Stegmeier, beset with sleepless nights, came agonizingly close to losing a company he had spent years building into an industry leader. “But I wasn’t ready to give up.”
Even the best entrepreneurs can hit a bad patch that threatens the very survival of their business. Recognizing the warning signs of trouble and taking decisive action to turn the situation around can make the difference between disaster and embarking on a new growth phase.
“Economic cycles are inevitable. Businesses have to be ready for them,” says René Leduc, BDC’s Vice President, Business Restructuring.
Eric Bisson agrees. “The good businesses learn from their mistakes,” says Bisson, director of BDC’s business restructuring unit for Western Canada.
He has worked closely with Stegmeier to help turn Kaymor around. The company makes and repairs specialized equipment for the oil, gas and other resource industries.
Sales began drying up at a time when the firm was $3 million in debt, largely because of a new 1,700 square-metre (18,000-square-foot) building it had moved into just before the downturn.
But Stegmeier was loath to lay off highly skilled workers because he worried it would be hard to get them back when sales picked up. Yet, wages accounted for 45 percent of expenses.
By mid-2008, Stegmeier realized he risked losing his business. He slashed his workforce from 42 to 25, but that wasn’t enough. He approached BDC for help to save his company.
Back from the brink
Bisson remembers being impressed with Stegmeier’s determination to keep going and his willingness to do what was needed to turn his business around.
Stegmeier proposed a plan to cut costs and make Kaymor more efficient. He found ways to make operations leaner and reduced fixed costs by 25 percent by finding cheaper suppliers and savings on utilities, office supplies and other non-operational expenses.
Recognizing Stegmeier’s efforts, Bisson agreed to allow Kaymor to postpone principle payments on its debt to BDC. Stegmeier kept Bisson informed of his progress with monthly reports.
These days, Stegmeier is glad he sought help and is now seeing the payoff from his hard work. His company is profitable again; revenues are back at their 2008 levels and growing.
“It shows you really need to watch what you’re doing and run a tight ship,” Stegmeier says. “Now we’ll be more prepared for next time.”
Business Survival 101
Review your costs, and get as lean as possible, even when you’re not facing a cash crunch. Also keep an eye on your balance sheet. Strive to keep on top of technological and market changes, so you are better placed than competitors to weather economic storms.
2. Contingency planning
Planning could save you a lot of hardship if you’re hit by a sales slump. Prepare a contingency plan that covers red flags to watch out for, such as the loss of an important client or a sudden increase in costs.
3. Act quickly
Don’t delay in taking decisive action if trouble looms. And don’t be shy about seeking outside advice if needed.