NATURE OF ASSIGNMENT:
Primary: Company Services / CEO
Secondary: Company Services / CRO
Primary Industry: Distribution / Logistics
Company: A supplier, distributor and importer of household appliances, automotive products, and audio/video accessories.
Situation: The Company, a supplier, distributor and importer of household appliances, automotive products, and audio/video accessories, was in a cash crisis. It faced a myriad of problems, including the following:
- Sales declined by half over the past twelve months.
- Gross margin compressed to 25% of the gross margins four years before, and half of the gross margins from the prior year.
- A lack of credibility in the market due to its inability to deliver on time and keep commitments regarding new product launches.
- Burning $500,000 to $1,000,000 per month
- Empty new product pipeline
- The five top managers (and founders) were deemed unreliable and removed shortly before FOCUS arrived.
Focus Scope: The leadership team engaged Focus to assist with stabilizing the business, developing and implementing a strategy to maximize the value for key stakeholders such as the secured lender and growing a profitable business (and shrinking unprofitable lines).
Tasks Performed:
Stabilizing the Business
Focus Professionals led the Company in stabilizing its business through the following initiatives:
- The Company regained the confidence of key constituencies -- employees, customers, vendors, rep organizations, and licensors.
- Focus restored the Company’s credibility by consistently communicating the positive changes and plans.
- Managed the team of employees and significantly improved morale by providing firm and positive direction regarding the Company’s future.
- Recruited and filled key managers for finance, sales and product development.
- Filled the empty product pipeline with a multitude of new SKUs.
Implementing Financial Management
Focus Professionals implemented disciplined financial management through the following:
- Rationalizing the expense-base of the Company to minimize the cash burn by cutting expenses (25% reduction in FTE’s; $500K annualized salary reduction), consolidating from two warehouses to one, and moving offices (which generated a save of approximately $50K/month).
- Tightening controls and significantly improving the veracity and soundness of the accounting environment.
- Implementing major improvements in the reporting environment to ensure continued attention on major issues of product returns, customer discounts, and advertising allowances.
- Improving operations and logistics management, thereby significantly reducing late orders.
- Improving an error-filled forecasting process with an automated solution comprising a statistical forecasting system and an interface used by the sales team that instantly provided numerous views of the key forecasting data.
- Updating a time-consuming, manual process with an automated pricing solution, thereby improving the Company’s ability to respond to customer requests as well as its accuracy.
Maximizing Value
Focus Professionals developed a strategy to maximize the value for key stakeholders, which included:
- Developing a business plan detailing required operational initiatives and their financial impact.
- Working with the Company’s Board of Directors to bring in permanent management.
- Growing a Profitable Business (and shrinking unprofitable business lines)
- Implementing rigorous profitability requirements for new sales.
- Developing several new blockbuster brand licenses.
- Developing two new product categories for the Company -- electric cleaning devices and hand tools.
- Updating the existing product line -- with a special focus on drills, the Company’s most important single product. The Company began improving its value proposition by upgrading the product, packaging and accessories.
Results: As a result of Focus involvement:
- Costs were cut, reducing the headcount by one-third, and the expense base by $500K on an annual basis.
- This reduced the cash burn approximately $50K/month.
- Staffing was upgraded and stabilized.
- Customer relationships were saved. No meaningful customers defected.
- New products were developed and are being brought to market.
- New brands were secured for future product placement.
- Permanent management arrived in early March, and Focus exited shortly thereafter.