The Summit Series: The Turnaround
An aging father; a chronically-ill child; a declining business: it’s a situation no one dreams of when building a business. Sadly, it was a reality for one of our clients.
As young, driven entrepreneurs start building a business and a family, they usually dream of passing their legacy from one generation to the next. “One day this will all be yours.” – It’s a statement you’ve likely heard (or said) before, right? Building a successful business and one day happily handing over the keys to children is an idyllic thought, but sadly one that doesn’t always become a reality.
Even as a situation becomes increasingly inevitable, many business owners don’t face their own situations for what they are. We understand you want to protect yourself and your family for as long as possible. This, however, is actually doing the opposite of what you intend.
Delaying taking an honest, objective look at the future of your company and your family is detrimental. For some though, it may not be too late. With careful planning and an open mind, our partners have helped thousands of business owners navigate their personal journeys, no matter the situation.
Our client founded a company decades ago. Among his children, the heir apparent was a son who, sadly, was suffering from chronic health issues. The other children didn’t show interest in taking over the company. As the founder got older, his son also got sicker and the business slowly declined.
When it became obvious that the son wouldn’t be able to lead the company, the client initiated a selling process and started to look for potential buyers. In order to help the founder get as much from the sale of the company as possible, a turnaround of the company was clearly necessary. Enter Richter partner Jordan Gould. Jordan started working with the family to get it back on the right track.
As a first step, a valuation of the business was performed. The valuation concluded that the company – at its current state – was essentially worthless. Jordan worked with the founder to then devise a strategy to help increase the company’s value and growth optimization long-term. This plan included evaluating the following areas:
- Human Resources: The employee roster was reviewed to assess strengths and weaknesses. A few replacements were made, and seasoned professionals were hired to improve upper management’s skillset.
- Financials and Operations: Jordan and the Richter team analyzed the different lines of business to reveal growth potential. This also created a new revenue stream by identifying opportunities to utilize excess capacity in a creative and opportunistic way.
- Equipment: A strategic review of the company’s equipment inventory was performed to optimize the operational efficiency. This included replacement or maintenance of aging equipment which helped dispose of excess equipment and reduce long-term debt.
As a result, the business advisory provided by Jordan Gould and the Richter team led to a complete company turnaround and an increase in its value.
A new valuation of the company was done, along with an estate freeze. Now that there was growing value in the company, and a strong possibility of future sale, there was an opportunity to multiply the capital gains exemption among all the family members, and fix the value of the senior generation, allowing them to plan for the tax implications upon their deaths.
What we assisted with
Our first contribution was to help the owner take a step back, to better understand the health of his business. How did we do it? By analyzing all the data available and gaining the trust of the family.
After considering the possibilities, we advised this client to reorganize senior management; deal with issues that were tolerated for too long and together, we found new revenue opportunities. Most importantly, together we helped sort through the softer – but realistically more emotionally difficult, issues the family was facing throughout the process. While sadly the business wasn’t passed on to the next generation, it was cared for in a way that helped alleviate a family’s stressful situation, so they could focus on what’s most important: the freedom and precious time to spend with each other.