This is real-life example of how strategic planning can turn a failing business around in order to acheive a successful transition and desired outcome. It originally appeared on OneAccord Partners and is reprinted here with permission.
The big difference with OneAccord Partners is the fact that we are operators.
Our clients are business owners and leaders who want to grow their business and build value, often with the underlying goal of eventually selling the business for its full value. The fact that we are operators gives us two very big advantages when we come in to help a company grow.
1. We understand business.
Our Principals have been there — and there and there and there. We’re familiar with the issues that challenge businesses and what they look like from the trenches. We’re also not distracted by symptoms, but directly address the root cause.
2. We step in to help work the plan.
Often when we look at a business and its barriers to growth, we identify the need for an expert to work within the business. We have people and partners who can step in to fill these needed positions for as long as necessary — proven, tried people who have lived in the role before and were successful.
Case in Point
OneAccord Principal Dean Kato recently completed an engagement with a local business. His experience there provides a classic case study of how OneAccord works and what we strive for on a daily basis. For the privacy of the business and its owners, we won’t reveal any identifying details, only that the company is a local, innovative business in the manufacturing industry.
This engagement began as many do: through a referral partner. The owners of the business in question were talking with their wealth manager, who recommended they meet with Dean and OneAccord Senior Partner Scott Smith.
The owners’ goal is to ultimately sell the business for a specific amount. They know that to get the price they want, they have to build the business to a point of $7 million to $8 million in annual sustained revenue. When they met with Dean and Scott, their annual sales were $4 million and unstable.
Step 1: The Assessment
The first step in any engagement is an assessment based upon the individual needs of the client. Upon completing this assessment, Dean’s first impression of this particular company was that it had been defying gravity. Despite major issues — poor on-time delivery, negative labor variance, poor quality of parts — it had still managed to reach $4 million in revenue. However, Dean also knew that gravity eventually wins and the company’s growth wasn’t sustainable.
Sure enough, it was already starting its downhill slide. Within six months, revenue had plummeted — down $1 million from its annual pace and falling.
Step 2: The Plan
After the initial assessment, OneAccord provides observations and recommendations on key areas to focus on to improve the overall value of the organization.
To begin, Dean and Scott worked with the company owners to create the position of interim COO and made the sales and operations functions direct reports. One area the owners needed more acumen in was financials, so they also brought in a B2B CFO partner to provide fractional CFO guidance, establish a robust chart of accounts, help navigate Quickbooks, work with payroll issues, etc. This partner also brought financial forecasting expertise that provided a reliable, forward-focused pathway for and measurement of progress.
Step 3: Operation
Once the team was in place, Dean addressed three key issues.
The first problem was the recurring theme of taking on business that did not make economic and strategic sense. If someone asked, “Can you do this?” the answer was always a resounding, “Yes, of course.” This led to the company regularly working on projects which required too much investment and risk, resulting in regular collection issues and large inventory write-offs.
They adopted a stringent bid/no bid review procedure and ingrained the philosophy that not all business is good business. They also established an ideal customer profile and built processes from the very front of the company.
One challenge requiring active management in the company was recognizing what a competitive wage is in the industry. The company had gone several years with no increases and was losing key personnel at a growing pace.
To pay more competitive wages, they created revenue in the business by improving company performance. Better performance led to higher profits and higher wages for employees.
Two related areas needing improvement were on-time delivery and reduction in rework/labor variance. Although an effective inspection process was in place and prevented many quality escapes, quality issues were causing significant rework, late delivery and increased cost.
Solutions involved putting the right managers in the right seats and focusing on the basics of visual metrics management, training and a constant mantra of customer-first workmanship. This is an ongoing challenge.
Results (So Far)
Today, a year and a half after that initial assessment, the business has 50-60 active customers and acquires an average of two more every month. Two months ago, they closed their largest customer yet, who was impressed with the company’s performance metrics: 98.5% on time and 99% quality.
By the end of 2017, the business will be at $7.5 million in recurring revenue. Within the next 18 months, depending on projections, the company is expected to hit $8 million to $9 million, which will allow the owners to exceed their goal selling price.
Our official engagement is complete, though the owners have arranged an agreement that allows them to call on Dean as needed. Over the past three months, Dean has been working to transition leadership to a full-time general manager who will take much of the daily responsibilities from the owners’ shoulders so they can slowly step back from the business and look towards transitioning out completely.
Speak with an expert about transitioning your business.