Does Your Business Have Cracks in its Foundation?

Dave Cain | May 9th, 2013

During the recession, the fiscal cliff and the so-called recovery, did your business develop cracks in its foundation? If you answered “yes,” you are not alone. Many businesses of all shapes, sizes and industries are still trying to rebuild cash flow strategies and bottom line results. Do any of the following eight foundational cracks apply to your business? Take a few minutes to answer the following questions and consider if you need to do some repair work.

  1. Entity Foundation: Is it time to examine your entity structure? Should you be operating as a C corporation, S corporation, general partnership or a limited liability company taxed as partnership or corporation? Should you consider preferred units and founders’ rights? The tax laws and economy continue to change. Has your entity structure changed accordingly?
  2. Capital Structure and Banking Relationship: Are you utilizing your line of credit properly and integrating it with your cash flow strategies? It may be time to review your loan covenants and determine if the covenants have changed in accordance with your business model.
  3. Buy-Sell Agreements: When was the last time you updated your buy-sell agreement? Has the value of your business changed during the past few years? What options do you have to increase the visibility and value of your company?
  4. Organizational Agreements: Do you have outdated leases or loans with related parties? Does your company have management or royalty agreements with related companies?
  5. Insurance Review: How will the new health care reform rules impact your business? How will the “pay-to-play” concept impact your cash flow? Do you have outdated life insurance policies or corporate-owned policies?
  6. Lean Principles: Do these economic times present an opportunity for your business to apply strategic Lean principles to your business operations?
  7. Accounting System and Software: Is your accounting system providing meaningful and forward-looking information? Have you considered different accounting methods for financial reporting and income tax reporting?
  8. Benefit Plans: Your employees are your business’s most important resource. Is it time to review your benefit packages to determine if the benefits are competitive in the marketplace?

If you find your business is experiencing any of these foundational cracks, maybe it’s time to contact your trusted financial advisor to evaluate what repair work you need to do to reinforce your business’s foundation. With so much economic uncertainty in our world today, don’t wait until it’s too late to fix problems.

 

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