Our business is faltering. Cashflow isn’t where we need it to be, and getting to covering our overhead is looking near impossible without a significant cash inflow.
Our largest customer is well capitalized and growing rapidly. We are a critical supplier for them. Because of the nature of our businesses, there are potentially substantial synergies by executing a merger - some overheads could be merged and it would put us on more solid footing to help them scale as rapidly as they need.
Has anyone approached a customer for investment or merger in a similar situation? I’m genuinely flummoxed as to the best way to approach it. It could really level up our business, and I believe would be a valuable investment for them. That said, I worry on two counts - (1) if they have full visibility into the state we are in they will simply flee, sealing our fate and sending us into bankruptcy; (2) they would have access to our cost structure during this process and see that we are making substantial gross profits on certain sales to them and simply push for better pricing without investing. There are probably other concerns I’m thinking of.
How would you approach a situation like this?
I’d suggest you consider engaging a consultant in your industry (not me) that is capable of working with you to develop a strategic guidance plan.
Although reaching for merger may be an option, it could end up being as fatal a move as not addressing the main issue; lack of sales.
Purpose of plan is to evaluate internal/external environment, assess risk, and determine appropriate objective strategy and tactics.
For example, growth strategy requires stability. In your case, retrenchment may be necessary to first stabilize business.
We certainly need to bring in a consultant to drive some operational efficiencies. Lack of sales isn’t exactly the issue - we’ve doubled our revenue in the past year and we have a solid pipeline ahead of us for future growth. Unfortunately scaling that growth caused a lot of issues and we weren’t really capitalized for it, and now we’re reaping the whirlwind.