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mcjazzy · 05-31-2010, 07:44 PM

I have the opportunity (possibly) to propose the take over a poorly managed business that has a ton of potential. It is a startup that has earned a solid footing in the national market, has accreditation and pull in the industry. The issue is that the company managed its growth poorly and there is some debt. Cash flow is sustainable for a very limited staff. Essentially the growth needed is in sales and marketing. I am looking for some pointers or references that I can use that can help me better understand the due-diligence process. I want to determine if this would be worth doing.

Thanks!

briansol · 06-01-2010, 11:51 AM

It would be unwise to offer any suggestion either way without tearing apart the balance sheet.

I think the biggest thing to consider is:
How long will it take to pay off the debt while still paying staff/yourself if you increase sales 5%? 10%? 20%?
and at what cost to earn that X% (sales staff, ad costs, cold-calling, maillings, etc etc etc)

If the numbers sound feasible, it might be something to consider.

If the brand image is still good, you're at a huge advantage. If there are brand issues/publicity/etc as a result of this debt, it might be something else to consider as well.

"under new management" works for about a month. After that, you've either proved everyone right, or you're still the exact same as before and you'll end up in the same hole the biz is now.

titan22 · 06-30-2010, 08:03 AM

I'm with Brian. You can't just decide on a company without tearing it apart from the inside. you must know all of the details. Debt, financing, revenues, market position, etc. Now if it something like a restaurant, it's a little easier to assess than a say something like a financial services company.

05-31-2010, 07:44 PM	#1
mcjazzy Greenhorn Join Date: May 2010 Posts: 2 Rep Power: 0	Take Over a Failing Business.... I have the opportunity (possibly) to propose the take over a poorly managed business that has a ton of potential. It is a startup that has earned a solid footing in the national market, has accreditation and pull in the industry. The issue is that the company managed its growth poorly and there is some debt. Cash flow is sustainable for a very limited staff. Essentially the growth needed is in sales and marketing. I am looking for some pointers or references that I can use that can help me better understand the due-diligence process. I want to determine if this would be worth doing. Thanks!

06-01-2010, 11:51 AM	#2
briansol Savings Advisor Join Date: Aug 2006 Location: Central CT Age: 32 Posts: 761 Rep Power: 7	It would be unwise to offer any suggestion either way without tearing apart the balance sheet. I think the biggest thing to consider is: How long will it take to pay off the debt while still paying staff/yourself if you increase sales 5%? 10%? 20%? and at what cost to earn that X% (sales staff, ad costs, cold-calling, maillings, etc etc etc) If the numbers sound feasible, it might be something to consider. If the brand image is still good, you're at a huge advantage. If there are brand issues/publicity/etc as a result of this debt, it might be something else to consider as well. "under new management" works for about a month. After that, you've either proved everyone right, or you're still the exact same as before and you'll end up in the same hole the biz is now. __________________ Any thoughts or opinions are that of my own. Research your buys and sales on your own. I am not a stock broker.

06-30-2010, 08:03 AM	#3
titan22 Super Moderator Join Date: Aug 2006 Location: West Coast Posts: 773 Rep Power: 7	I'm with Brian. You can't just decide on a company without tearing it apart from the inside. you must know all of the details. Debt, financing, revenues, market position, etc. Now if it something like a restaurant, it's a little easier to assess than a say something like a financial services company. __________________ This post does not express the opinions of the website, it's members, or its owner. Always invest with caution and do proper research. If you have questions, consult a paid, investment professional.

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