Case Studies

Executive Summary

A fourteen-year-old technology company was struggling to grow and find ways to relieve the stress suffered by the owner concerning people issues, quality control, financial management and customer complaints regarding service quality.  We were brought in to help him get some direction and regain control of his business at a new level. After five years of improvements in systems, procedures, people, and financial management, the company was immensely profitable, the owner was stress free and had a great team running the business.  A year later he sold the business for five times EBITDA and remains at the company in business development while the team has control of day-to-day responsibilities.

Background

I was introduced to the CEO of a 14-year-old Custom Electronics company, a major provider of residential and commercial smart audio visual, lighting, office and home control systems. The owner was the entrepreneur/founder but felt stuck having only grown the business to about $4.2 MM of revenue. He didn’t know what he needed to know to grow the company. We were tasked with helping him make the conversion from entrepreneur to CEO and to grow the company significantly.

Challenges

While he had some good people, he had no leadership team, no training program, no sales force or strategy for business development. The accounting practices were minimally effective, accounts receivable was not well managed and their field service work suffered from quality control causing many customer complaints and dissatisfied customers.

Profitability and Growth

After two years working with the company it grew from $4.2MM to $7.6MM with EBITDA of 6% and projections for year 4 of $9MM in sales with a 6% EBITDA.  The key success herein in the words of the CEO, “You have matured me as CEO of my company.  You have helped me make decisions and take actions that I never would have done without your advice. You showed me how to let people go who were a liability to my success”.

Solution Provided

We worked with the CEO to become better at understanding his business financially and operationally. We terminated employees that could not accept necessary changes, hired a new warehouse manager, added an experienced accountant to update the accounting system and created a budget and cash flow forecasting.  We obtained a significant line of credit which was seldom used because of better cash flow management internally. We began formal training for existing and new field service employees.  The CEO hired a sales team and then spent more time in business development himself instead of day-to-day management.

Results

By the end of the fifth year the company began to have real value and opportunities to sell the company surfaced. The company was doing about $16MM with EBITDA in excess of $2MM.  An offer was finally put together to sell the company to a large publicly traded company at 5 times EBITDA.

ROI

Clearly the ROI for the investment in our advisory services had a huge return.  Credit goes largely to the owner for his acknowledgment the he needed help. He was a great listener and executed change and improvement well. He brought in quality people and treated them very well. All of them, including the CEO, stayed through the transition and beyond.

Future Plans

The CEO remains with a nice compensation package as well as an earnout component of the sale that will add to the sale price. The company continues to perform well and the purchaser is using this transaction and the company operations business model to create a $500MM division of their overall business through additional acquisitions.

Executive Summary

A fourteen-old building products company was struggling with growth, leadership, major stress on the CEO and poor financial reporting.  We were brought in to replace another advisory team that was ineffective in suggesting needed changes. By the end of the first year we were able to create a new management team, upgrade financial reporting, help the CEO become less involved in day-to-day tactical issues, add some key staff to increase sales, management of accounts receivable, create a new proprietary software management system, create an on-line ecommerce platform and increase sales from $9MM to $13MM with an 8% EBITDA.

Challenges

We were referred to a building products company with general contractors as primary customers to provide management consulting on a variety of key areas of the company operations.  The company was doing well but extraordinarily stressful for the CEO as everyone depended on him for answers, and support on their problems.

We discovered other issues that needed attention. Their financial reporting was quarterly and very simplistic and not useful as the information was 3-4 months old by the time it was given to them. They had a line of credit but were not managing it well and it was up for renewal.  Accounts receivable were way too high because the general contractors did their best to drag out payments and there was not a good system to collect money.  There were other issues of significance but were not being addressed.

Solution Provided

We began to make adjustments in problem areas starting with a conversation with the outside accounting firm and asking them to increase their reporting regime and deliver reports quicker.  We created better reporting on as requested basis from their internal system. We began to get involved with the creation of their proprietary data management system that was way behind the expected completion schedule. We met with all of their staff and realigned some responsibilities and leadership which was well received. Specifically, we created a buffer between the staff and the CEO and this has worked very well.

Results

After just 16 months working with the CEO, EVP and his team we have accomplished many major adjustments in accounting, sales, leadership, reallocation of day-to-day responsibilities away from the CEO, completion of the data management software, creation of an enterprise ecommerce initiative, significant progress in increased sales in our Amazon on-line sales, hire two new staffers and one new business development person, an exciting culture that everyone adheres to and significantly greater financial results.

ROI

The company is on target to close out 2019 at $15MM+ with 10% EBITDA.  The investment in our involvement and other changes has more than paid for itself and the company continues to grow.  It could be on target for $20MM by the end of 2020.

Future Plans

Slow growth is the plan.  E-commerce will grow and the additional salesperson will aid in growth.  Keeping on track with financial reporting, controlling expenses, watching margin, payroll and protecting customer relationships will provide the necessary protections to avoid unintended setbacks.