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Manufacturer of Electromechanical Components

Problem: A serious decline in business caused by the loss of several large customers, coupled with an ill-timed expansion, ran this company out of cash. Losses mounted to $1 million per year. Management panicked and began cutting prices and chasing large orders at low gross profit rates. The owner put everything he had into the business, including the proceeds from the sale of his house.

Solution: We immediately stabilized creditor relations. Our analysis revealed inefficiencies and a lack of communication in the manufacturing process, a backlog heavily skewed toward large orders and a cost accounting system that was posting inaccurate material charges to jobs.

Results: We assembled a turnaround team composed of key management personnel and took the necessary steps to streamline the manufacturing process, develop procedures to manage the backlog mix and improve the cost accounting system. The company achieved break-even in five months and went on to achieve profitability in excess of $1 million per year.

Automobile Dealership Group

Problem: A group of automobile dealerships wanted to combine their businesses and raise equity capital through an IPO to acquire other dealerships and expand their business. There was no corporate financial structure and none of the dealerships had financial personnel with the skill level to lead the company through a merger and IPO.

Solution: We prepared the initial financial projections to attract an underwriter, assisted in the preparation of the SEC filing documents and provided an interim chief financial officer who accompanied the president on the road to generate interest among investors and brokers for the IPO.

Results: The IPO was successfully completed and the automobile group became a single public entity.

Retailer of Ready-to-Wear Clothing

Problem: This retailer wanted to open a new chain of theme stores in Chile. Their existing business was a family business dating back two generations and had grown slowly from within. Management needed to understand the process to start a retail chain from the beginning.

Solution: We reviewed their new concept and provided recommendations. We then conducted a seminar for key management personnel on the process of developing a new retail concept and opening stores. We prepared a plan outline with a timeline and milestones.

Results: Management proceeded to follow the plan, develop the concept and successfully opened their first store.

Dot-com Company

Problem: A dot-com company selling prepaid funeral contracts to senior citizens over the Internet was approached by a West Coast direct marketing company selling life insurance to senior citizens through cable advertising and a call center. The insurance could be a funding source for the prepaid insurance contracts, providing a much-needed enhancement to the sales of those contracts. The direct marketing company represented their business model as a two-for-one model—that every $1 spent on advertising would return $2 in revenue. The dot-com company wanted to validate that business model.

Solution: We used a three-step analysis to validate the business model that included a limited advertising test. We conducted the analysis and test at the direct marketing company site over a two-week period and found that, historically, the business model had produced slightly more than $1 per advertising dollar spent and not $2.

Results: The dot-com company declined the acquisition and avoided making a costly mistake.

Distribution Subsidiary of a German Manufacturer

Problem: The combination of the sudden departure of the chief financial officer and a failed implementation of a new accounting system left the books and records of this distributor in total disarray. On top of that, a hurricane left eight inches of water in their offices and destroyed some original entry documents and damaged some computer hard drives. The year-end was approaching and the company had to prepare for an audit required by their overseas parent.

Solution: We quickly evaluated the condition of their books and records, determined what was missing and how to work around the missing documentation, and prepared a plan to complete the internal financial statements in time to have the audit completed by the parent’s deadline. Further, the Beacon associate assumed the role of interim chief financial officer through the crisis period. We also assisted the company in filing a business interruption and damage claim and negotiated that claim with the insurance company.

Results: The audit was completed by the deadline. The company recovered the maximum damages possible under their policy and Beacon Consulting Associates assisted the company in hiring a new controller.

Mechanical Contractor

Problem: This mechanical contractor was required to submit a highly complex and technical description of qualifications to continue to be an approved contractor with AT&T. The client was concerned that they did not have the in-house skills to effectively respond to many of the issues.

Solution: We reviewed the requirements and the company’s strengths and qualifications and prepared and submitted the documents. We also recommended a strategy shift away from the high concentration and dependence on AT&T work and recommended certain internal structural improvements to facilitate that business shift.

Results: The Company continues to be an important AT&T contractor, has implemented key internal structural improvements and is diversifying its customer base. We continue to advise the company on business strategy and marketing issues on a regular basis.

Printer

Problem: This printer of advertising inserts for newspapers faced increasing competition forcing down margins and leading to a severe cash shortage. The company’s creditors, several of whom were also competitors, forced the company into bankruptcy. The bankruptcy dragged on for over a year and the company continued to struggle financially. The company made a very low offer of settlement, but the creditors maintained that the company would not be able to perform and sought liquidation.

Solution: We quickly evaluated the company’s situation and realized that the company was operating at capacity and barely breaking even. The problem was in the job mix—too many large, low-margin jobs versus too few small, high-margin jobs. We presented a valuation of the company to the bankruptcy court that demonstrated the owner had invested equivalent value into the business in accordance with the cram-down provisions of the federal bankruptcy code.

Results: The Company’s plan was confirmed, essentially crammed-down over the objection of the unsecured creditors. The company changed its strategy to diversify its job mix, successfully emerged from bankruptcy and is now operating profitably. Plumbing Supply Distributor Problem: In an expansion move, this plumbing supply distributor acquired another plumbing supply distributor out of bankruptcy with the intent of turning it around. The turnaround failed, and combined with shrinking margins in its own market, the company was itself facing bankruptcy. Solution: Under our guidance, the failed turnaround was quickly disposed of, and we began working on strategies to control costs and improve margins in the company’s own market area. Results: The Company is now operating profitably and is once again on an expansion track, having opened three new branches in the past two years. We continue to advise them in a board of directors format, meeting semi-weekly.