Logistics/Road transport advice

Discussion in 'Growing and Managing a Business' started by ruhaanmehta, Sep 20, 2010.

  1. ruhaanmehta

    ruhaanmehta
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    Hello,
    I own a road transport company which has been passed on to me from family. When it was passed on to me, it was in heavy debt. I planned to expand my fleet of vehicles in order to generate more business and clear my debts. In order to expand, I managed to receive loans to purchase new vehicles and gain a working capital. However, this only pushed me back and increased my dept as I had to use most of my Working capital to pay my CA's and other people who offered their collateral. Now, I'm bound by unsecured Private financiers for working capital. Which is only increasing my dept and cutting my profit margins. Hence, making it a vicious circle of dept.
    I have proposed an expansion project for Venture capitalists but have found none so far.
    I would really appreciate some advice, be it radical or simple. Also, if you could guide me on how to approach venture capitalists and suggest a few worthy V.C's looking to invest in India.

    Thank you
     
  2. Fergal

    Fergal
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    Welcome to Business Advice Forum ruhaanmehta!

    To be honest I'm not sure that additional venture capital finance is something you need right now. Does your business have an accountant who advises you on your financial structure?

    Have you thought about ways that you can reduce your costs so as to help your cash flow? That would be very important to your business right now.

    Another thing you should do is carefully analyse all the work you are doing and the contracts you have to see if they are profitable for the business. If some of them are not profitable it may be time to stop working on them and to focus on your relationship with your profitable clients and possibly increasing your sales effort and getting more of the type of work that is profitable.

    Please post back with your thoughts and we will do our best to help you.
     
  3. ruhaanmehta

    ruhaanmehta
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    Thank you for your reply.
    Firstly, I do have an accountant who manages my finances. However, the financial structure of my organisation is solely handled by me. So far, I have cut costs in every sector I can. But lots of running costs are inevitable.
    Most of my clients offer me an decent profit margin for my company's services. However, as I mentioned earlier, Private Financiers are turning out to take a hefty sum of that margin. My trucking, booking, marketing and finance management sectors are all slacking more and more due to shortage of funds. Whatever, my organisation is generating, is being directly forwarded to paying previous debts. At the same time, to keep business going, I have to continuously borrow from financiers.

    Will it be sensible for me currently stop transactions with financier and just try to work with what I have?

    Also, I have a proposed expansion project to almost triple the size of my organisation which, I believe, will immediately plunge me into success. I have worked on making this project report along side accountants, a team of advocates and the development department.

    Thank you for your time
    any suggestion is welcome.
     
  4. Kay

    Kay
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    Welcome to Business Advice Forum, ruhaanmehta. :)

    These private financiers you talk about: is there no way that you could get a different kind of loan to pay them all off and have less costly financing? I get the impression -and correct me if I'm wrong here- that the current arrangements you have with them are costing you a fortune. Alternatively could you renegotiate the current payment arrangements to extend the payment period and reduce your monthly outgoings? It doesn't sound like you have any room to breathe at all.

    I agree with Fergal. I don't think it would be wise to take on more debt right now. If your business is struggling at the size it is, tripling its size doesn't make sense to me. What is it about the new plan that makes you feel it will plunge you into success? Is there no way you could adapt the ideas to suit your business as it is and build success from there up?

    I would say yes, absolutely, as long as it's not going to affect your credit rating adversely. If you can manage on what you have, then do it or at least try it for a while.
     
  5. Fergal

    Fergal
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    ruhaanmehta it sounds to me as if you need to arrange a meeting with these financiers, it would also help to bring your Accountant to that meeting. Explain your situation to them and tell them that your business is in serious danger of going bankrupt. The objective is to make them realise that coming to some sort of workable arrangement with you, will benefit both you and them, because it will allow your business to survive and to pay them over the longer term. It's not in anyone's best interest for you to pay so much in the short term that the business does not survive. Your financiers aim will be to get their money back, they won't achieve that in the short term if they squeeze you so hard that you go out of business.

    It sounds like a difficult situation, good luck with it and please keep us posted.
     
  6. ruhaanmehta

    ruhaanmehta
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    Thank you so much for your suggestions and advice Fergal and Kay.

    I have discussed with my staff on how to cut major costs. I am definitely going to negotiate with my financiers for them to offer me time and support to get my company back on track. I am pretty sure that it will affect my market value and credibility but, as of now, its seems like this is my only option. I have already begun looking for financiers offering capital with a less ROI. However, it is highly difficult to do so because I have shunned myself from networking since I have taken over the company.

    I analysed a few assets and contracts of my company and some seem less profitable. Thus I am planning to re-sell/re-negotiate them in order to gain whatever working capital/profit margins I can. *Thank you for bringing this to my attention Fergal.

    Although, my company is in bad shape, I am pretty sure my expansion project will place things back on track. Logistics, being a service industry, doesn't behave like one in India. Phase 1 of my expansion project focuses on fleet development and dedicated express cargoes across India. This will involve the purchase of vehicles and massive infrastructure development across my branches. With capital, I will be able to hire a stronger and more dedicated work force. This development is proposed to be implemented in less than 40 days. It should directly increase my clientele by size and quality which will cut my marketing cost by over 70%.
    I am very confident about this expansion. If you ask me, this should change the way the logistics sector functions across India.
    Which is why I am very confident that a VC will plunge my company to success.

    Kay and Fergal, I thank you so much for your time and effort to help me.
    Regards
     
  7. Fergal

    Fergal
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    Thanks for the update ruhaanmehta and good luck with getting it all sorted. Please post again to tell us how business is progressing for you, to ask any further questions or to participate in any of our other discussions - we would love to have the benefit of your experience.
     
  8. elids1979

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    hi
    basically, i dont have much business experience, but it is my opinion that a business in debt should not expand
    its just like i would give an advice to someone that invested in a stock that lost lots of money not to invest more money in it
    the reasons are various for not expanding, you need to reduce costs and not taking more debt, more debt can be a severe problem for your cashflow.
    not to mention that more debt to a badly shaped company costs more, since the risk is higher.
    my advice to you is not to be stuck on a solution that you are sure that will bring you to success, you are into expansion as a way to save your business, in some cases it might be the answer, but in most cases, putting more money in a place that is currently losing, is a bad idea
    what you should consider to do is to form a change of how your profit and loss report looks right now, not by expansion, but with working with what you got generating profit and reducing debt
    by the way, injecting capital by investors might also be a problem now since no one will give you a good deal if you are currently losing money, change the P&L report, and then go to the investors, right now, as i see it, you will either get bad terms for additional loans, or bad deals for injecting money.
    In any case, i wish you the best of luck.
     
  9. jdwork

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    Have you considered a fleet management company?

    sorry, here is a link to one we use
    http://www.comdata.com
     
  10. marrie

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    Re:

    We are one of leading suppliers of electrical pump sets in our city because of Star Distribution Systems. Their quick delivery service is fulfilling our customers demand. Thrid Party Logistics
     

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