Steele Development Corporation has aided many multi-million dollar companies.  Here are some examples of how we've helped them turn their financial situation around.

INDUSTRY
Roadway material recycling subcontractor
COMPANY
$10 million a year in sales
PRIMARY
Determine the long term viability of the business 
SECONDARY
Strategy for improving gross and net profits

SITUATION
Owned by two brothers who took the company over from their father. Poor bidding practices, lack of management information and bad weather combined to create:

  • 2% gross profit and $800k loss in the most recent year
  • $1.5 million LOC was maxed out and no payments made for several months
  • The bank was pulling all financing
  • Highly seasonal, most revenue was generated in 6 months each year

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 and secure funding and to improve operations and profitability.

TASKS PERFORMED

  • Within three weeks SDC developed a cash flow plan and 12-month budget based on known business operations.
  • Secured $900k in equipment financing to retire $700k in equipment debt
  • Arranged for refinancing the owner's facility to raise $500k in cash
  • Secured a secondary $500k line of credit collateralized against accounts receivable
  • Improved collections on accounts receivable and retainage so that the new $500k LOC was sufficient for positive cash flow
  • Improved Gross Profit Margin by 15% of sales, allowing the company to make progress in paying down its new LOC
  • Implemented a daily scorecard reporting system from job superintendents
  • SDC consultants worked with the firm's controller to reduce the reporting cycle on job costing so that the information could be acted on soon enough to change the outcome on jobs.
  • SDC worked with the owner to improve the gross margin during the bidding process and eliminate jobs with low potential for acceptable profit.
  • Equipment repair costs were reduced from $1.5 million a year to less than $1 million
  • SDC designed and installed a formalized functional and organizational system which improved employee accountability.
  • SDC worked with the owners to develop a strategy for increasing off-season sales by $1 million, reducing the pressure on peak season operations.

RESULTS
Over the course of one year the owners went from being undecided about whether to stay in business to dedicating themselves to becoming one of the best $10 million highway construction companies in the west. Having regained their financial footing the company is repositioned for standard bank financing within a year and is producing above average gross profit for the industry. SDC helped turn the company into a profit-centered enterprise, dependent on its LOC for seasonal operating costs in only thee or four months of the year.

 

 

 

INDUSTRY
Record Storage and Document Management
COMPANY
< $1 million a year in sales
PRIMARY
Cash planning and control
SECONDARY
Help plan for selling off a division

SITUATION
Under the leadership of sales-oriented owners, a team of career sales professionals lacked the operational controls needed to assure profitability and longevity. Started two years ago, this company was financed by friends, relatives and associates - operating at a loss of about $300k through the first 9 months of the current year.

  • The owners expected to do about $s million in sales in the next twelve months but current sales were < $65k a month. Although complex sales pipeline tools were in place, monthly sales were inconsistent and unpredictable. Sales projections were wild guesses and hopes based on often unrealized opportunities. Production was inconsistent and almost completely shut down due to lack of cash for payroll.
  • A $75k short-term note, collateralized against personal assets and accounts receivable, was due in 30 days. An eviction notice had been received from the warehouse landlord. Over $90k in credit card debt had been accrued and payments were typically > 60 days late.
  • Several potential buyers had expressed interest in different parts of the company but total debt outstripped the total value of the companies.
  • Past payment commitments had not been met and the IRS levied the bank account for over $20k.

The receivables factoring form suggested the company engage SDC, 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 of each of the company's three divisions, develop a finance plan, negotiate debt with 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 developed an analysis of the sale of single or multiple divisions and recommended a course of action.
  • Under SDC's direction the owners refinanced their home to satisfy the over-collateralized $75k note. An additional $75k HELOC provided operating capital while operations were stabilized. A temporary payment plan was negotiated with the IRS until the sale of one division was completed.
  • SDC helped in developing a Production Control Report for projecting and tracking sales through production each month, and a Cost Analysis model from tracking project labor costs.
  • Using the SDC Cash Flow and Budget models, costs were broken down into cost groups assigned to managers who were held accountable for results within acceptable limits. Under SDC's guidance, the company cut overhead by eliminating non-productive positions and spent more effort developing a smaller staff.

RESULTS
The added capital from HELOC provided the cash needed to make immediate production payroll, opening the production bottleneck on backlogged orders. Operational capacity was matched to meaningful sales projections. One division was sold, bringing in over $175k in cash - enough to fund operations through break-even and into profitability. One of the two remaining divisions set a record of sales through production in the second month. Production assets which had been collateralized are owned free and clear. Cash on hand is sufficient to eliminate the need for receivables factoring, having another $130k a year in interest. Break-even sales needed for cash flow was reduced from $145k to $73k in the first three months.