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Barry Pace and Terry Myers have toured the business world long enough to know that when times are good, virtually anyone can manage a business.

They saw it happen, on both the local and national levels, from 2000 to 2007. When the economy soured in 2008, they offered to do the heavy lifting for managers whose businesses were struggling.

Pace and Myers are the principals of Business Edge LLC, a company that, to their knowledge, is the only one in Greater Des Moines that offers turnaround and workout expertise for struggling businesses.

Pace, whose background is in marketing, sales and leadership, and Myers, a financial manager, do more than assess the value of a company that might be destined for a fire sale or a long haul in court after running afoul of lenders.

If lenders are involved in a workout – trying to salvage value from bad loans – then their most talented people are dealing with the past rather than planning for the future, Pace said.

“When bankers are working on workouts, nobody is driving the ship,” he said. “Good loan officers are doing work that is not conducive to moving the bank forward. The best talent should be planning the future. We make that possible for bankers.”

Looking at more than value

Business Edge does more than determine the value of a company. Instead, it evaluates a company’s overall structure and performance, its management structure and its spot in whatever market it focuses on, to determine whether it is destined for the scrap yard – that would be a workout – or some form of survival. Companies with some promise of making it out of tough times are the subject of turnarounds.

In many cases, Business Edge takes control. Myers and Pace pay the bills, run day-to-day operations and suggest that some managers might be better suited to spending the day on the golf course rather than trying to run a business.

They cut to the chase in a hurry, essentially determining whether the company deserves to live or die, always with a mind to getting the most value for lenders and owners.

Myers and Pace attempt to make the live-or-die decision within a few days, frequently dragging reluctant managers or owners to tough choices.

As Pace says, the partners don’t like to “burn daylight.”

Business Edge was the brainchild of local businessman Tom Steen, who saw it as an opportunity to “clean up” companies to prepare them for an infusion of capital. Pace and Myers, longtime business acquaintances of Steen’s, came on board early last year.

By this spring, the sources of investment capital were drying up and Steen was considering a move from private enterprise to the nonprofit world.

Pace and Myers realized that the local marketplace needed a service that included management consulting in addition to a company that specialized in turnarounds and workouts that could preserve the value of a business on the rocks or at the edge of a sword, as the company name suggests.

“We change the vocabulary with our clients, and we do that very much on purpose,” Myers said. “We go in with the idea that we are going to prepare a survival plan, not a business plan. … We talk about a survival plan and their eyes get very big, because nobody has had that conversation with them before.”

Autocracy rules

Their approach might seem harsh, especially in a local environment that is flush with privately held, family-owned businesses.

On the other hand, they typically are called in when blunt language and immediate action are necessary.

“I would prefer to be a coach or democratic kind of leader, but this requires an autocratic approach,” Pace said.

Both men noted that they often receive a considerable amount of pushback from managers who are reluctant to take the dramatic steps necessary to save their company.

“When we go in, we have to establish that there needs to be control, and that’s the dicey part,” Pace said. “If it weren’t for the people, some of this stuff would be really easy.

That pushback is dutifully reported to lenders or owners.

Their clients often are the business owners, but in reality they are working for lenders trying to salvage their investment in a company.

“You have to admire the people that have you come into their companies because they are recognizing that they can’t get it done by themselves,” Pace said.

In these times, lenders also must be willing to accept the fact that they are not going to receive a full payback on their loans.

Pace noted that Business Edge recently oversaw the liquidation of new inventory that sold for 50 cents or less on the dollar.

In good times, a distressed company might sell at 60 to 20 percent of fair market value. In the last two years, those numbers have dropped to between 40 and 10 percent, he said.

Business Edge acts as a buffer between lenders and companies, in part to defuse the emotion that surrounds a company facing a bleak future.

Such a company might be reluctant to talk candidly about its financial standing, the viability of its products or services, even its management structure. That especially may be true in family-owned businesses, where a surname can lead to an undeserved leadership position.

Once it takes over operations, Business Edge does the talking with lenders, suppliers and vendors to take the pressure off of management.

Cut the checks

One of the first things Business Edge does is persuade the company to stop writing checks. Myers and Pace said that is necessary to get a handle on the company’s cash position. Because of the recession, vendors often are willing to wait out a payment, following the philosophy that getting something from a troubled company later is better than getting nothing now.

In addition to accounts payable, Business Edge wants to make certain that receivables are in order.

And in the long run, the partners want to make certain that lenders get accurate information.

“We have to answer questions,” Myers said. After all, the lenders generally have the final say on whether a company survives.

It should be noted that Myers and Pace refuse to discuss specific businesses they work with. They sign confidentiality agreements in order to gain full access to a company’s finances, management and employees.

Myers said one of the first questions they are asked is, “You’re not going to tell everybody that we have a problem, are you?”

For a troubled company, the problem often is that management hasn’t been talking to anyone about its troubles – not its employees, and certainly not its bankers.

Business Edge frequently is referred to a company by lenders, accountants, attorneys, equity groups or business brokers who have recognized that the company is struggling.

“It is difficult for us to do our own advertising,” Pace said.

About 70 percent of Business Edge’s clients are located in Iowa; however its range also includes eastern Nebraska, Illinois and Missouri. It specializes in helping companies in manufacturing, servicing and distribution.

To date, Business Edge has been in the driver’s seat on 10 turnarounds, consulted on eight to 10 others and has been involved in three or four workouts or liquidations, Pace said. Its success rate on turnarounds is 65 to 70 percent, he said.

A call to Myers and Pace frequently results from a bank telling a company to find a workout and turnaround specialist.

One client, initially referred by a vendor, was contacted twice. The first time, management replied that it could go it alone. The second time, its lender demanded that it seek help.

In some other cases, they have reported to lenders that a company is in such poor shape that it cannot be salvaged.

An evaluation

Business Edge also attempts to determine whether a company is too diversified, whether its management functions overlap and whether some managers are doing their jobs. A key consideration is where a company stands in its market niche and whether that market is stagnant or shrinking. (See sidebar for an outline of a turnaround.)

Even when a turnaround is successful – when some of the value of a company is preserved, management changes are made and unnecessary fat is trimmed – a company still could be destined for the auction block.

“You start stirring the cauldron, and while there is a lot of pain and a lot of anguish in the middle of all of this,” Myers said, “one of the things you really start doing is asking, what are the opportunities?”