Other than the standard measures of analysis (Net Profit, EBITDA, Gross Margin, Leverage, etc), how to convince or reassure the lending community or investor group that this business makes sense to finance or that it will make sense to finance in the future?

The operation will be studied for any specific advantages it has over the average in the industry. The benefit of these advantages will be highlighted to show the economic impact. In a commodity type market, the concept of being a “low cost producer” will be explored and explained. In a value added market, the concept of “market differentiation and market acceptance” will be explored and explained.

Each product, process, division, or crop will be analyzed for variable margin contribution. Costs will be compared, where possible to the industry and advantages or disadvantages will be pointed out. Unprofitable products, processes, or crops will be pointed out and recommendations for consolidation efficiencies will be made. Lost leader products will be analyzed and justified.

Overhead will be laid out and explained. Management staff will be analyzed for efficiency and effectiveness. Often additions to the management staff; CEO, COO, CFO, IT, accounting, sales, marketing and production supervision may come to light and these will be pointed out and an action plan for correction presented.

Where applicable, product pricing, sales and marketing strategies will be studied and compared to the industry. A market definition, penetration and product pricing justification study will be made for each product. The effectiveness of the sales team will be studied. Strategies for food service and retail markets will be analyzed. Margin contribution for each product will be analyzed and justified. Product quality and customer satisfaction will be analyzed and quantified. Customer queries can be done to prove customer satisfaction.

Where applicable, competitors and/or competing processes or products will be analyzed and studied.

Past historic profitability and cash flow performance will be studied in detail to show unusual occurrences such as specific catastrophes, excess management compensation, specific efficiencies or inefficiencies and certain expenses, penalties, interest or fees that can be eliminated in the future.

A plan of action will be presented with specific recommendations for any corrective actions necessary. This may involve personnel changes, new capital investment, the liquidation of certain assets, factories or divisions, a change in product or crop mix, and a change in pricing or marketing strategy. A new economic projection will be developed showing the effect of these changes.

Your lending relationship has been assigned to a Special Asset or Loan Adjustment Group within your bank.

One of the most important aspects of a lending relationship is the confidence the lender has in the borrower. Many times when a loan relationship is transferred to the special assets department of a bank, the lender has lost confidence in the borrower, the borrower’s ability to make a profit or service the debt, the borrower’s ability to make the necessary correct decisions or simply the bank does not understand what is going on within the borrowers business. Most often it is a combination of all of the above. Hiring a reputable outside consultant is a very effective way to re-establish confidence within the bank that you can and will fix the problem in whatever form or fashion that may turn out to be. Chuck Hoyt has vast experience with special asset situations and is very well regarded by agricultural special asset personnel and has earned a reputation for being very capable, fair, honest and straight forward.

Chuck will study the business, work with the ownership and/or management and formulate a plan of action that can involve process or product changes, cost reductions, personnel changes, overhead reductions, asset liquidations, debt replacement, equity infusion or simply the provision for time. Very often it is a combination of many of those factors. The banks acceptance of the plan and continued cooperation will be greatly influenced by the level of confidence they have that the plan will be carried out and accomplished as planned. An outside consultant that the bank has confidence in will be instrumental in this process.

Administration is not providing accurate information showing the information you find useful. Your bank is losing confidence in the information being (or not being) provided and is pressuring you for more or different reports.

An evaluation will be made of the processes and procedures administration is performing now, what results are occurring and what results are desired that are not occurring. This can include an accounting type of analysis as well as an analysis of the management information flow. New procedures if necessary will be designed. Thereafter the answer often lies in job duty organization among the personnel, ability level of personnel, personality conflicts among personnel, and the actual number of personnel. A new job duty organization will be outlined and, if necessary, personnel changes will be conducted and if new personnel are required, a search, interview and hire process will be performed.

In banking relationships, borrowing base accuracy is often an issue. This would be an example of how an analysis of the procedures and personnel used in the production of the borrowing base could save the entire banking relationship. Another example is process cost control. Is the most meaningful information being collected in time to make a difference?

There is squabbling and accusations among investors, partners, business family members, or employees about where the business is headed and/or certain management practices.

Investors, business partners, family members, employee’s and/or vendors (banks are included here) often have differences that can and should be resolved out of court. Chuck Hoyt has a great deal of experience and logic aptitude in “fairness” issues. On numerous occasions he has been asked to manage actions or situations among disputing parties. Chuck will come into an operation, study it, learn the issues involved and provide the independent third party input that has smoothed a number of tense situations. This can be as little as an expressed opinion, or as involved as being an independent manager to run the operation until other arrangements can be made.

The operation has grown to be much more complex than in the past, margins have become too thin and you need to take a closer look at levels of volume, product profitability, raw product cost ranges, energy factors, and personnel requirements. To say nothing of the fact your overhead has become too large.

In order to address all the factors that make a business “tick”, it is extremely useful to create a detailed economic business model that will enable you to study such things as production volume, pay scale, energy rates, raw product prices, and sales prices and product margin contributions. This will enable a variable contribution analysis to be made and the level of overhead required for that mix of activity. This should be combined with a market study of the product mix, an analysis of your competitors, showing their products, prices and production capabilities. A new mix of products, operations or prices might be suggested from this. A new model showing these affects can then be made and compared with existing operations.

Charles Hoyt Company can perform this process from the ground up by interviewing management, employees, customers, vendors, and industry experts to determine the pertinent factors and operating criteria. Chuck Hoyt has designed and built numerous economic models that start from the ground up and have encompassed even such detail as every motor’s kilowatt usage to project energy expense. The company has preformed market research, customer queries, product margin analysis and determined competitor profiles.

This analysis can be made only of one segment of the operation or the total. The analysis can be used to project a very detailed picture of the business needs and profitability at varied levels of activity or used as a general guide. It is often done for multiple years and used in conjunction with the need to provide financing or capital infusion.