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How To Take Control Of Companies With No Capital
Everyday sees opportunities for people and firms to take over companies that are in financial difficulty, and if that company is near bankrupt, it is not unusual for an outsider to take over and return the company to a profitable state.
You will find such businesses looking in the local and national newspapers, from business brokers and property agents who specialise in business sales. Once you have located such a company, get all the information you possibly can on how much it owes, its asset value, and why it is having problems. Is it due to marketing, could its products be produced cheaper, and when was the last time the company showed a profit?
Once you have all this information, work out on paper how much it is worth. This worth is what the company would fetch if it were sold. Put another way, the value of assets minus its liabilities.
Once the company worth has been established, try an offer of between 25% to 50 % of this amount. The idea here is not to offer cash, but promissory notes, with, say, an option to pay over a ten year period.
If the owner of the company refuses, try again; this time offer a 5 year paying off period for promissory notes, and try offering a profit sharing plan as well. Further to this, you could offer the owner(s) part ownership by issuing them with stock or shares.
Remind the owner(s) that due to the parlous state of the company you will have to withhold payment on promissory notes and dividends to shares for at least a year, in order to give you time to make the company either profitable again or else sell off the assets to raise cash.
Use the advise of a solicitor and have him or her draw up terms, closing the deal as soon as possible, and projecting yourself as the saviour of the company. Above all, always project a professional image. Quite often take-overs are by people who do not know how to run the business they are taking over. As it is your concern to make the business profitable again, employ business and marketing professionals to help you in your task.
Those already in the company may resent an outsider making changes - be ruthless - remind them that thus far their own contributions have directly or indirectly led to the company approaching bankruptcy. The same goes for owners and shareholders: keep on the present track and go under or grasp the alternative salvation you are offering; a hard decision?
After take-over, arrange to meet creditors individually. Remember, the creditors are concerned that if the business goes under they stand little chance of seeing the smallest
percentage of the debt owed being returned to them. Offer to pay from one third to one half of what is owed, and then with nothing for the first year, and over instalments of up to 10 years. You might think creditors would not put up with this type of offer, but when the alternative is being paid perhaps nothing at all as unsecured creditors, if the company goes bankrupt.
Having come to agreement with your creditors, have them sign a letter confirming this new agreement. You have now reduced the company's debts by at least 50% or more; given the company a breathing space of at least a year regarding repayments, and has cost you nothing - just negotiation.
Your next trick will be to look at assets owned which may not be crucial to the day to day running of the business; sell anything which is not essential: machinery, copyrights, property, vehicles etc. You want the best price in the shortest possible time.
Use your marketing and management professional to plot a way to recovery. If the sale of assets has not produced enough cash, you could always form a partnership of professional business people who have available funds, but your business plan must show them exactly how you intend to return the company back into profitability.
You may need to discontinue certain products and concentrate on what the company does best - back to basics. If part of the operation has been running at a loss with no immediate hope of a turnaround, wave it goodbye. Ruthless? Yes. Unless you strip your costs to the bone, the business will likely fail.
There are many books available on how companies have been saved from collapse and are invaluable sources for someone looking to turn a company around. John Harvey Jones, the famous trouble-shooter has written several books, such as "Back from the brink" and "Managing to survive".
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