Financial advisors, avoiding BK(corp). Layin it out there, not pretty.
 

This is going to suck..............a lot.


I've mentioned before that our business hasn't been doing well and I've probably sugar coated even that. We are heavily automotive and we're in Michigan which is a mfg wasteland right now. We invested heavily in equipment to win new work at the downturn when we should have just shut the doors. Earlier in the year we lost 40% of our work to China. We (mostly my father as my assets were limited) have poured virtually everything we have back into the company and have watched it erode at an amazing clip. I am tapped out and my father is close. Watching him lose everything he spent the last 35 years building is not an easy thing.


Without getting into too much detail (which I'm not afraid of if it's required) I am looking for advice. We need to speak with a financial adviser in regards to financial crisis management and our options. We do not want to file BK if at all possible. We have some core business that is good but not enough to support the beast if you will. I have reluctantly had a couple consultations with BK lawyers and they essentially just want to start the process rather than advise as to other options. "just fill these out and we'll get rolling next week" ughhhh. The more I thought about it why would a bk lawyer advise me not to file? No BK, no fees for him...So, what kind of adviser should I be looking for? Is this even a "specialty"? Does anyone here have any experience in what we're going through?


Many times I have typed this out only to erase it due to pride. I don't have the luxury of pride anymore and you guys are by far more experienced and educated as a group than anyone I know in real life. I am not posting for pity or charity but rather the chance that someone may have some advice that helps my father, as I said this is a great knowledge base.

I and my family will be fine, my wife has recently taken a job and I'll find work if need be. I don't make much now so it's not a big deal in that regard. Besides, I'm relatively young and little assets to worry about. This is all about my mother and father and trying to protect them if at all possible (mainly their modest home).

We have not given up, we work seven days a week and are actively pursuing new work (some very exciting) but being extremely low on capital and time I need to prepare for the likely outcome. In years past we never had to advertise or even pound the pavement for work. In a way we thought that was our ace in the hole, that if things ever got ugly we could certainly drum up "sustenance" work. Well this has proven to be a very bad assumption on our part, the well appears quite dry. Even though I am a positive and well grounded person that deals very well with stress, the extreme stress and fog of all this makes it difficult to focus. Any advice is appreciated.

I'm just going to post this rambling rant before I erase it again and clear everything up later.

Thanks guys,

Bump...

Len, Sorry I can't help. I'm in a similar situation, also tied to the US auto industry. This year, I will earn 40% of what I made in 2004 after a decade of growing my business. Six of the local Ford dealerships I subcontract for are closing in the next 90 days. Ford is planning to close 600 dealerships in the very near future. GM and Chry are not far behind. There have been lulls before, but this is more lull than many can tolerate.

Hope things work out for you and your family.

Damn, it saddens me to read this. I have no answer...only sympathy. Perhaps go into machining for other industries? A family in my neck of the woods is doing well...maching custom gears for any industry that needs them.

But that is all they've done for decades...

Lendaddy, this is outside my areas, but if I can be of any help, please don't hesitate to ask. Tough times are tough, but they are good opportunities for growth.

Sounds like you need to find a new niche for your business. If your dad has 35 years of experience it has to have value to fill a niche, it just might not be in the auto field. It's easy for me to say hang in there because I'm not affected but that might be good advice. What capability does your business have? Are you a machine shop? If you can let us know what your business is we may be able to give more precise suggestions. Good luck.

I think what you need is a lawyer who specializes in workouts. This likely will be someone with bky experience, but as you have found, a lot of bky lawyers aren't really interested in workouts, and just want to push the papers. But good workout lawyers are out there. I could help hook you up in Colorado or California, but I think you really need someone local. It's good to be able to meet face to face with the lawyer, go over documents, etc.

A good workout lawyer can be a real godsend to you and really help alleviate the stress. They've been through it before and knows what works and doesn't work, and take the reins as far as dealing with your creditors and helping you to put together a workable plan of attack. Once you have a strategy, you'll start feeling a LOT better. This is not an area you have experience with, and you are operating in the dark, which is causing stress. When you have someone skilled in the area watching out for your interests, someone you have confidence in, you'll feel better.

Basically, what you need to do is convince your creditors and suppliers, particularly the largest ones, that you are all in the same boat, and that it is best for everyone if you can work through this. You need a strategy where there is "light at the end of the tunnel," if your creditors and suppliers will cut you some temporary slack. Show them you have worked out a plan that is realistic and workable. Everybody will have to take some pain during this time, but will come out better than if you are forced into bky. You will need to deal with unsecured creditors and secured creditors.

