Key Approaches to Avoid Financial Disaster 
For Intrapreneurs and Entrepreneurs

 This morning, I was saddened to read about the bankruptcy of Seattle based retailer Eddie Bauer - the seller of high quality casual sportswear and accessories for the “modern outdoor lifestyle”, with 370 stores throughout the US and Canada.  The chain also has catalog and on-line divisions, participates in joint ventures in Japan and Germany and has numerous licensing agreements across many product categories.

With $268 million in outstanding debt, CEO, Neil Fiske, recruited to the company in 2007, told industry analysts that “the capital structure has simply too much debt for the economic reality we now face.”  Industry analysts simplify the problem further by stating that “sales are down and so is revenue.” It seemed like Eddie Bauer was doing all the right things.  They focused on the customer and built strong relationships with business partners for social responsible practices around issues such as the environment and global labor practices.

 Eddie Bauer, with its changing ownership landscape was formerly owned by Spiegel, until 2003 and previously by General Mills - with two very different corporate cultures and demands.

 Yet the higher they climbed, the more they seemed to lose their outdoorsy edge.

Once known for their exhibition creed - providing the US Army Air Corps in World War II with more than 50,000 parkas  and outfitting the 1963 summit at Mt. Everest, the company began to shift its focus to indoor casual.

 With a focus on turnaround strategy to return Eddie Bauer to its heritage as an active outdoor brand, the CEO states this may be thwarted due to previous crushing debt from the Spiegel reorganization in 2005 and the current recession environment. 

 Now - in its second Chapter 11 filing, the board received a limited guarantee from two affiliates of CCMP Capital on payment obligations.  There may be regrets about turning down a deal in 2007 to go private for $280 million with Sun Capital Partners, Inc. and Golden Gate Capital. 

 We will see what happens next….

 THE KEY FOR AVOIDING FINANCIAL DISASTER USING PROFITS Principles 
Go back to the “well” (your company’s raison d’etre) and replenish.

As you wonder how Eddie Bauer could have avoided this sad state of affairs - ask yourself what you are doing to avoid financial disaster for your company….before it happens.  As with Eddie Bauer, disaster doesn’t happen in a moment of time.  It is convenient to blame our problems on the economy.  What are the PROFITS Principles, that you, as either an intrapreneur or entrepreneur of your own company, utilize to avoid financial disaster?

• REALITY Review your financial structure and ask:  What decisions am I making when structuring for debt/equity? These require both long and short term considerations.
• OBTAIN VITAL INFORMATION Focus on the competition - to obtain vital information and do not adopt a new anxiety-driven shotgun strategy.  Instead, first focus on how you can differentiate yourself from the competition.
• INTEGRATION Integrate all aspects of your business.  Eddie Bauer kept adding more and more to their strategy.  Has anyone studied whether these strategic moves (adding indoor casual, adding strategic partners, selling licenses, on-line shopping, catalog division) worked together as an integrated whole?  I haven’t seen anything!
• FLEXIBILITY Are you nimble enough  - financially, strategically, operationally to be proactive in a volatile and disruptive competitive environment?  How can you become moreso?

 Our PROFITS Principles Community is growing rapidly.  As always, we welcome your comments in expanding the PROFITS Principles.