Business Improvement Group

North Amercian Distributor

A North American Distributor, which had experienced rapid growth, had run out of cash and recorded its first loss in its 32-year history.

Issues:

• Cash Flow was critical.
• The business was failing rapidly.
• The lending institution was calling in the loan.
• A/R DSO had climbed to 65 days.
• Inventory DOH had climbed to 70 days.
• Operating expenses were 95% fixed.
• 250 of over 2,000 SKU’s comprised 85% of its sales.
• A customer segmentation analysis showed 90% of its revenue came from 10% of its customers.

Actions Taken:

• A complete assessment of the organization was completed.
• A complete turn-around plan was implemented.
• Existing personnel were upgraded.
• A telemarketing sales initiative was launched.
• The revolving credit facility was negotiated with a new lending institution.
• Leases were terminated, facilities were sold, and warehouses were consolidated.
• A business that was not part of the core competency of the business was divested.

Results:

• Expenses were reduced by 45%.
• Headcount was reduced by 50%.
• DSO was reduced by 17 days.
• DOH was reduced by 25 days.
• Debt levels were reduced by 70%.
• $20 Million of free cash flow was produced.
• The balance sheet was restructured and the company was positioned to sell.
• Shareholder value was maximized by the sale of the company.