Given what you've said, I think that can be done. Bky almost always doesn't work out well for unsecured creditors. Secured creditors are a bit more of a challenge, because in a bky they generally can take back their security, and if they are fully secured, they don't usually have much to lose in a bky.

The problem for everyone in a bky is that (1) if it is a Ch. 7 liquidation, people usually don't get much, and (2) if it is an 11, it is, ironically, a very expensive process that most companies can't afford. While you could come out of an 11 and survive, the reality is that for most small companies, the bky lawyers and process will suck what's left out of the company, and you'll end up in a 7.

Creditors usually realize those grim prospects, and will work with you. But the skills of your bky lawyer in dealing with them is really, really impt.

Again, local is better, but if you can't find anyone, shoot me a PM, and I'll see if I can hook you up with someone to at least talk to.

+1

If time permits look at it from an opportunity perspective. For instance, I know of a foundry in Pa that had similar situation. Although I do not know all the details, they did have a lot of auto industry work. They shifted into small. lower volume production that served a new customer - the guy who can't afford to go to Asia because he doesn't need the volume of parts to make it worthwhile or he doesn't know how to source there or simply doesn't want to go there. This new strategy worked and now they are growing again. It is a family business also.

They went from being use to running one part for at least one shift or more on a casting machine to now changing molds 3 or 4 times per shift to accommodate the new low volume customer. They went from only machining what they cast to taking on outside machine work. Basically they changed the way they were doing business.

Its hard to see sometimes beyond the crisis but there is opportunity.

Do you have a rep out beating the bushes?

Very sorry to hear.

Since manufacturing is being "outsourced" (I hate the phony, euphemistic nature of that word, actually) at such a frenzied pace, is there any possibility of shifting your own production overseas and transitioning your business into more of a domestic distributor role? I know it might not be as pleasant or as "nuts and bolts", but it's maybe worth considering.

Alternatively, there are still business that are doing assembly here in the U.S. Yes, they're becoming scarcer, but perhaps looking into heretofore unexplored niches - sports equipment, boats, aircraft, consumer goods? I wish I could offer some more specific advice, but all I'll say is I wish you the best of luck. I really do believe that if someone is good at what they do and passionate enough about it, there will always be a place at the table for them to eat - even during a famine. You certainly seem to have the passion and I've every reason to believe you have the skills. Believe in yourself.

There is still room for innovation in America - or for building a better mousetrap. One of our largest clients sometimes uses dock levelers for the receiving areas of their buildings. They prefer depressed truck wells, but they're starting to realize that these are very costly and lead to all kinds of problems with permitting, especially when they're on highly aggressive construction timetables. Anyway, long story short, the dock levelers they have been using for a long time are a bit of a pain also - they require a pit with trenched hydraulics, etc. One day on a site visit, a co-worker saw a new grocery store nearby installing a VERY slick new dock leveler - no pit required or anything. They literally dropped this thing off a flatbed onto a pad and in about an hour it was up and going - permanent installation completed. This new lift was a BRAND NEW product cooked up by a guy in Florida. Much better than anything else on the market - and he invented it himself. Needless to say, his business is booming right now. Our client tripped over themselves to get a presentation of his lift at their corporate HQ and they loved it. My point is - there is still room for opportunity out there if you're good.

Maybe there are some contracts for U.S. military or for defense contractors? With all the war efforts, I'd think that machining skills would be in some demand (producing parts for military vehicles & equipment, armor plating, etc.) Maybe worth looking into. . .

All the best in any case. Sorry to hear of your troubles. Never doubt that in adversity lies opportunity though. If I ever meet you, I'll share a story of my own with you over a beer or something - about 5 years ago I thought for sure that my wife and I were going to BK for sure, and we had about 2 months before we'd be kicked out on the street. We'd exhausted our meager life's savings and things were very dire. Long story short, we found a way. It might be difficult and ugly and disruptive in the short term, but I believe you will too.

If you know AutoCAD and can stand living in CA with all the liberal wackos out here, maybe we could use you. . . :)

what do you make ? what can you make?

Len, I am a lawyer, and it occurs to me that you probably do not need a lawyer. I think you need an accountant that specializes in distressed companies and debtors rights issues.

