PRIMARY: Decide whether to keep the company open
SECONDARY: Cure cash flow shortfall, perform turnaround

INDUSTRY: Commercial millwrights & metal workers

COMPANY: $7 million a year in sales

SITUATION: Following 2 years of heavy losses and internal strife, the remaining partner acquired the outstanding shares of the company.

• The company owed $150k to three unions
• $400k in old tax debt
• $500k in accounts payable had fallen behind terms
• At risk of losing their line of credit under secondary financing
• Meetings with superintendents and foremen gave us hope for higher margins

The secondary financing firm suggested that the company engage the services of a turnaround professional.

SCOPE OF WORK: Steele Development was brought in to develop a cash flow plan, assess the company's short and long term viability, develop a finance plan, negotiate debt with the unions, taxing authorities and vendors, assist in reducing fixed overhead, help control production costs and improve profitability.

TASKS PERFORMED:

• Within three weeks SDC developed a cash flow plan and 12-month budget based on known business operations.
• SDC negotiated a suspension of accounts payable with vendors until the company was stabilized
• Got the unions to agree to term out their debt and stay current
• Because of the company's loyal customer base a preliminary decision was made to keep the company open
• An operational assessment showed low gross profit but a good turnover on accounts receivable, and an experienced and loyal workforce.
• SDC conducted project management training with superintendents and foremen
• After developing an improved bidding model and production costs controls, project management was improved
• Under SDC guidance, the company demonstrated a strong commitment to improvement on all levels and were fast adopters of new solutions developed by SDC
• Using the SDC's planning process, we worked with the owner to develop a longer term businesses plan and strategy for improving profitability and less emphasis on growing sales

RESULTS: SDC's involvement resulted in the company turning around its cash position in the first couple of months. Over $150k in debt was forgiven during the vendor negotiations. Gross profits improved by 7% of sales over the first three months. Annualized overhead expenses were reduced by over $300k a year by implementing proposed changes. The company returned to profitability within three months. A year and a half later the company has grown from a loss of $500k on sales of $7 million to a net profit of over $650k on $5.5 million in sales. Over the first 18 months $500k in debt has been paid down and the company expects to be debt-free in another 18 months. The company expects to be bankable and bondable within 6 months. SDC organizational development and cost savings controls remain a significant part of this ongoing engagement.