Tip of the Month

Plain English Seminar tm on "Business Turnarounds"

BEFORE the Plan

There is a reason for preparing current financial statements and future projections of cash inflow and
expenditures. Look closely at the cash outflow projections. Do the expense seem reasonable in
comparison with prior month expenditures? Are the amounts due toward other debts in line with the
balance sheet and aging schedule?

Look at the cash inflow projections. Compare the amounts projected to actual cash inflows with prior
month sales. Do the numbers actually seem reasonable? Or are they just wishful thinking? How long will
it take before cash inflows exceed the cash outflows? Can the business hang on that long? Can you and
your family hang on that long?

The reason for these tough questions is to save time and great amounts of anguish. If it doesn’t appear
that the business can actually be saved in the current economy, or that you or your family cannot hang on
long enough, then you should consider other options as soon as possible to minimize the bleeding and
pain. The options could include selling the business, closing it or filing for bankruptcy.

Abraham Lincoln, Walt Disney and J.C. Penney all failed at business and filed bankruptcy at least once –
when it wasn’t socially acceptable to file bankruptcy. They, along with many others who closed businesses
over the years, went on to become America’s leaders.

The ideal situation for most people is to turn the business around, but one also has to be practical in view
of personal, family and economic conditions to first determine whether it is practical to pursue the
turnaround steps.