Business Tips
August 8, 2003-Comments by James Koch, President and CEO / KOCH Consulting 
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Financial Fitness Exam

As part of our work, we deal with businesses that are struggling financially. Any business owner who is smart will continually review the financial fitness of his company and make changes quickly. In all my years of experience, the clients that had the best financial results were the ones who could “pull the trigger” on a decision and not wait for the problem to get worse.

Leveraging

If a business is struggling today it is many times due to over-borrowing for assets that are not producing enough net revenue to service the debt. In recent years many businesses were bought or started based on values of cash flow in multiples of 7 to 10. The bad part is that there were lenders out there willing to underwrite this debt using the same valuations. You combat bad historical borrowing by doing all you can to renegotiate the terms of the loans and getting participation in this process from your lender. Most any lender is willing to do this and not have to take over overvalued / underperforming assets.

Consolidation and Downsizing

Never let your ego control your decision making process. If you have underperforming assets, you need to begin your financial fitness exam by selling off this drag on your company. Continuing to operate segments of a business that are clearly underperforming is a quick way to damage or reduce the value of that part of the business that is doing well.

Diversification

You need to continually evaluate your products or services and the customer base you are trying to reach. Good accounting and financial reporting are the only way to track the profitability of product / service lines and the quality of your customers. Continually looking for ways to improve your business in this area is critical to success and survival.

Growth

Bigger is not always better. I have seen and personally experienced where growth does not always result in financial success. You may be growing the company, increasing sales and jobs, increasing total assets, and not adding one dollar to your bottom line. This is your reward and you should protect it. If everyone around you is benefiting from the growth but you, this will take its toll on you physically and mentally.

KOCH Consulting is ready to help you with a thorough financial fitness exam. Just contact us for a free estimate of the cost to you.

 

For more information contact us at jkconsult54@hotmail.com

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Business Tips
-January 2004

Financial Fitness Exam
-August 2003

Tax Planning
after the Jobs and Growth
Tax Relief Reconciliation
Act of 2003

-July 2003

Why Do So Many Small Businesses Fail?
–May 2003

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