Case History: Turnaround Management & Recovery
Through a 4-Phase turnaround approach - Analyze-Stabilize-Optimize-Maximize - a strategic plan can be developed that leads to viable performance improvements and a troubled credit exit.
Situated in east Atlanta is a $4.1MM revenue-generating manufacturer and distributor of consumer packaged goods (CPG). A family-operated small business of almost 40 years the company has grown to house six brands that include innovative oral care products, grilling accessories, baby and toddler accessories, a skincare line, pet oral care, and kitchen/bath/home solutions. In spite of its strong reputation and devoted leadership, ownership felt like the company was a startup with profitability, but cash flow challenges were compromising performance and leading to insufficient debt serviceability. Results from an initial analysis showed revenue was driven by an extended Days Sales Outstanding with no short-term cash flow, no sound strategic marketing plan, a lack of effective inventory management and control systems, and no policy, procedures, or training for managed growth. Results from a follow-up analysis several months later showed improvements with marketing initiatives from a new social media engagement, however, the business remained challenged with balanced inventory leveling, line-item profitability, invoicing procedures, negative equity, and two key concentrated accounts had decreased orders.
The lender was ready to foreclose. Fortis Business Advisors was referred to CPG by the lender with the goal of a comprehensive analysis, and if viable, a turnaround and/or credit exit to avoid further action. Specific requests from the lender included 13-week initiatives and cash flow projections, an obsolete/slow-moving inventory report with a monetization plan, and a written business analysis report evaluating continued viability and a turnaround plan. Other challenges to address included a sales and marketing strategy, enhanced sales skills, top 10 customer analysis, inventory procurement analysis, break-even, invoice and collection controls, SWOT analysis, established mandatory minimum profitability, a standard operating platform, and a “go to market” strategy.
A 4-phased turnaround was initiated: Analyze-Stabilize-Optimize-Maximize
As performance improved and the lender gave more “runway,” by lender request 3-sets of 13-week initiatives were developed over the course of the turnaround.
A strategic plan was developed that led to improvements in operations, organization, communication, branding, sales and marketing, leadership, and decision making.
Initiatives included expense reductions, compensation planning, short-term cash solutions, a new organizational structure with defined roles and alignments, reengineered job descriptions and resource allocation, a fully-integrated sales and marketing plan, sales management system, marketing collateral and rebranding initiatives, across the board KPI measurements with targeted benchmarks.
Comprehensive historical and projected Working Capital and Financial Ratio reporting was developed to show the effective use of funds.
As CPG turned around, the key equity holder recognized the continued business viability and initiated a real-estate backed loan to exit the original troubled credit.