With over 40 years of business experience and an MBA in Organizational Development Gary’s experience has guided business owners through their business challenges by providing the clarity needed to produce profitable results. The following case studies are examples of how bridging the gap between current reality and desired future drives business success to the next level.
Trying to Sell a Struggling Business
SITUATION
A business broker referred me to a manufacturing client. The business broker had been contacted by my soon to be client and wanted to sell their business. But unfortunately after having lost money the previous year and struggling in the current year the business broker wasn’t able to sell their company in it’s current condition and referred me to help them get the business in order.
PROBLEM
When I arrived and did a complete analysis of the business including interviewing the staff and shop personnel I discovered multiple problems. Under their current structure there were three active owners, two of which were giving direction to the shop and different days and differing directions. The shop was confused. On top of that they had transferred two critical shop supervisors to office positions leaving one highly qualified technical person to supervise the entire shop and he spent his days putting out fires. The high amount of mistakes and rework was killing the business. In my initial meetings with the owners they had expressed that they needed more business and sales was where they needed to focus.
SOLUTION
I immediately worked with ownership to put one of the two owners in charge of the company and instead of two owners giving direction all direction would come from single source. We then transferred one of the shop supervisors who had been moved to an upstairs office position back to the shop floor to double up on supervision in an effort to eliminate mistakes and rework. We could not address the sales issue until we solved the throughput or flow issue, getting work through the shop in a timely manner without mistakes and rework. It would do no good to increase sales only to miss deadlines because of mistakes and rework, we had to fix the consistency of flow first. Once we got flow moving in the right direction and started eliminating the bottlenecks that were preventing efficient and continuous flow we were able to increase output and reduce mistakes and rework.
RESULTS
With leadership and direction coming form one individual and not multiple individuals we were able too eliminate a lot of confusion on the shop floor. With the increase supervision the rework and mistakes decreased rapidly and the finished product went through the production line in a timely manner. We were able to identify the bottlenecks to efficient flow and eliminate them one by one until product was flowing through efficiently. Once the flow issues had been addressed and we were confident that we could produce the product in a timely manner and within budget, we could start addressing sales. All of these efforts created a positive cash flow position within the six months I worked with this company and set them up for a profitable first quarter of the New Year.
On the Verge of Bankruptcy
SITUATION
In April of 2015 I was called by the manager of two businesses in the state of Washington owned by an absentee owner who lived in Utah. The manager was struggling to pay his bills and was concerned.
PROBLEM
After interviewing and working with the manager of the two businesses things were not adding up. What he was telling me about the businesses and what I observed and learned from talking with the staff made me suspicious that the manager wasn’t telling me the truth. When the owner in Utah came out for a visit and we sat down together with the manager I began to sense a number of red flags and asked the owner if he would mind if I drilled down into his finances. I found that the manager was mixing the revenues from the two businesses and was moving money back and fourth to cover bills and make payroll.
After reviewing the financials and receipts I discovered that the two businesses were not paying their bills on time and were in fact on the verge of bankruptcy. I also discovered that the manger had been embezzling money. The absentee owner was shocked that the manger had been stealing from him since he had known him along time and had trusted him. I also found that the manger had taken out an additional $100,000 credit for the business line that the owner did not know about and the credit line was maxed out.
SOLUTION
I worked with the owner to terminate the manager and then began drilling down into the businesses to discover all that had gone on and what could be done to correct it. I immediately separated the finances of the two businesses and stopped the mingling of revenue and expenses. Each business needed to be treated as separate businesses and track revenue and expenses without mixing the two together. I worked with the managers at both facilities to help them understand what was going on and the plan to correct the situation. I worked with the financial institution to appraise them of what had occurred and our plan to correct the problem. I created cash flow projections for each business and started monitoring all revenue and expense items developing metrics to measure performance.
RESULT
Within six months December 2015, we started showing a profit and I was able to had pay down the $100,000 line of credit that the previous manager had opened and maxed out. We were in a good enough cash position to pay all of our bills on time and each business was being managed as a separate business entity. By the end of the first complete year after taking over for the absentee owner we had a 335% increase in net profit. Since then we have paid down a $1.5 million dollar loan on the property and the businesses continue to be profitable.
Helping Businesses to Grow
SITUATION
I occasionally serve as a consultant for Business Oregon, and they contacted me concerning a SE Portland food processor that produces a line of vegan and vegetarian breakfast burritos and hoagie style sandwiches. The food processor had maxed out their current space. They wanted to grow, but instead they were turning down business because they did not have the necessary capacity. Their customers were asking to purchase more of their delicious products. The business had grown every year and been profitable every year as well, but they had hit a wall. In addition, they wanted to add a frozen food line to have the ability to distribute nationally and potentially internationally.
PROBLEM
The problem was that the business was out of space and they didn’t see how they could produce any more products using their current facility. In order to expand they would need a new facility, which meant they would need bank financing. They needed a solid business plan and to ensure the financials were in order so they could seek bank financing and also work with Business Oregon on partnering in their expansion goals.
SOLUTION
I worked with the owners and their two sons to examine potential adjustments within their current facility that would allow them to increase output without adding any additional employees (which they had no room for). I assisted the owners in developing their business plan and creating financial metrics that would allow them to forecast growth and the costs associated with their intended growth.
RESULTS
As a result, both the bank they were working with and Business Oregon were interested in working with the owners to build a new facility with a mechanized linear production line to increase production. Business Oregon was also interested in promoting this Oregon product nationally and internationally.
