The home heating oil industry has a long and proud history, and Fuel Oil News has been there supporting it since 1935. It is an industry that has faced many challenges during that time. In its 77th year, Fuel Oil News is doing more than just holding
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www.fueloilnews.com | FUEL OIL NEWS | JUNE 2014 27 BUSINESS OpEratIONS realities of the fuel distribution business have not been factored into the mechan- ics of the line of credit. For example, there is no recognition of fuel or service part inventory as collateral, narrowly- defined bank advance rates on collateral were accepted at face value without thor- oughly evaluating the potential impact or receivables associated with reliable budget customers have aged to the point of becoming ineligible collateral. For many, the impact of addressing these variables is material. Quick relief from banks in the midst of the winter rarely occurs, and this results in stress and distraction from what should be your primary focus—serving your customers in an efficient manner. Savvy dealers tackle line of credit fixes well before the heating season begins, when thoughtful discussions with a bank can occur. Resolve to communicate effectively with your banker. Let's face it, dealer interactions with bankers are typically limited. Too many dealers take a "drop it and run" approach to presenting finan- cial results to their bank and suppliers. Each interaction with your lender (and supplier) is an opportunity to exhibit your managerial competency. When you take steps to improve the financial stand- ing of your company through specific adjustments to your operation, let your financing partners know. If handled cor- rectly, you build a well of goodwill with people who, in the end, are paid to judge your ability to lead an organization. Such goodwill is priceless when finan- cial challenges arise. If your company's results are disappointing, avoid the urge to hide until you get the inevitable ques- tions. It is imperative that you control the message. While lenders are trained to examine historical results to form their future credit decisions, understand that they fundamentally want to sup- port you. Help your bank and supplier representatives formulate the argument on your behalf to "the powers that be" behind the scenes. Summarize the non- recurring issues that have impacted your company's results and avoid relying too heavily on yet-to-materialize revenue sources from marketing campaigns and new products as the primary source of correcting the financial issues facing the company. Bad news in and of itself isn't the problem. Bad news presented with- out mitigating factors and the steps you have already taken to attack the challenge is toxic. While the banking environment for fuel dealers may be marginally better than during the depths of the financial crisis, for many small businesses it can still be less than accommodating and requires a well-formulated approach to place your company in a position to maximize prof- itability. Success is determined in large part by your company's ability to cap- ture opportunities when they arise. An improperly functioning debt structure can be an unrecognized but significant drag on both your company's profitability and personal mental state, and often requires a significant amount of time to correct. For those managers who have simply survived in recent years but know opportunities were missed due to cash constraints, now is the time to explore the options available and seek to upgrade the structure now in place. Resolve to make this the year you take control of your company's financial health. Jeffrey Simpson is managing director of Angus Energy's Advisory & Finance team and has worked in the fuel distribution industry for nearly two decades in opera- tional, banking and financial advisory roles. Angus Advisory & Finance provides advi- sory services for evaluating strengths and weaknesses, improving financial manage- ment practices, supporting banking relation- ships and also designs/implements growth, risk management and acquisition strategies. The group also provides funded capital solu- tions through the investment fund, Angus Fund, L.P. Jeff can be reached at (860)299- 3358 or jsimpson@angusenergy.com. l F O N