BUSINESS CHALLENGE: How Much is My Business Worth?
When Andrew led the charge to buy his manufacturing division from its conglomerate owner, he allowed his management team to participate. Three years later, he was forced to fire the plant manager, who demanded what Andrew perceived to be an unreasonably high price for his shares.
The plant manager's advisors built a case for the high stock value using unusual post-takeover cost savings individually orchestrated by Andrew. Profits stemming from these cost savings were non-recurring. Andrew felt he was being beaten with his own stick – but he couldn’t prove it.
KBT&E SOLUTION: Accurate, Indisputable Business Valuation
KBT&E valued the company by comparing it to publicly-traded companies in the same industry based upon sales and financial ratios such as profit margin and debt-to-equity. Our recommended stock value was one-third of the value presented by the plant manager – the results could not be successfully refuted.
Andrew bought the plant manager's shares for $1,500,00 less than the plant manager originally demanded.
BUSINESS CHALLENGE: Successful Entry into New Technology Territory
Martin spent his impressive career in a blue-collar business. After 20 years slugging it out at the plant, he found himself drawn to the "information highway" where he thought of an intriguing way to apply the Internet to his industry. Martin had no idea where to go to seriously explore his idea. He shared the premise with us during one of our ongoing communication sessions about his financial needs.
KBT&E SOLUTION: Share the Knowledge – Empower Each Client
KBT&E introduced Martin to another KBT&E client with a proven track record of high-tech start-up successes. Although the "techster" was busy in her own new venture, she was able to guide Martin on the nuances of structuring a new business-to-business internet application.
Martin raised “seed capital”, assembled his Development team, and built his prototype Web site. He is currently negotiating for mezzanine financing as a precursor to establishing beta sites.
BUSINESS CHALLENGE: Finding the Right Person for the Job
William manufactures a large portfolio of patented products in his plant. He spends a tremendous amount of money developing new patents and is dependent on the efforts of a skilled scientist. The scientist overseeing this research effort left the company, leaving a significant gap in their R&D operation.
William and his team desperately needed another qualified scientist, but the demands of day-to-day operations impeded their progress.
KBT&E SOLUTION: Let Us Handle Your Non-Routine Projects
KBT&E managed an exhaustive search to locate the best person for William’s company – our effectiveness in performing this role for William was a direct result of our ongoing communications and two-way sharing of information. KBT&E found two (2) qualified candidates for the scientist position from a series of web postings, response follow-ups, and detailed interviews.
Without missing a beat in his “business as usual” operations, William now has a qualified scientist on the payroll.
BUSINESS CHALLENGE: The Need for an Equitable Buyout Agreement
Millard and Zachary were 50/50 owners of a high tech equipment business. Due to differing goals, Zachary wanted to buy Millard's share of the business.
The buyout negotiations were friendly, but they extended over months. Millard believed a new level of success and prosperity was "right around the corner" and did not want to sell his share at current value.
KBT&E SOLUTION: Consider Both Current and Future Value
KBT&E showed Millard and Zachary how to structure a buyout paying fair current value and possible future value at some point down the road. We structured an objective system based on financial results and pegged Millard's contingent future payment to a formula using this system.
More than halfway through the buyout, things are going well.
BUSINESS CHALLENGE: Ever-Increasing Insurance Cost
Franklin and James own a company that spends over $1,000,000 a year on property insurance premiums. After the tragic events of 9/11/01, insurers proposed premium increases of $400,000 to cover the business.
KBT&E SOLUTION: Creative Insurance Planning and Implementation
KBT&E recommended the services of a specialized insurance firm to implement an offshore insurance captive to cover the risks in an alternative fashion. Franklin, James, and key employees own the captive. The captive insured the first $1,000,000 of loss and laid off excess loss coverage on reinsurers. Since the former premium level of $1,000,000 equaled the risk insured, the captive was funded with the same cash previously used to pay premiums.
Franklin and James got lucky! Losses for the first year were less than $50,000. After paying premiums for excess loss coverage to reinsurers, the captive kept over $800,000 (which would have normally gone to an insurance carrier). When last seen, the guys were planning a trip to the islands.
BUSINESS CHALLENGE: Loss Protection – Inferior Manufactured Goods
John is a middleman who earns his profits by matching customer product needs with manufacturers. Increasingly, the items he sells are manufactured outside the U.S. where it is customary to require full payment for merchandise prior to shipment.
In recent months, two separate orders of merchandise were of inferior grade when received by John's customers. Since these orders were shipped directly by the manufacturers to the customers, John felt he was entitled partial reimbursement from the manufacturers for the cost. Unfortunately, the manufacturers did not agree. Since the customers would not pay for inferior merchandise, John lost the cost of product manufacturing and shipment he was forced to prepay.
KBT&E SOLUTION: Customized Specialty Insurance Coverage
When John came to KBT&E for help, we enlisted the help of a sophisticated insurance broker on John’s behalf. John purchased an insurance product to essentially guarantee the quality of imported merchandise by documenting minimum acceptable product specifications in the purchase agreement.
John could enjoy the peace of mind that comes from being protected if inferior goods resurface in his dealings with foreign manufacturers.
BUSINESS CHALLENGE: Dealing With a Bad Hiring Decision
James owns a manufacturing plant. Years ago he hired a college professor to run the research and quality control functions.
The professor complained about being underpaid, about the quality of employees, about the lack of research equipment – the list went on and on. He was so busy complaining that he had little time to do his job. Since the professor had sterling academic credentials but appeared to be a "troublemaker", James struggled to resolve the problem.
KBT&E SOLUTION: Effective Hiring and Termination Practices
KBT&E conducted an in-depth performance evaluation of the professor on James’s behalf, highlighting the unfulfilled promises the professor made to originally secure the job offer from Thomas.
We documented how the professor’s salary was a small portion of his cost when compared to the expensive mistakes that had occurred in product quality control on his watch.
We detailed all the research gizmos he had been granted through the years, noticing the dust they gathered as he continued complaining about inadequate research equipment.
The review concluded with a statement that James was well within his rights to insist that the professor work more and complain less.
The professor quit within a year. Because of various misdeeds KBT&E helped uncover, James was able to avoid legal problems on the professor's exit.
BUSINESS CHALLENGE: Bad Debt Collection and Recovery
Thomas bought a portfolio of old debts and judgments originally acquired by the Federal Deposit Insurance Corporation (FDIC) in various failed-bank takeovers.
Thomas and his team collected many of these "consumer debts" but tossed the complicated (yet high dollar) business loans into the corner.
KBT&E SOLUTION: Be Vigilant in Uncovering Ways to Earn Money For The Client
While visiting Thomas to discuss other financial matters, we noticed the pile of loan documents. After we analyzed these files over a two-day time period, we designated a handful of loans as worthy of collection efforts.
Unable to focus on these debts given his normal workload, Thomas asked us to attempt to collect the debts. From July through January, we chased one of the debtors from Arizona to Michigan.
After tiring of the chase, the debtor settled by paying Thomas $435,000 against a $600,000 judgment. Thomas, being exceedingly grateful and generous, paid a large contingent fee to KBT&E.