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ALAN OAKES publisher ajoakes@aol.com

ls your company in trouble?

Like all businesses, we have a few clients who are always a struggle to collect from (although thankfully not too many). While most of us think it is mostly young companies that go under, I have seen many long-time industry leaders go under as well. Now while it is true that only about 50Vo of companies make it past the four-year mark, there are many factors that can start even the best companies sliding to oblivion.

Sometimes the hardest thing to explain to colleagues has been why successful profitable-on-paper companies have gone out of business or been decimated to a fraction of their former size. While there is always plenty of blame to go around, interestingly it is not exterior issues that normally cause a downfall. Mostly internal issues have been the cause of trouble, and more often than not because the signs have been neglected by senior management.

The rising number of bankruptcies and increasing interest rates should serve as warning signs to quickly address problems in your own company-or in the companies that you do business with.

One of the biggest causes of failure is the seeming need of corporate management to buy or start companies that are far from their core business. I have learned the hard way that skills in one sector do not necessarily generate success in another industry. Indeed, how many times do you see in the newspaper that companies or divisions are being sold off because they no longer fit in with the main core product line? And yet, many of these companies or products were probably bought only a few years earlier.

For example, at one book publisher I worked for, we strayed into producing software. We lost our shirt over the next 18 months as we struggled to bring product to market-the biggest single asset we had as a book publisher- and we ended up with a large write-off. If the investment is not a fit with your core business, don't make it.

Entrepreneurs are often their own worst enemy. While it takes great guts and sweat equity to start a business and make it successful, many do not know when to hand over the reins to professional managers. I have worked for some pretty headstrong owners. Unless they are open to input from subordinates, at some point the business outgrows the skill set of the owner. Experience at a number of levels showed that they were often great marketers or inventors, but they were not skilled financially, and often ignored or disbelieved waming signs.

I remember some years ago installing a new computer system in our company, and the conversion became an absolute nightmare when we realized that we could not shift information from the old system to the new system. We caused complete chaos for many of our customers and lost a fair amount of business in the process, when a number of customers gave up on us. If you cannot send out invoices or produce packing slips, especially if you are under capitalized, you are in great danger. The main things I learned over a number of conversions are the need for truly careful planning, great training, and phasing the conversion into small chunks-not all in one go.

Of course, many companies have problems due to cash flow or lack thereof. Often that can not be just because sales are poor, but also because they are too large. When companies grow at a fast pace, when expenses are outstrip ping cash flow in, cash flow forecasts becomes king. Understanding where your cash is going to come from and when over the next three months, and what your expenses will be, will perhaps stave off a cash crunch that might cut you off from your major suppliers. You need to stay cashflow positive. When you are strong and healthy is the time to go out and get reserve lines ofcredit.

And, what about those customers who actually lose you money every time you sell to them (yes, we all have them)? Maybe it's time to get rid of them. Understanding who is making you money and who is not is one of the best exercises you will ever complete in your company.

Or, are you under the thumb of one or two customen? Having one or two eggs making up the entire basket is a risky game to play, as a number of manufacturers in this industry have discovered.

While we are all after growth, and are generally optimistic and tend to focus on growth strategies, constant analysis ofour businesses and dealing with issues is the key to staying healthy and not being part ofthe statistics.