Working Capital – Business Owner’s Best Friend
Getting It • Keeping It • What happens when it’s gone
Day in the Life of Crisis
Tremors • Quakes • Wobbles
Started 20 years ago and finally attained industry relevance
Welcome to Crisis
Crisis – OK now what do I do?
Don’t Panic • You are not alone • Everyone has faced it
Time Speeds Up • It’s a full-time job!
Best Defense: Managing Working Capital
Easy fixes • Begin Crisis-Proofing your Company
Company Life Cycle
Where are you on this curve?
Working Capital Cycle
Where are you vulnerable?
Factors affecting working capital
Business Cycle –
- Up market – growth
- Down market – cost cutting
- Seasonal – cushion for swings
How do I get it?
Senior Debt vs. Equity
- Advantage – fixed debt svc.
- Disadvantage – 100% drawn
Asset based loan:
- Advantage – draw as needed; fast build up of available cash
- Disadvantage – payback quickly as sales decline / offseason
- Weekly borrowing base – costs
- Advantage – simple formula
- Disadvantage – borrowing costs; must payoff past due accounts
- 2 part interest – pay and accrual
- Residual equity amount
- Looking for 18+% IRR
- Control – % ownership
- Board of Directors
- Looking for 30+% IRR
Build Trust through Predictability and Visibility
Develop Comprehensive Business Plan:
SWOT analysis (strengths-weaknesses-opportunities-threats)
What happens when things go wrong.
$15M Manufacturing Company:
Description: Privately owned manufacturer of commercial skylights. Asset-based line of credit.
$50M Shoe Distributor:
Description: Private Equity owned designer and distributor of women’s shoes. UK office. Asset-based line of credit.
$40M Temporary Staffing:
Description: Private Equity owned, multi-office provider of temporary personnel. Asset- based line of credit.