Saving a distressed family business

Many family business owners’ reaction to the recession and mismanagement of finances hurt their profits and viability. However, by making some important changes to their strategic business plans and improving communication with business partners, these companies can again become prosperous.

The first step is to determine whether the business can be cash flow positive at the current sales level or at lower levels, if sales continue to decline. A review of historical trends will reveal whether the company is viable at the current sales and gross margin levels.

In addition to controlling costs through overhead and workforce reductions, the sales mix may need to be adjusted. This might decrease incremental profit dollars but improve overall profitability. If these steps cannot be completed, it’s time to look at options for selling the company.