There is nothing wrong with lawyers, but they are set up for one purpose. They're the people that actually do the lawsuit, file the bankruptcy, etc. They're just not well set up to help you evaluate your situation and select your best option. Lawyers are best set up for when a client comes into them and says "I need ___ filed/drafted. Can you do it for me?"

What you really need now is a cold hard, professional assessment of your finances from a financial professional, and then some sober advice about how long you can last, what to jetison/expand in order to maximize what you have, and then your options on moving forward. Almost any decent public accounting firm will have accountants who can crunch the numbers, financial analysts who can tell you what is working and what isn't, and consultants who can help you put together a business plan for going forward, whether it's bankruptcy or a smaller company. The firm might even be able to hook you up with another client of theirs who needs what you sell or who is looking to invest in someone like you.

My sense is that part of your company is still proftabe but that is overwhelmed by th parts that are losing money. You might be able to save the tree by pruning its branches off ruthlessly. I think you need a professional to look at your books and help you decide.

If your company is large and is willing to pay $300-$500 an hour, call any of the Big 4 (are there still four of them) accounting firms - like Deloite Tousche, or the big consulting company - Accenture. If your company is smaller or would rather pay $250-$350 an hour, look for a reputable regional accounting firm with a consulting group, like McGladrey Pullen.

If you aren't willing to pay that much, look to 10 or 12 man CPA firms that have good reputations. Interview a bunch. Ask specifically for examples of their past work where they have helped people in your situation. There are lots of people who are expert in helping people in your situation. Call around, inteview accountants until you find a group that has a proven track record. Tell them your financial situation and agree on a budget in advance. They'll appreciate it and you will benefit from it.

Road trip:cool:


Nothing to add that hasn't been posted...all the best, Len. You are a good man.

If I can find a way to help you I will.

Best,
Scott

Len, there's some very good advice posted above. I wholeheartedly agree with MRM, you don't need a lawyer. A quality accountant can give you the advice you need related to the state of your business. However, if you have issues with your creditors, legal advice might become more necessary.

How about more details? This is a pretty bright crowd, it's very possible someone here could come up with a niche that you haven't thought of. While I'm sure your situation seems dire, it sounds like you still have something worth fighting for.

Most importantly, keep your head up. Everybody has hard times, you'll make it through. The difference between winning and losing in life is getting back up when you've been knocked down.

Sorry to hear this. I know this must have been hard to post in the public venue ...so to speak.

Yes, details man! What EXACTLY do you and your father make? Sounds like no trade secrets to worry about exposing here. Give us more info.

Someone may provide more help/guidance that way.

Thanks guys, I really appreciate the many thoughtful responses. I was out for the night and just glanced them but I'm headed in to work now and will go over them more there. Asking for help is not something I've ever been "good at", and your reactions have helped ease some of my reservations already. Clicking the submit button on that original post was (oddly given the circumstances) one of the toughest things I've done in a while.

As I mentioned I have no problem giving more details if it will help and I fully intend to do so.

Thanks again guys.....sincerly, back shortly.

Len,

This brought a tear to my eye as I went through this with my Dad in the early 90's. It still hurts to think what happened to us.

No advice, but the very best of luck.

Scott

I can't help with BK issue, but the thing that comes to mind is oil field equipment. Everything's in extremely high demand down here.

We are actually working with a drill tooling company in Texas right now. We are quoting liner hangers. It seems like an excellent opportunity but the five axis equipment alone is ~.5 mill.

More on this later.

Sorry to hear this Terry, hopefully you can act now before it gets to be too late. Our biggest mistake so far was being overly optimistic. The work walked in the door for decades and we just got used to it, when it stops it's hard to believe.

Yep, we're trying to branch out into others areas. Our lack of sales experience is really hurting us here and we certainly don't have any dough for a full time salesman. In trying to get reps they are very unexcited about representing a place like ours as they don't see much money in it (our gross revenue has never been much more than a million). The last three didn't even return my calls.

Len I think you know I am an attorney too, and agree with MRM. You definitely need someone more interested in looking at the plusses and minuses of your company and can give sound advice as to the ongoing viability of your company. As I recall you have downsized once. If there are any employees left they may have to go for you to survive. One lesson I think you have already learned is that you should always be out there drumming up business. Never wait for it to come to you. Keep us informed as to what is going on. You never know what ideas may emerge. Not to mention just typing out a problem sometimes is a catharsis.

