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Salvage mission Featured

12:50pm EDT April 25, 2003

The movie "Weekend at Bernie's" features two friends who trick everyone into believing that their dead boss, Bernie, is still alive.

Bob Cohen, president of the Centrus Group, has seen this same plot in the business world.

"It's a Bernie business," says Cohen. "It's a business that is dead but is still acting like it's alive. I've walked into a lot of Bernie businesses and the management is in denial. Their funding is typically with trade credit, and they are extending those lines further and further."

When a business reaches that point, there are three questions that will determine whether it can survive or whether it should be sold.

* Is there a core business? "Core means a product line or market worth saving," says Cohen.

* Is there a management team in place that can complete a turnaround?

* Are there adequate financial resources to complete a turnaround?

"If the answer to any of the three questions is no, then you may have a business that you may have to sell or liquidate and wind down to maximize the cash value for the company," says Cohen. "If you have a core business with not enough cash, you can often find a lender or equity investor that will contribute to the company. If you have a core business with inadequate management -- but you have money -- you can go and get better management. If you don't have the management, you can get the money to get it. If there is no core business, you are dead as a business.

"In the other two cases, you can either bolster the company with an investment or better management, or you can sell the business as a going concern and use the money to pay down creditors. If there is no core business, you are into liquidation."

Business leaders who find themselves in these situations are often led there by ineffective or nonexistent business strategies.

"A business strategy is all-inclusive," says Cohen. "It's not just a sales plan. It's not just who you are going to sell to and what doors you are going to knock on. It's not just about making the best product or the least expensive product. It's not just having the best people or cash plan.

"It's all of those things together. A good strategic plan takes a look at all these aspects and looks at what is likely to happen, as well as what-if scenarios. It also has an effective and frequent monitoring process to see if you are varying from the plan.

"Your management team has to have a good handle on those issues that impact a business internally and externally. Internal issues are things in the company, such as people, product and even competition. Then there are the external issues such as the economy or war that have to be taken into consideration.

"If your plan doesn't look at both internal and external issues, your plan is headed for failure." How to reach: Centrus Group, (330) 864-5800 or www.centrusgroup.com

Countdown to disaster

Bad financials can get executives worried about the future of their business, but the numbers themselves rarely hold the answers.

"The numbers are only a symptom of the problem," says Bob Cohen, president of Centrus Group. "You have to look at the root causes of what makes the numbers go to hell. There are three main things that let me know where a troubled company is at."

* Ineffective communication. "Either someone isn't communicating effectively or isn't listening effectively," says Cohen. "In all cases, it is management's responsibility to tell the employees what is appropriate to support the continued viability of the company."

When communication breaks down, Cohen says a company has one to two years before crisis mode will take over.

* Denial. "When you are to the point where the company is having serious problems, most people in the company will know it, but not the senior management," says Cohen. "Their attitude will be, 'We've been here before and made it through, we'll do it again.'"

When denial sets in, a business has about six months before hitting the financial wall and the numbers start looking really bad.

* Blame. "Blame is when they realize there's a train coming down through the tunnel," says Cohen. "They know they have problems and start looking for someone to blame. Senior management needs to find fault in someone other than themselves, and they often blame the bank or someone outside the organization."

When blame starts, a business has 30 to 90 days before serious financial problems arise.