Excella Group – Frequently Asked Questions

FREQUENTLY ASKED QUESTIONS

What is a turnaround specialist?

Turnaround Specialists are professionals who understand crisis management. They may be CPA's, lawyers or management consultants. The specialist will work with your management team to stop cash flow hemorrhaging, develop short-term and long-term plans of action, negotiate with lenders and creditors, assist in maximizing assets to solve problems, and advise on steps to protect your business. A turnaround specialist also assists in restoring and building your most important asset - your credibility with lenders, vendors and clients.

How much do your charge for your services?

Our turnaround management fees vary depending upon the extent and complexity of the situation. Please contact us to discuss our fees in detail. However, as a general rule, our fees are as follows:

Monthly -- $20,000
Weekly -- $5,500
Daily Rate -- $1,250
Hourly Rate -- $175
Terms -- 50% payable before arrival, and 50% at the completion of the engagement;
Client must pay for all out-of-pocket expenses (travel, hotel, meals, car rental, etc.).

When is a turnaround specialist needed?

If you find yourself in one or more of the following situations, you might need a turnaround specialist. Contact us to privately discuss the details of your particular situation.

If your business is not been generating enough cash flow and the situation is not likely to change any time soon.
If your industry has become much more competitive recently. And, as a result, your company has decreased its prices significantly to compete, and this action has reduced profitability and has caused a liquidity problem. More importantly, if you are in default of some of the covenants that govern your bank credit line.
If your partner (or anyone else), who until recently has had your complete trust, has misappropriated a large sum of money. This has left your business depleted. More importantly, you can't pay your creditors on time and, though you have already talked with your bank, they won't extend you additional credit.
If your business partner recently passed away. You've never been actively involved in the business and now the senior employees at the business are calling you and asking you to make decisions in relation to the daily conduct of the business. One of your competitors has asked you to sell the business to them.
If your bank won't increase your credit line and/or your bank has asked you to find a new bank.

Why do I need a turnaround specialist?

Nobody knows your business better than you do. However, the skills it takes to create and grow a business are usually quite different from those required to effectively turn around a distressed business. Our turnaround specialists have crisis management skills, cash management and corporate finance experience; relationships with bankruptcy attorneys and DIP financing providers; and the ability to negotiate an out-of-court workout and an operational restructuring of your business. At Excella Group, we don’t claim to be experts in your industry. But, for that very reason, you are unlikely to be as objective and single-minded about restoring your business to profitability as we are. Excella Group’s experience in turning around financially troubled companies across a broad range of industries has proven to be an ideal compliment to the industry-specific expertise of a corporate management team. Most often, you need both to make a turnaround work.

What are the financing options for a distressed company?

Your financing options fall into two categories - internal and external. Internal funds are typically generated from three areas: (1) careful management of your Balance Sheet -- particularly working capital items, (2) reorganization of the operational aspects of your business, and (3) cash advanced (characterized as debt or equity) by the owners. External sources of finance include the extension of existing credit lines; new credit advanced by asset based (receivables and inventory) lenders; DIP financing; factoring; the sale of assets (and possibly their lease back); the sale of a division of the business; and vulture-type investment.

Most businesses can benefit significantly from better management of their working capital. And, the need to reorganize your operations was likely a contributing factor to your liquidity crisis in the first place. Consequently, both of these options will be implemented. Beyond that, the mix of financing options selected will depend upon and be tailored to each individual business.

What are the main elements of a business turnaround?

The elements involved in a business turnaround will vary with each company. But, as a general rule, a business turnaround will involve four basic stages as follows:

Management of the immediate crisis (creditors / customers / employees / owners);
Obtaining new financing for the company to create some breathing room;
Negotiating debt forgiveness and/or compromise agreements with your existing creditors (either in a bankruptcy setting or in an out-of-court mode); and
Implementing the operational reorganization to make your company competitive and profitable once more.

Do you work for me or the bank?

We work for you, exclusively, all the time. Our relationship with lenders is at arm’s length and they understand that. However, the bank will always do what is in their best interest, so our job is to help you create and implement a turnaround plan that makes sense both for your business and the bank. Excella Group makes sure that turnaround strategies are supported by clear analysis and hard facts. And when they are, lenders are likely to support the plan.

How do I know if my numbers are valid?

It is not uncommon for our clients to question the validity of their own numbers. In fact, we encourage it, because financial statement preparation is not an entirely objective exercise. Inventory valuation, accounts receivables, even product costing are based on assumptions that over time may become incorrect. Excella Group helps clients reassess those assumptions and restate financial results and projections to accurately identify the current problem and set the stage for implementation of a turnaround plan.

How should I deal with creditors?

It is very difficult for management to make the transition from dealing with creditors in a business-as-usual manner to informing them that their debt with your company may have to be restructured. There are, however, effective ways of giving creditors the facts in a way that encourages them to continue to support the company’s business. The involvement of Excella Group can range from coaching clients on how to deal with creditors to direct intervention and negotiation. Avoid signing agreements or giving a personal guarantee without independent advice.

What is crisis management?

The speed at which a company responds to a crisis often determines whether the company will survive. The best team to resolve the crisis is not always the same team "involved" in the crisis. Crisis situations may require the assistance of a turnaround specialist who understands the trauma of reorganization and is experienced in expediting actions required for continued viability of a business.

What if my business isn’t viable?

It’s our responsibility to give you an objective assessment of your business. If we conclude that it is not viable, this confirmation is much preferred rather than a long and agonizing effort to save it. In this case, Excella Group is experienced in creating an optimum exit strategy for the business and its owners.

What if bankruptcy is my only option?

The first thing you should do, with the help of a turnaround specialist, is to attempt to restructure your business without filing bankruptcy. A bankruptcy is required when a creditor or group of creditors have taken a course of action that will force your business into a desperate situation that requires filing. These include attachments, tax liens and contract terms that are impossible to satisfy without destroying your business. Most bankruptcy attorneys will advise you that bankruptcy is an act of last resort. It is expensive and time consuming, and most debtors do not emerge from bankruptcy.

If bankruptcy is absolutely necessary, do not wait until the last minute. The best bankruptcies are ones that have been well planned. Sometimes reorganization plans are agreed to with major creditor groups prior to filing. These plans are called pre-packaged plans and are becoming quite popular.

A company can be saved if it has sufficient assets or sufficient cash flow to survive and maintain the level of service required to keep its customers. If adjustments cannot be made to continue the level of service, at some point there will not be enough cash to support the minimum needs of the company and its doors will close. The purpose of bringing in a turnaround specialist is to identify these levels of service and design a program that allows for the survival of the company.