Let's start out with a hypothetical question – at least I hope it's hypothetical. If you were a vampire, would you feed on healthy or sick people? I would feed on healthy people to get better quality blood. Of course, I don't have much experience in this area other than watching “True Blood” on HBO.
Two months ago, I met a business vampire (consultant), who sucks the blood out of sick companies. He focuses on sick companies, because no healthy company would ever invite him in. And, we all know a vampire needs an invitation to enter.
I have (or had as it turns out) a client in the construction industry, who has been in financial trouble for the last year at least. His business has suffered from the recession as have almost all construction contractors. But his business has a fundamental problem most other construction contractors don't face. He has to order and pay for his materials six and sometimes nine months before he gets paid. He has a custom product that requires a month lead time to get from the manufacturer. Then,he has to hold the material until almost all the other contractors on the job are finished to install his product. If the other contractors are late getting done, he has to wait. If they get done on time, and he isn't ready, he faces financial penalties. His business is a really tough business.
Of course, he needed good bank financing, and I helped him find a bank that generously provided that financing. But over time, his revenue began to trend downward with the recession. He faced serious problems keeping his bank line of credit within terms while still paying vendors to get material for new jobs. Eventually, he was forced to violate the terms of his bank financing, and the bank wanted a plan to get back within terms. That plan would almost certainly involve a new capital source. In case you haven't noticed, not many investors are interested in financing construction businesses in trouble.
When the bank became insistent on cutting its exposure, Fred began a desperate search for anyone, who could potentially rescue the business. I introduced Fred to a reputable investment bank, who began a search for potential merger partners. The investment bank actually had a couple of prospects. However, in the middle of putting together the financial information for the potential merger partners, Fred was introduced to Greg. Greg told Fred that he had investors just waiting to invest in fine businesses like Fred's – even businesses in trouble. Fred would only have to give up a minority ownership interest, and he could operate the business as before. All Fred needed to do was hire Greg.
Fred scheduled a meeting with the bank. When I showed up for the meeting, Fred introduced me to Greg, who had brought along his trusted accountant, who looked like the crypt keeper. He was so old, I wasn't certain he would survive to the end of the meeting. After exchanging a few pleasantries with the crypt keeper, I determined that he knew absolutely nothing about the construction business.
Before the banker showed up, the four of us had a brief pre-meeting meeting to come up with a plan to present to the bank. Greg and the crypt keeper had absolutely nothing in mind to present to the bank. I offered a plan where the bank would provide additional capital for new jobs in exchange for receiving all of the profit from those jobs. That way, Fred could get the material for new contracts, and the bank would be able to gradually reduce its exposure as the line of credit was paid down. My plan wasn't perfect. There ain't no perfect in this situation. Fred would have very little money for overhead expenses, which meant he would have to make deep cuts. But he would live on to fight another day. Greg opined that my plan was near genius. The crypt keeper wheezed in agreement.
When the banker arrived, we presented my plan. The banker, who is a personal friend and someone whose business opinion I greatly respect, was non-committal. I had anticipated this. He agreed to take the proposal back to the bank's other executives. I had told Fred this was going to be a tough sell. At least, Fred was still in the game.
After we completed the discussion of my proposal, during which Greg and the crypt keeper thankfully kept quiet, Greg launched into his presentation. He stood at the head of the conference room sketching out his vision of the world on a flip chart. His first phrase to the banker was, “You know you can trust me.” When I hear someone lead with that, I know the world is about to come to an end. Of course, the banker had no clue who Greg was or what he was up to.
Greg continued on, spewing forth about the difference between venture capitalists and vulture capitalists and how you never want to deal with the vultures. Of course, none of this was remotely relevant. The banker just wanted a plan to get repaid. He just nodded politely throughout. I was mortified that our good proposal might be forgotten after Greg's presentation. Any college professor would have failed even a freshman business student for giving that presentation. There wasn't even a hint of substance or a plan to pay the bank except with some unnamed source of either equity or debt capital, who was ready to invest in two weeks. Mercifully, the meeting soon ended, and the banker left.
Greg, Fred, the crypt keeper, and I walked from the conference room to Fred's office. On the way, Greg told me how impressed he was with my plan. He told me he had a lot of important friends – like Lindsay Lohan's father. Greg told me he had vacationed with Lindsay's father in the Hamptons, and that he would soon introduce me to all of his important and rich friends.
When I got home that night, I told my wife, Laura, “We are damned.” Instead of “damned” I actually used a synonym for coital relations that begins with the letter “f”. I think I also added “doggie style” to the phrase.
The two weeks Greg had promised the banker soon passed. Now we are at two months with no sign of any money. Greg hired his wife, Mrs. Dracula, to suck out all the blood even faster. Then he fired all of Fred's office staff. Of course, there is no investor and no money. Greg is a vampire, who feeds on nearly dead business owners. He isn't even a competent vampire let alone a real consultant. The moral to this story is simple, never invite a vampire (consultant) in to run your business.
On a happier note, I now get the popularity of yoga. A couple of days ago, I was doing my normal stretching routine at Lifetime Fitness. My wife was scheduled to take a 3:30PM yoga class. As I finished stretching, I smelled a familiar acrid odor, that could have come from the psychedelic 1960's, wafting out of her slightly ajar classroom door. Now I get it. Yoga is a bunch of women who get high, lie down to nap, and call it exercise.
I have started a new exercise class for men. It involves drinking beer, watching sports, and belching. I call it beerobics. Last Friday, we held our first class at Buffalo Wild Wings. Mike Otto, Neil Richman, Jon Butt, and I worked out together. We were exhausted afterward. I needed a good ten hours sleep and four Tylenol to recover.
Thanks for reading. Check out our real S&K web site at www.skcpas.com. You'll find real advice there. I promise.
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