Business Triage: Items to Consider During Times of Uncertainty

Posted on March 18, 2020

Times of Uncertainty - Virginia M&A Deals

What Businesses Should Consider During Times of Uncertainty

During times of uncertainty, we wanted to share our thoughts on some things that you might want to consider.  Many of you may have some of these underway now, but basing your initial assumptions on hardnosed forecasting is essential.

  1. Develop a worst case set of cash flow projection covering the next 60 – 90 days.  Take into consideration your customer mix and their ability to pay your invoices over that period.
  1. Look closely at your cost structure and be prepared to rapidly adjust based on changing income.
  • What are your fixed and variable costs?
  • What costs can you cut and how long will it take to reduce them?
  • What is your break-even level under drastically reduced revenue conditions?
  1. Based on that forecast, determine if you have available capacity on your bank line(s) of credit to cover any shortfall in cash flow.
  1. Proactively consider all opportunities for reducing expenses and/or creating revenue including:
  • Can you negotiate extended vendor terms?
  • Are there creative ways to reduce inventory, managing perishables, etc.?
  • Can any leased equipment be returned without penalty or what payments can be deferred?
  • Consider contacting your lender to ask for a payment holiday – we are aware of a situation where a lender granted a 90 day payment holiday to a borrower.
  1. Some customers will want to extend their terms with you.  Can you afford to finance their business?  If necessary, consider suspending “terms” for some accounts and temporarily go to COD.
  1. Are there new channels of business you can open now – retail for instance?
  1. If you have coverage, consider filing a claim for business interruption with your insurance carrier – regardless of what your insurance agent may say as to the success of such claim.
  1. Contact an employment attorney to understand how you might handle layoffs / furloughs / reductions in workforce.

We know things are hectic but remember to lean on your advisors (counsel, accountant) for insights they have, as many of these decisions in normal times are made infrequently.

With 15+ years in the food distribution industry, we are here to answer your questions and assist in any way we can.  We will be providing additional insights and updates as we move through this period of uncertainty.

Bill Beattie                                                                           Matt Austin

Email: bbeattie@keiteradvisors.com                Email: maustin@keiteradvisors.com

Phone: 804.565.6018                                                        Phone: 804.433.4184

 

 

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