The Problem: The company’s key shareholders management of Operations and Finance decided to retire and transfer the company to family member management in Sales. The loss of the 2 key management personnel left a large gap in experience to lead the planning and executing the daily operation. Additionally, there are no qualify middle management that understand the cross functional management and managerial skillset to support the company. The company has established manual processes and operable legacy system that are not on par with the competition and lacking operational data that can provide management actionable information to make decision like customer margin, cash flow, banking, and fleet management.
Analysis of Alternatives: 1. Continue as is with allowing the current personnel to learn how to manage and plan the company operation with the risk of detonation of profitability and cash flow.
Recommended Solution: Hire outsourced financial CFO and CEO to seek various plan options to address the creation of updated processes, system, and train new leaders to operate at a professional level with understanding how to strategically implement, track, and adjust as needed.
Implementation: To tactfully provide stability to the operation with incorporating supervisory management personnel to establish a discipline structure and control in developing accountability to focus in refining the 3 key functions of their business: Sales, Operation, and Finance. Our approach is to focus on Process, System, and People to triangulate the synergy in delivering incremental progress by setting up baseline of business and personnel performance measurement.
- Solidify operational & financial management control and analysis in providing drivers & trucing costs components detailing the direct labor, incentive, and overhead burden rate to identify the critical core driver of margin by customer and services to evaluate action plan on shrink or expand partnership and/or trucking route services.
- Establish a 3–6-month detail cash flow planning with a weekly update to adjust all necessary expenses and control vendor payments and customer collection. Develop an open communication with key supervisory personnel to embrace operational changes to track performance and progress. Create a proactive customer collection process to reduce over 30 days by offering payment term and plan install a late payment penalty and interest.
- Evaluate all personnel & contractors’ performance to measure against sales & services volume to identify under performer to either upgrade or promote leaders in driving changes with process redesigning to eliminate redundancies.
- Develop a broad plan in reaching out to conventional lenders to address the refinance of current equipment loan and increase in Line of Credit. Approach every lender with a solid management plan in addressing revenue delivery, trucing cost management, operating cost control, equipment utilization, and personnel training and development.
Results: Our deliberate approach to focus on the Process, System, and People to established confidence with internal workforce and outside partners to participate in the restructuring plan. Within 6 months of our engagement with a management consultant partner, the company identify deficiency and inaccurate financial reporting and poor costing to determine profitability. The company financial projection for the next 3 years is steadily healthy with a stable sales growth, Net Income of 5% and EBITDA growth of minimum of 10%.
The company was able to refinance out the current lender with a new lender within 6 months to restructure the business equipment and increase LOC to 3X the larger for working capital for new investment in trucks to expand new service and improve efficiency. Additionally, the company continues to evaluate the current system to upgrade new ERP within 6 months that can improve productivity, operational and financial reporting to provide management critical information to drive profitability and high-quality services.
With the emphasis of Process, System, and People, the company revamp key areas of each department to develop clear Process and then strengthen it by incorporating the System to deliver consistent results that allow People to perform effectively and efficiently throughout the company in delivering an ‘extraordinary’ result.