I often say, “It is the good times that get businesses in trouble, not the difficult times.” This is relevant in today’s economic climate. Recently, in a combined lender-producer seminar, a participant submitted a written question that read, “What should I do if I didn’t position myself very well when things were good economically. What now?”

Undoubtedly, this type of situation happens for a variety of reasons. Some possible mistakes may have included: failure to build adequate working capital and financial reserves, aggressive expansion, excessive family living withdrawals, and purchases of non-productive assets. Individually or cumulatively, any of these could have fast, significant impacts on future sustainability.

My first piece of advice is to organize your financial statements, including your balance sheet. Determine past results utilizing income statements on an accrual adjusted basis. In this case, one must build a case showing net worth is viable for financing and determine how much, if any, working capital exists. This information allows one to make decisions from knowledge and logic instead of emotion. This is a time-sensitive priority because if you wait too long, you may discover your net worth is quickly evaporating through negative margins and losses.

Second, quickly develop cost of production budgets to determine your current financial status. This is an area where a third-party advisor or outside consultant may be valuable. An outside resource can help determine product profit as well as cost strategies and structures. This is the time that outside relationships such as those with your lender or mentor can be most helpful.

Next, one must take some time for honest reflection and answer the inevitable question of whether or not the business is viable enough to continue. Equally important, determine if your current skillsets, including marketing and management abilities, are sufficient to weather the downside of the economic cycle. If during the good times, a manager was complacent and “shooting from the hip” in marketing and management, perhaps this individual may not have the energy or motivation required to continue the business. Include business partners and spouses in this process, as it is an essential mental exercise for all involved.

With business struggles, perspective is important. Some will choose improvement and move ahead, while others may become embittered, blaming performance on outside conditions and others. If one chooses to remain in business, a positive perspective can be a powerful tool for you and others around you.

In summary, turning around a situation like the participant described will be challenging, but not insurmountable. If a producer chooses improvement, corrective strategies and immediate action are imperative. Examine the numbers so you can make the most well-informed decisions possible. Remember, outside resources may be very useful. Finally, think through your decision well and then, move forward.