When we began working for this company, it was insolvent and needed a turnaround plan to save the company and return to profitability and positive cash flow.
Sales began to decrease at each of the company’s six stores as well as in its service division. The company was not profitable and cash flow was getting tighter and tighter. The company had close to a negative working capital, meaning it was on its way to insolvency. Our first step was to create a financial plan to determine what needed to happen for the company to survive. We negotiated with the company’s major supplier and freed up as much cash as possible in each area of the company.
With sales on the decline, the company was posting significant losses each month. We did a thorough study on each of the stores and divisions of the company to determine which stores were helping and which were hurting the overall company. We implemented sales, gross margin, and expense budgets for each store and held each manager and sales person accountable for their role in the overall company’s plan. Although it became clear that some stores had to close and other overhead costs needed to be cut for the company to survive, the company was able to survive and return to positive cash flow and profitability.
The accounting system used by the company was out-of-date and hindered effective financial statement reporting, especially on a store-by-store basis. We helped them arrange the system to facilitate financial statement reporting with very little manual adjustments, saving a significant amount of time.
With the short and long-term cash flow issues solved, the owner was empowered to focus on training his sales staff and driving sales to more profitable levels. This is, by far, his most valuable contribution to the overall success of the business.
The owner of this business has run it by his “gut” feel for 26 years. With a clear plan in place and monthly financial statements to review, he sees his business more clearly than he ever has.
Enter and Exit Successfully
The owner has less than 10 years left before he will be ready to retire. With his company at a point of insolvency, he had watched his net worth (most of which was his business) erode to almost nothing. The business is now successfully turning around and becoming more valuable by the day. We are helping the owner fulfill his dream to be able to sell his business and retire on the proceeds of the sale.
We have worked in few businesses in as dire of a situation as this company. The owner did not know what to do and was close to filing bankruptcy. Although the company still has some challenges ahead of it, the company is on its way to redefining itself in its market and coming back stronger than it has ever been.