Thanks Richard I appreciate the very kind offer and you're correct that there are opportunities out there we just need to make that connection. We are very versatile and I'm fully confident we could rise to nearly any manufacturing challenge if we could just get the opportunity.

I couldn't agree more. An accountant will look at your business with an unbiased view, and give you advice to help you make informed decisions. Choose carefully, ask around, you need a bright, competent and honest assesment.

My sense is that you need to downsize and cut costs ruthlessly and tend to whatever core business you see as able to survive long term.

This is not a short-term automotive downturn, it is restructuring of North American business. Smaller is more flexible and safer right now.

And there are thousands of guys in your shoes right now.

PM me if you need a reference in the Detroit area, I know someone who will know who to use. Good luck.

If you seek an accountant, or an "expert" in finance, please find one with manufacturing experience. A few days of an Industrial Engineer's time might be well spent to revue your operations.

My experience is personal finance (although I do have an engineeing degree) so I cannot be of direct assistance.

Good luck. Too bad that the growing economy is not lifting all boats.

Thanks, I'll use this as an opportunity to let you all know about the company and what we do/have done.

My father started this company when he returned from Vietnam. It was literally a 15' x 15' old shack and he made marble sinks, counters, step-stones(remember those:)). From there he somehow hooked up with a guy in the insulation business that wanted a way to pump urea formaldehyde insulation as the pumps on the market were clog prone. So he did and it was a raging success. They went gangbusters on this pump for a year o two I guess then the government declared the insulation a carcinogen and thus the industry was destroyed overnight.

In looking for "what to do now" he went to the Chicago tool show and hooked up with a cold saw(for cutting steel pipe/tube/bar) mfg out of Germany and became a dealer here in Michigan. In short order he found more money in actually cutting tube for mills(high production stuff) than selling them the saws. This was the beginning of our current iteration. Over the years we cut more and more and the connections led to other related work such as production mig and tig welding, drilling and tapping, non-ferrous(aluminum/brass/copper) cutting and machining, you name it and we've done it.

For instance we assembled and welded all the 4wd shifters for every S10/15 truck and Blazer back in the 80's. All the engine bay vibration dampers for the first generation Ford Explorers(The company we did this for went bankrupt, we could never get this work today, they won't even talk to us) We made huge valve actuating hand-wheels for oil rigs for years (lost to China). We assembled and welded the brass and aluminum air horns for Mack and Peterbuilt (lost to China). We cut and machine aluminum extrusions for various companies. We still do precision cut to length work for a couple of tube mills(most of this is automotive such as converters and other exhaust comp). We used to make the tubular portion of the mounting bracket for one of the mini satellite companies (mfg went bankrupt and lost the work to Mexico). An electrical supplier to Ford somehow got wind of us and asked us to help them develop and manufacture a malleable brass crimp ring for wiring harnesses. It was very exciting and we did develop an excellent solution and they loved it. We made them by the millions and were making money again! They let us have it for two years or so before sending the mfg to either China or Mexico I don't remember. Sense a pattern here?

Man I could go on and on, we have worked with plastics to wood and all metals. We have done everything from simple cutting to complete assemblies and sub-assemblies. This actually a big part of the problem when we try to sell as we don't have a definable product. In a way we are too diverse if that makes any sense.

What is your most pressing problem, right now?
Are you able to keep up your payments to creditors/suppliers at this time?
How much longer do you think you'll be able to do that?

Thanks, I was hoping you would respond as I've seen your comments on BK many times and got the idea you were in the business. Regarding the "workout lawyer", is that an actual classification like "divorce lawyer or PI lawyer"? I've never heard the term before.

I have negotiated interest only with my bank on a couple notes and the same with the one big lease we have. These are not behind. We have a line and a couple of cards that are not behind but are close to maxed out. I make all these on time as a priority.

But...I have had to dip into these more and more to keep materials coming in and the reaper is closing in if you will. The cards and line total 100-110k and we have 10-20k available.

I have kept our credit fairly good with smoke and mirrors and could probably get more credit but being personally guaranteed that would only screw my father deeper into the ground.

I also have two lines secured by me for another $30k.

Sorry, I didn't answer two questions there.

What is your most pressing problem, right now?

That I am not going to have the money for materials, insurances, etc.., the monthly beast cannot be slain by the monthly intake.

Are you able to keep up your payments to creditors/suppliers at this time?
How much longer do you think you'll be able to do that?

