2/3rds of Bulgarian Companies With Serious Difficulties Because of the Crisis

Oct. 29, 2009 - PRLog -- Over the past year, the real estate company BULGARIAN PROPERTIES (www.BulgarianProperties.com) has seen a significant increase of inquiries from customers looking to sell their businesses or find partners/investors willing to provide the necessary funding in the current difficult conditions in the economy. Even businessmen with solid positions are increasingly trying to find good solutions for their affected businesses and find ways out of the difficult situation. More and more owners of operating companies are willing to part with them by selling assets or the entire operating businesses. This is what prompted the owners of BULGARIAN PROPERTIES to create a new company brand and relevant professionally working organization to find buyers for distressed businesses for their customers. This mediation and consultancy company uses its reputation among foreign investors and its good experience in high value assets deals.

So, in July 2009 the new subsidiary structure for consultancy services in business mergers and acquisitions called BusinessForSale.BG, www.BusinessForSale.bg was launched.

Analysis of the newly created company BusinessForSale.BG shows that currently 2/3rds of firms actively working in Bulgaria face significant difficulties in their activities, as well as serious disturbances in the balance of their financial flows. As a result of the negative effects of financial and economic crisis that has been developing for more than a year, the Bulgarian business continues to lose ground and starts to take extreme measures to survive through the difficult times. There is almost no industry in the economy which hasn't been affected, and even the few companies that manage to maintain their levels of sales from 2008 feel uncertain about their future and start taking preventive measures. The effects of the crisis are expressed mostly in drastically decreased activity by the buyers, lack of adequate credit to the businesses, disturbed cycle in the market relations, huge inter-company indebtedness, lack of consumption of Bulgarian goods and services abroad, lack of fresh income from foreign investments. The most affected sectors are construction, industrial production, sales of cars and other vehicles. The real estate sector experiences severe months with dramatically reduced number of transactions and falling prices. Luxury goods trade is almost completely dormant. Even bars and restaurants, which until recently were considered less subject to the crisis, have lost a significant percentage of turnover and fewer customers visit them. Hoteliers report lower occupancy and expect heavy winter season because of total loss ot the UK market and reduced purchasing power of all the other tourists.

It is clear that the big companies with widely-set business activities, experience most serious negatives due to the crisis, while their smaller competitors are in a relatively better financial situation because of their low costs and more streamlined structures.

Firms react differently to today's harsh conditions, making the impression that most serious players in each sector are those that act most adequately. They clearly realize that the moment does not offer any opportunities to make large profits from their activities, but rather their strategy is aimed at keeping their businesses and minimizing losses. Small part of the the major players are able to cover their operating costs and it is noticed that more and more businessmen are happy if the expiring month is completed at least without losses. Many businesses manage to survive due to reserves remaining from previous successful years, hoping for more positive news in the coming months. The measures the top companies in Bulgaria take are diverse, the most frequently used are:

• Significant reduction in selling prices combined with attractive promotional offers and payment terms, thus minimizing the rate of profit
• Reductions of staff and salaries
• Closure of loss-making units and activities
• Concentration on the most efficient and profitable operations
• Drastically cutting the cost of advertising
• Sale of assets
• Renegotiation with suppliers
• Renegotiation of loans
• Search for partnerships and other forms of integration
• Development of new activities, release of new products
• Introduction of innovative and more efficient technologies
• Maximum cost optimization and increased monitoring of financial flows

Consultants of BusinessForSale.BG, in their conversations with clients, account lost confidence in advertising, the majority of managers agree that in present conditions it does not work effectively for them in the direction to sales increases. This is due to changed attitudes among consumers who make choices primarily on the basis of price and rarely make decision to buy before they have explored all the possibilities offered by the competition. In the more expensive goods and services segment what impresses most is the significantly increased time for deciding on a purchase. Consumers themselves feel very insecure about their own future, which makes them very cautious. They consume basic goods and essential services, postponing expensive purchases for the undefined future.

In such working conditions, inexperienced managers make many mistakes and take wrong decisions, which are often fatal for their businesses. The most common errors are:

• Inadequate pricing policies, lack of flexibility and timely price reductions
• Too big discounts based on incorrect or missing estimates, which ultimately lead companies to even greater losses
• Slow business restructuring or even absence of such
• Lack of realization of the need to fundamentally change the business model
• Unfounded optimism and expectations for rapid improvement of the situation
• Ineffective and outdated technologies
• Inability to motivate staff with methods other than monetary compensation
• Filling holes and the financial support of loss-making units with new credit
• Reluctance to separate with losing activities, numerous staff and unnecessary assets
• Lack of modern thinking, lack of flexible and rapid reactions
• Total cut of advertising or ignorance of modern methods of advertising, which in the current situation are rather more effective than conventional ones.

The conclusion of BusinessForSale.BG's professionals is that the vast majority of business entrepreneurs in Bulgaria don't have enough experience and haven't expected such a negative development, which made them unprepared for the crisis. Unfortunately, many Bulgarian companies will not resist the challenge and will be forced to close or go bankrupt.

Road exit from the situation companies have to search in two main directions - innovation and change in business models, taking into account changes in the behavior of their customers. When this is impossible, they should sell the enterprise.

Statistics show that Bulgarian businessmen decide to sell their businesses or attract new members against shares as a last possible measure and businesses go for it after having tried many other measures to no result. However, most of them choose this option at a very late stage when the situation has gone out of control and the parameters of the business are very low. This puts the business at a disadvantage and eliminates the possibility of achieving a well-deserved sales price. The reasons for this short-rooted thinking are mostly in the lack of experience of the managers in our young market economy and in the absence of tradition in the field of business acquisitions and mergers in Bulgaria.

Buy or sell businesses in Bulgaria at http://www.businessforsale.bg/en/

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BusinessForSale.BG is a consultancy company dealing with company sales, mergers and acquisitions, franchise and other business operations in Bulgaria. Buy or sell business in Bulgaria. The company website contains hundreds of businesses for sale in Bulgaria. It is the right time to invest in operating companies at very good prices.