Our client, a multi-million dollar precast concrete manufacturer, brought in Momentum Advisors when the company was in crisis. Two consecutive years of losses had placed a heavy strain on the banking relationships. The plant operated substantially under capacity, and the business encountered an increasingly difficult time sourcing resale products, both causing increasing cash burn.
Because the owner was focusing most of his attention on outside ventures, the resulting vacuum in leadership and increasingly low morale edged the company towards a high likelihood of total collapse. Management and staff were overwhelmed and contacted us to help them get out of this grim situation.
Momentum Advisors performed a thorough analysis designed to highlight systemic failures and prioritize those failures based on the severity of their impact on the business. From this, we developed a detailed six-month phased work plan, broken down into incremental steps and guided by quantifiable measurements. Momentum assumed management control of daily operations, centralizing decision making and resource allocation.
Our solutions to affect a successful turnaround included:
- Development and implementation of a 13-week cash flow projection
- Establishment of weekly sales, production, and purchasing meetings to increase connectivity and information flow-through
- Implementation of a new sales team compensation plan, resulting in substantially higher sales and order backlog
- Vendor negotiation efforts resulting in the re-opening of credit terms and increased product availability, decreasing purchasing costs
- Discovery of new suppliers and elimination of materials broker relationships, decreasing raw material costs
- Change in estimation practices to increase accuracy and competitiveness of bids without hurting profit margins
- Assignment of pricing authority to the estimators to ensure bid competitiveness and alignment of decisions to production levels (under-utilization in the factory triggers lower pricing) to ensure better workflow balancing
- Reorganization of facility workspaces to improve inventory control and improve morale
- Consolidation of purchasing functions under a single position to allow for better price shopping and materials delivery timing
- Hiring of general manager to replace Momentum and establish daily control of operations
- Development of business plan and forecast model for management decision-making and bank loan covenant requirements
- Implementation of lean visual management techniques to track work and workflow for the estimating, production backlog, and sales targets
Momentum Advisors returned the company to profitability within a year, resulting in a $400,000 swing in net income from negative to positive. The changes enacted by Momentum Advisors gave employees a renewed sense of purpose, worth and a believable future which improved morale and lead to an increased commitment to the company. Re-establishing trust with vendors and customers led them to increase their commitment to our client.
System changes, compensation plan improvements, management changes and workflow enhancements all contributed to improved profitability, stabilized cash flow, and increased sales. A substantial backlog of firm orders going into the winter season also substantially improved viability and morale. A new short-term lender relationship was secured, and groundwork was laid for a traditional banking relationship after sustained profitability.