of the entire mid-section of America — which is not the true subject addressed by the JOBS Act or anyone’s legislative, regulatory or professional menu —  has been occurring at an increasing rate, and is perceived as a self-fulfilling prophesy.

In my professional capacity, I am keenly aware that most company owners, management, directors or even legal counsel do not know who to turn to to perform this type of special precision surgery.

The problem is one of epic proportions. The following statistics for court bankruptcy filings of businesses were provided by The American Bankruptcy Institute for the entire United States, based upon data accumulated from judicial records:

Quarterly Business Filings by Year (1994-2012)

Year 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
1994 13,858 13,617 12,878 12,021 52,374
1995 13,123 12,216 12,648 12,891 51,878
1996 13,388 13,992 13,198 12,887 53,465
1997 13,831 13,991 13,456 12,653 53,931
1998 12,410 11,552 10,346 9,888 44,196
1999 9,180 10,378 8,986 9,020 37,564
2000 9,456 9,243 8,211 8,413 35,472
2001 10,005 10,330 9,537 10,013 40,099
2002 9,775 9,695 9,433 9,500 38,540
2003 8,814 9,331 8,446 8,294 35,037
2004 10,566 8,249 7,574 7,778 34,317
2005 8,063 8,736 9,476 12,798 39,201
2006 4,086 4,858 5,284 5,586 19,695
2007 6,280 6,705 7,167 7,985 28,322
2008 8,713 9,743 11,504 12,901 43,546
2009 14,319 16,014 15,177 15,020 60,837
2010 14,607 14,452 13,957 13,030 56,282
2011 12,376 12,304 11,705 11,149 47,806
2012 10,998 10,374 9,248

You’ll note that the highest number of filings was in 2009, one year following the central banking system and capital markets meltdown that decimated this country’s economy, with the rest of the Global Economy to follow soon thereafter.

One insidious implication, referring again to the above table, is that businesses in the United States (as well as their clients and consumers) were so dependent upon access to credit and the expectation of serial refinancing to prop up cash flow, that they had no cushion of equity in the form of cash reserves, and the other implication was that these companies were taking some liberties with what they considered to be collateral assets, profits and earnings.

These companies, and their legal representatives where virtually running to the courthouses to throw their businesses away. They were collapsing like dominoes, and the overwhelming negativity in the emotional drivers of the economy accelerated this flight to the express route. Many of these companies were unaware that possibilities existed for a reversal of their fortunes — and those who actually thought of the possibility of a means of saving the business by bringing an outside expert inside simply did not know where to find an expert.

Applying some simple and strictly hypothetical assumptions to the numbers set forth in the  above table for the second calendar quarter of 2012, let us say that :

  • 10% of the companies (that’s 1,037) could have been saved;
  • That each company, while operating at full capacity, had on average of 75 full-time employees;
  • That if all of those existing jobs could have been saved, the total of persons seeking unemployment assistance or very low-paying jobs would have been reduced [just for that quarter!] by 77,779.

I believe these numbers to be reasonable.

In sum, companies do not have to die for their mistakes, transgressions and lack of adequate stewardship. There is help for them. It shouldn’t be a secret.

Thank you for reading me and for sharing my articles with your colleagues, connections and contacts over your numerous social networks.

Douglas E. Castle

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This site is the Management Consultants' and Chief Reconstruction Officers' best all-industry guide to analyzing, diagnosing, devising a strategy, creating either an Action Plan or an Emergence Plan and overseeing and monitoring the successful implementation of either in order to ensure the client organization's optimal, sustainable profitability. These plans are always made scalable to accommodate the size and needs of the client, whether it is fast-growing young company with an aggressive and ambitious agenda, or whether it is an older, larger, well-established business which is experiencing problems or which is at a crucial decision making point in its evolution as an entity, and which requires sound advice (and often implementation oversight and assertive "hands-on" assistance in the form of a powerful third-party representative agent or a an expert in the art of negotiation as its appointed "point person") regarding its next steps. In the alternative, Douglas E. Castle is expert at helping fast-track, rapidly emerging companies to growth through acquisitions, mergers, licensing, branding and both domestic and international strategic joint ventures to access better, more efficient supply chain sourcing and to open up wider global markets to dramatically increase the scope of possible new revenue opportunities.