Privately-held food manufacturer and processor with sales of $200 million
Company performance and financial results fell below budget and subsequent forecasts to the lender were not achieved. Manufacturing process issues and lost sales resulted in operating losses and negative cash flow. The company’s problems were exacerbated by an unforeseen disruption to its core business. The loss of a few key managers meant those who remained had added responsibilities, including leading the organization through a crisis. Working capital management was weak. A new business venture that the company had invested in two years earlier was struggling and unprofitable. The company needed to develop and execute a precise plan to turn the business around or face possible risk of closure or sale.
Interlochen was hired to immediately assist with the cash crisis and assess the condition of the company, as well as to help develop and implement a strategy that would return the company to profitability. Working with management, we identified immediate cost savings opportunities and implemented an effective working capital management approach. This included downsizing the organization, while insuring that all key activities were adequately supported. Key performance indicators were developed to measure the effectiveness of sales, operations and administration. A reluctant management team was finally convinced to shutter the unprofitable new business venture which reduced staff and expenses. The Interlochen CFO developed a meaningful cash and business forecast to present to the lender. Internal communications were strengthened by establishing clear goals for each functional area that linked to the overall company forecast. Internal performance measures were reviewed weekly as a team, insuring focus and accountability on critical success factors that would drive the business to improved profitability. Work continued with each functional area to establish targets down to the production line and for each sales person and team. For the first time, the overall business and financial goals of the company were linked across all functions and key managers in the organization.
Organizational changes, coupled with aggressive cost cutting and working capital management, eased the cash crunch and the company returned to modest profitability. The new strategic plan was presented to the lenders and received their endorsement. The company was meeting or exceeding its financial forecast and began paying down its operating bank line and making term loan payments. By focusing on the most impactful initiatives, company profits increased substantially resulting in improved performance and margins. As the new fiscal year began, the company began establishing a leaner more disciplined management approach, stronger internal communications across functional lines and more effective financial planning and reporting. These initiatives met both lender and internal management needs. Bank relations were again normalized and the company exceeded its budget the following year.