Viability plan

A viability plan (PV) the ordered set of measures and actions you should take and apply the entrepreneur in order to bring the company to a positive situation both economically and financially. This set of measures and actions should be agreed with the various players in order to renegotiate existing contracts by adapting them to the obtaining of new cash flows expected. Without this renegotiation the company has no viability.

They are many years since we have been deep and long crisis that have helped thousands of companies into bankruptcy and others or bankruptcy proceedings which. With greater or lesser success, have gotten out now approving their conventions.

Overview

As we saw in a previous post, we understand as strategic plan the set of measures and actions propose by the property of the company. Manages the direction, in order to achieve the aims concerning growth, continuity, and maximization of the compensation to the shareholders/owners.

Now, when the company enters situation happens to a situation of non-viability and economic crisis. That is, when you don't have enough benefits or enters continued losses. As well as not allowing to give back to shareholders, not They allow the commitments of payment with some or all players.

If the company with its own resources is able to adjust its strategic plan to the new market situation without the need to reach. A consensus with external agents is not refer to a plan of viability. But simply a more or less complex adaptation plan. Even, as we shall see, we could talk about a plan of urgency. Which would apply when the delay could involve the inability to resolve the situation with their own resources.

Purpose

For legal purposes, a PV is a renegotiation of contracts with the various economic agents who contract with the company. A PV prepares and applies when the company enters a financial crisis which prevents. The permanence of the strategic plan and which endangers the principle of continuity of the same. This financial crisis is caused by one or more of the following reasons:

• Lowered sales by general crisis or the sector general.


• Loss of some fundamental market resulting in lowered sales.


• Competitive pressures forcing down prices.


• Entry of substitute products that require investments that cannot be address and which also involves a descent of sales.


• Non-payment of important customers.


• Excess of costs that are generating losses.


• Pressure from customers on prices. Etc.

In short, by a reduction of cash flows that do not allow to maintain the existing structure. That the company has sufficient resources to cope alone with the situation and allow re balancing balance and rediscover the path a cash-flow positive it will comply with the strategic plan.

Strategic planning

Thus, when we talk about viability plan we refer to a particular case of strategic plan. Actually it is the strategic plan for a scenario in which the financial or economic situation not allow the obtaining of sufficient cash flow to pay agents who provide goods, efforts, services or risk. It is a planning tool for the company whose object is to solve them financial problems in situations of difficulty. In this sense, it differs from strategic plan (which have already spoken on this corner) insofar that this is made for all kinds of situations, marking the route to be followed by the company in the long run.

The relationship between both plans is extremely narrow. We cannot develop, or even understand, a viability plan if it is not within the framework of its strategic plan. For this reason, we will assume that every company has a strategic plan that guides its activities.

Later, in a future post, we'll talk about what are the basic points that are part of a plan's feasibility and how to develop it.