Special management is certainly not the end for a business. For the business owner, it's important to continue communicating openly with the bank, to be prepared to take clear measures and, above all, to have the courage to look himself in the mirror.
For various reasons companies can end up in special administration. For example, an investment that has run out of control, an ICT project or a sudden drop in turnover. It can happen to any entrepreneur, it is absolutely no shame. In many cases a company even comes out of such a process stronger.
The example that Frank describes is based on my experience as an adviser to a large hotel and catering industry entrepreneur, but with some imagination other sectors can be filled in as well. Banks also consider the hotel and catering industry a risky sector for various reasons, such as: highly cyclical, high dependency on the entrepreneur and cash.
This entrepreneur was and is a valued client of one of the major banks. He had good figures for years, clear reports and was growing fast. However, because he had taken over what was for him a large number of other hospitality businesses in a short space of time, he ran into difficulties in a number of areas. Faced with a downturn in the economy, the results were disappointing and the integration of the new companies took longer than expected. His CFO left the company unexpectedly, as a result of which the reports were no longer delivered on time.
He told his advisor: 'I am doomed, this is the end of my business'. However, he found out that the soup was not so hot. He quickly put his hurt ego and anger aside and got to work.
An improvement plan was drawn up in a short time and shared with the account managers of Special Management. During these discussions, a constructive discussion ensued in which both sides could voice their concerns and there was room for indicating each other's expectations. We were soon able to conclude that, at this stage, the entrepreneur and the bank share the same interest: the recovery of the business.
A number of measures were taken within a short space of time: no further acquisitions for the time being. A good interim CFO was recruited and the entrepreneur fully focused on the integration of the recent acquisitions. These measures were clearly communicated to the bank, but it was also made clear that in view of the magnitude of the problem and especially the mediocre economic climate, no miracles were to be expected.
Within a few months the financial reporting was back in order and although the figures were still disappointing, the bank regained confidence. Within six months a competent new CFO was recruited.
Integrating the new companies proved to be a tough job, but after more than a year the entrepreneur saw light at the end of the tunnel. The leaks had been exposed and staff had been replaced where necessary. In the meantime, a very accurate reporting system had been developed which is now used throughout the group.
Because of these developments, the attitude of the special administration people became more and more relaxed and a good bond developed. There were still a few discussions here and there, but overall the atmosphere was positive. Certainly when the economy picked up and the results improved, the bank showed great respect for the entrepreneur. After more than two years, the company left the special administration department and was actually stronger and better organized than before.
In more than two thirds of cases, non-performing accounts are not the end of the road. For the business owner, it is important to continue communicating openly with the bank, to be prepared to take clear measures and, last but not least, to have the courage to look himself in the mirror.