Preventing Bankruptcy
Business Reorganization Reduces Debt and Generates Positive Cash Flow…
SITUATION
I was initially called in to evaluate the COO in this business and to coach him for success. In the process of interviewing the CEO, he realized that he was in need of coaching as well. The business was not running as well as it could. Once I started my work, I realized that there were deeper issues affecting the entire business and though discussions with the CEO it was decided that I would drill down a little deeper.
PROBLEM
After a complete business analysis it was discovered that the business was on the verge of bankruptcy. The CFO was incompetent and did not understand the financials. The CEO didn’t know they were in such bad of shape, their banker didn’t know, the CPA didn’t know and neither did the employees. The business was not generating sufficient revenue to cover their immediate debts. They were deep in debt and had a large amount of unsold inventory that had already been paid for or was owed money on. The rent on their current facility was going up by 200% and they couldn’t afford the current rental expense. The business had diversified into multiple other businesses that were draining their cash.
SOLUTION
We immediately downsized the operation by letting the CFO and four out of the eight employees go. We acquired a much smaller facility at a fraction of the cost and moved the business cutting the rental expense by 150%. We began selling off surplus inventory to generate cash to pay vendors and reduce debt. We closed the other businesses that were a huge cash drain and got refocused on their core business.
RESULTS
As a result of reorganizing the business they were able to avoid bankruptcy and start paying down debt. The business refocused on their core competency and eventually let another employee go reducing cost any further. Currently the business is running much better, reducing debt and generating positive cash flow.
Providing Guidance to Weather the Greatest Downturn since the Great Depression
Global Business Plan Creates a Solution with Long Term Benefits…
SITUATION
During the greatest downturns in business history since the great depression, we were called in by a client that was struggling to stay alive in the existing business environment. For over 60 years they had experienced excellent business growth and had weathered all previous downturns with minimal damage. This downturn was much different. Business was declining and they were struggling to cover expenses even after extensive cuts and layoffs.
SOLUTION
We were able to analyze their business practices, previous sales history, and product mix. We looked for other potential markets outside the U.S. as potential partners. We were able to diversify the clients sales base by facilitating a new global business plan that developed business in China and Russia allowing the client not only to diversify their customer base and product mix, increasing revenue and allowing for greater profitability.
RESULTS
As a result of global business expansion, this client was able to weather the biggest downturn in their company history. This new global business allowed them to develop a long term diversification of revenue streams outside the U.S. They were able to remain in business and as the economy started to come back they were able to continue their long history of providing quality products to the U.S. market place.
Redesigning the Company Business Model to Ensure Success and Profitability
SITUATION
A U.S.-owned company with two manufacturing facilities in China was struggling to make money, and they contacted me. The company had doubled their size within two years and was bleeding cash, trying to make the business successful. I traveled to China in December 2015 to take a look at the business: first to Haining and then 800 miles north to Jinan to visit their second location. I interviewed the staff on the ground; most were expats from the United States or Chinese nationals with MBAs from the States.
PROBLEM
The staff in China were dealing with a number of issues, including lack of a clear vision of where they were headed, poor communication between the two locations because of a competitive environment that had been created, poor product quality, and the lack of a dedicated sales team that understood the product. But the most pressing issue was that the business model was completely flawed. They wanted to create a high-end product, but the production method they were using couldn’t achieve that; instead it produced products of inconsistent quality.
SOLUTION
We had to step back from the current production model and take a 30,000-foot view. We began with the end in mind, and then we worked backwards to design a way to make that happen efficiently and effectively. We completely redesigned the entire production model to ensure a consistent output of high-quality products.
RESULTS
It took years to correct the problem that had been created. After two years the production facilities were consistently putting out a high-quality product, which gained the attention of the entire industry in China. The company had a vision of where they were going, good communication between the operations with a cooperative approach, and a sales team in place. By December 2018 they were able to sell this company for a significant upside to a Chinese company.
Aerospace Manufacturing Business Turnaround
SITUATION
I was referred to a manufacturing client by Business Oregon where I serve as a consultant to help struggling businesses. The client machined parts for the aerospace industry as well as some other specialized industries; they had lost money in 2018 and didn’t understand why. They were busy putting out quality products, but the first few months of 2019 started the same way—with losing money.
PROBLEM
After visiting with the owner and examining his financials I discovered that he had not raised prices in three years for fear of losing jobs to the competition. Applying metrics to each line item, I found that his cost of goods sold had gone up by 12 percent over the previous year, and he had not compensated for it with increased efficiency or by increasing prices. He was losing money right out of the gate, affecting his gross profit. When businesses do not raise prices for a number of years, they get behind and start losing money because all of their costs are going up. They then have to implement a large price increase to make up lost margin—and that is when the customer starts getting upset. Customers tend to be more accepting of incremental adjustments because all business people understand that costs go up. Additional issues needed to be addressed, including the fact that the owner was not proactively selling but waiting for his customers to come to him.
SOLUTION
We immediately adjusted pricing to compensate for the 12 percent increase in COGS. We analyzed each line item expense and compared it to years in which he was making money; then we worked to bring costs under control and in line with what they were as a percentage of gross profit in good years. We established a sales plan that included visiting customers, calling customers on a regular basis, and sending cards to thank them for their business.
RESULTS
Gross profit came back in line immediately. Cost were adjusted to better match what they were in profitable years, and net income increased as a result. Sales started increasing due to a new, proactive approach. Net income increased over 1000 percent as a result of these combined efforts.
--- END POST ---