The first part I covered, the second is tough to say. In a wink I would say a couple to a few months but looking back I remember thinking the same thing a year ago. I have pulled so many rabbits from hats that I deserve a weekend show at the Tropicana.

OK, at this time, it seems like you have enough breathing room to work, and need to focus on figuring out how to increase your income.

On that, a workout lawyer is not necessary at this time. Yes, there are lawyers who specialize in business workouts. It is a recognized term in the field.

As to increasing your income, that's a bit harder for us to help, I think, since we don't know you industry, your contacts, etc. It sounds like you have some good ideas, though.

You sound like a fairly small operation, and honestly, I don't see how an accountant is going to help you. Certainly not a "Big 4" accounting firm. If your small biz is not broke now, it will be after they are done with you. Your biz, on the operations side, does not sound like it has a lot of "fat" on it. Accountants and consultants can help to trim the "fat" from mid to large operations that are being run inefficiently, but inefficency does not sound like a significant part of your problem. Your problem seems to be almost solely a lack of work. An accountant is not going to help with that. That is something that the biz owner usually is in the best position to work through.

I'm looking down the road a bit, and am assuming the biz is set up as a corp., but are there any significant obligations which you or your family has personal guarantees on?

Jeff, thanks for the kind thoughts and for sharing your story. You and I seem to either agree entirely or disagree entirely depending on issue:)

Your dock plate story is one I can relate to and have seen that type of thing myself many times. Good for him and that's exactly the kind of story that makes me so proud of our system. I know we have the knowledge, experience and tools to make our way much the same but there have been mis-steps and pipers are to be paid.

I myself am not afraid of starting over or struggling, I have confidence and determination but my parents should not have to go through this. That is really where 95% of my stress comes from.

Len, I don't know if this has been discussed, or is totally whacked for your biz, but can you get/do government or military contracts? I knew a guy with a machine shop and he did almost all machining of little bits for the military, it seemed to be pretty good and steady work. Don't know how you get that work, though.

(Edit - just read Jeff's post, he suggests the same thing).

Your spot on, we are small and there is very little fat. We need income and we need it fast. Your advice in regards to accountants and lawyers rings true with me and I greatly appreciate your honesty there.

Regarding personal guarantees, well just about everything is. Obviously the cards and the line. The building lease and a couple of other notes.

All told:

Notes - 300k

Cards and line-130k

Leases - 200k equip + five year building at $6,500/mo

Payables are only 55k (running 45-60)

Receivables are @ about 80k (averaging 45 days)

Sales are ~40k- 60k / month right now which is terrible.

I'm surprised you haven't contacted our Governess' office for assistance in converting your business to ethanol production - that's Michigan's future don't you know :rolleyes:

Hey, you've got to keep your sense of humor when things are down! :cool:

http://www.senate.gov/~levin/newsroom/release.cfm?id=258365

Are your leases at market value? I suspect if they are several years old they are overpriced in todays market, esp. for your area.

Renegotiation might be worth a try.

You should also be looking for work in Southern Ontario, they way our/your dollar is you will be competetive.

I would be concentrating on minimizing expenses, not just adding sales. You can be sure that expenses can be cut, so it's worth the time. And I would avoid any personal debt obligations completely. They are not an option in my opinion.

I have thought of that before and we would certainly be interested. I need to figure out how you even get rolling on that. I went through the website maze once or twice a while back but cannot recall my conclusions exactly. One of my initial reservations given my situation is that knowing how gov works I imagine if I start the paperwork now I might see a PO in mid to late '09 if everything goes well:D

My father has been dealing with a couple of congressmen recently though, maybe they can point us to the fast track?? I'm calling him on this now.

Believe it or not I told my dad just yesterday that we should doze the whole place and plant switch grass, then the Jenny would subsidize us:D

The lease is only 9-10 months old so it's not out of whack but the holder is a great guy that will likely work with us if we can show light at the end of the tunnel.

Good point on Canada, I just spoke with a tube mill in Toronto Friday. It didn't hit me until your post on our $ advantage there.

Thanks Wayne that's very generous of you. You are absolutely correct that family issues make everything harder. It's a whole additional layer of complexity and communications are different than in "normal" businesses, some better/some worse.

An alternative to going after a government contract directly, the process may be much faster and easier being a subcontractor to a prime on a major govt. project. Contracts written to the big govt. contractors (Boeing, Lockheed Martin, Northrop) require precedence given to small businesses as subcontractors. Good luck!