Case 2: Recommendation #5

Selling the business is always an option. TSI was 80% owned by a retired individual and 20% by the current CEO. To the extent that prospects for the company appeared bleak, why not sell it (and let someone else have the headache)? That thinking is flawed. Who would buy a business whose prognosis for success was bleak? Whose major customers were all bankrupt? That had little cash reserves and a reputation tied solely to this industry? Clearly, the brighter the outlook and the better the company's performance, the higher the value it could command in the marketplace. So timing is critical, and this clearly was not the right time to sell. In fact, when things did get worse, the company managed to find a buyer. But as due diligence was being conducted and financing lined up, its performance got substantially worse (amid a lot of red ink) and the buyer retracted the offer that was on the table.

Of course, no particular option is necessarily the best option, i.e., there is no "right answer" to this case (in the event you were expecting one). When companies choose to change their strategy, they do so only by being persuaded at the time that it makes the most sense. It's an imperfect process at best, witness the many corporate decisions made today that turn out badly...

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