A handful of their products have shown some revival in demand, clearly not enough to meet the costs. Thus the family’s investments are lying unsold in the godowns, in a variety of speciality chemicals that cannot find a buyer even at depressed prices. When the business consistently needs funds and working capital, how could one invest in other instruments that offer a lesser return than the business? Why invest elsewhere and worry how the money will be used, when one can invest in one’s own business and determine how it is used? Second, there is the sheer need. But there aren’t many investments to draw from, as the family traditionally returns all surplus to the business. Our friend has mostly insulated the family from the state of affairs in the business, drawing upon reserves kept here and there. They have raised money against the stocks as well as against debtors, but there is stress and strain from a prolonged period of low sales and high fixed costs. Slowdown in revenue has meant costs of carrying unsold stocks is bleeding the business. The father insists on paying suppliers on time, even when customers have delayed payments. Customers are spread geographically and they export to a few countries. While the applications range from architecture and interiors to medical and pharmaceuticals, they depend on a few suppliers who have worked with them for long. Theirs is a trading business in speciality chemicals. Much of the difficulty comes in management of working capital. The father is insistent about protecting the equity he has created and refuses the son’s request for any changes to the processes. Relationships with customers, suppliers and others have been strengthened over years. Our friend inherited the business from his father. Small businesses do not have a formal set up for functions, with the proprietor managing with the help of assistants for accounts, stock management and operations.
The slow recovery seems to have impacted small businesses the most. He has a young family to take care of, apart from being responsible for his parents.
#See finance version 1.1.5 generator
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