Featured Success Story
"My cash flow is killing me...."
A landscaping construction, landscape and lawn maintenance, and snow removal services firm in business for nearly thirty years had run into a cash crunch…
"GJA Services did a great job to restore order and discipline in our financials!”
-Owner, Pet Food Manufacturer
“They did not require us to re-invent the wheel and the process still worked!”
-CEO, Utility Contractor
The company had experienced uneven revenue growth over the past five years. The uneven results are due to the seasonal nature of the three primary service offerings – Landscape Construction, Snow Removal and Lawn Maintenance.
Ben and his wife Barb had succeeded by virtually any accounting. The company reputation is good and Ben’s marketing work has created a strong local brand awareness. That said, they are struggling with the management of the company at its current $3.5 million size.
Ben used an SBA note to consolidate debt 4 years ago. A period of both personal and professional difficulty saw creation of a $200,000+ liability with the IRS for employment taxes as well as a $60k obligation for the Grants’ personal income taxes. The net result of the challenges is that the company performance was below breakeven with cash management a particular concern. Liabilities have mounted and any weather-induced work reduction would require a severe cutback and asset disposal in order to remain solvent in the face of the long-term debt.
The financial management of the company is weak. the financials are not of sufficient quality to improve the capital structure of the business; there are multiple lingering Balance Sheet issues in particular. Barb is assuming a larger role with the financial functions; she needs
assistance with technical and other accounting challenges. The first $700,000 in operating profit goes to debt service that is unsustainable. The bank was threatening to call the notes.
The current approach to Sales and Account management is concerning as just at 1/3 of the top 50 Customers all-time have left in the past 24 months.
Analysis:
We worked with the Pandems in our Initial Review and determined together that we could help them in the areas marked below. Among other things we leveraged good pricing practice and an improved collection process to significantly improve the cash flow from their services. By focusing on managing Cash Flow differently than before and providing the banker regular reporting of their success, the Pandems avoided the pending call of the note and successfully reduced the Accounts Payable at a rapid rate. The cash crunch was averted.
Pandems’ Action Emphasis Summary:
Among many other things our plan called for:
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Improving the Pandems’ collective financial knowledge and skills
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Creating Pricing structures to alleviate cash flow challenges with current approach
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Establishing a monthly reporting process where in the Key Performance Indicators (KPIs) are both clear and provide a view forward
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Aided in meeting with the banker to “take the pressure” off
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Created a five-year capital refresh plan to permit growth of necessary equipment without overburdening the business.
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Adjust the management processes to continually improve profits.
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Engineer the business such that Ben can meet both his short-term (eliminate the debt) and long-term (wealth accumulation) goals.
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Establish management and controls suitable for Ben to expand and accelerate his preferred responsibility as leader of the organization
Ultimately our plan served to improve their profits by about $600k per year; but, most importantly our project also gave the Pandems back their free time. They now happily preside over a business growing beyond $4m and generating the kind of personal wealth and income their labors so richly deserve.
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