First, know the numbers
If you are not a numbers person, consult with someone who is. It could mean life or death for your small business. Some of us are just not a “numbers person”. That is fine, but little is more important in business than understanding your financial situation. Numbers give a clear indication about the status of your business’s financial health, and will give you the ability to make good decisions about how to move your business forward; add a new product, expand, hire more, or scale back, reduce inventory, etc.
An owner of a restaurant could no longer make his note payment and was risking foreclosure. Because of negative cash flow, nobody would refinance the debt. The owner owed only $1.4MM on his real estate which was worth $2.5 MM. American Finasco negotiated a discount on the debt which would get a bad loan off the bank’s books. Our sister company, PMF Partners, bought the loan from the bank and, due to the discount, didn’t require any payments for a year. PMF advised him to sell the building within 12 months to avoid foreclosure. He sold it for $2.5 MM, paid off all his debt, and had enough money left over to start a new restaurant in a better location.
He was a great Chef but didn’t understand the financials at all. One look at his financials revealed low gross margins were unable to cover operating costs. His location and competition forced menu prices to be low. Refusing to sacrifice quality made him lose money on every customer that walked through the door. In his case, he thought hard work and quality food would eventually get him out of financial distress. In an effort to not get foreclosed on, he stopped all other payments in order to make payments on his note to the bank. It’s easy to be emotionally attached to your business, which is why help from outside services such as American Finasco will help you understand your business’s finances, economics or simply review your books and tell you the truth. Sometimes the best decision is to close rather than go into more debt.
Knowing the numbers and being realistic go hand in hand. If you don’t understand the numbers, how can you know what is realistic so you can make good decisions? If you find yourself with substantial debt, consider leveraging American Finasco. We can manage, reduce, or consolidate your debt while you stay focused on your business. Visit Contact Us and complete our Online Form for a free consultation or call (800) 299-2909. We look forward to speaking with you.