Personal Care Manufacturing Case Study
Contract manufacturer of personal care products (hair care, skin care and facial care)
Services: Revenue growth strategies, business turnaround plans, strategic business & financial plans, interim management, alternative financing methods, organizational fitness assessments, long term value creation
The company’s back orders totaled approximately one million dollars, there was negative cash flow and orders could not be turned into revenue. Their accounts payable had doubled in one year and past due obligations were in arrears by 60 days to six months. Infrastructure needed development along with systems, processes and practices. The company lost $500.0K in 2008, $750.0K in 2009 and $1.3M in 2010. There were also no financial controls in place; cash flow statement was non-existent.
- Developed a work out plan to reduce bank debt by 50% or $500.0K
- Put in place the annual financial budget which effectively reduced the million dollars plus loss to EBITDA positive.
- Authored a Confidential Information Memorandum to present to alternative financial sources for working capital and purchase order financing.
- Was able to convince an investor to buy the bank debt at the reduced rate and provide working capital so back orders were converted to revenue.
- Developed a “Schedule of Payments” to reduce past due debt so all vendors will be paid off in 18 months.
- Revenue is running 15% ahead of the prior year’s actual performance.
- 2011 first quarter loss was substantially reduced against 2010’s actual performance. Company will show a small pre-tax profit based on forecast.
- Over one million dollars of private capital was injected into the company. VP of Operations and Controller hired to execute the operating and financial plans.
- Debt was reduced by 60% using internal financial controls and a disciplined approach to the execution of the plan.
- Cash flow improved to a positive position for the first time in three years. Will be EBITDA positive for the first time in four years.
- Raw materials cost of goods was reduced by $150K