June 2006

Q:  I have a metal stamping company that’s been in my family for almost 50 years, now.  It’s never been very big, but we always did okay.  Things have never been as tight as they’ve been since September 11.  Since then, I’ve had to lay off people who had been with us for more than 20 years, and half the time I don’t know whether I’ll make payroll even now.  I never know if my suppliers are going to ship me material because I’m overextended and they’re threatening to put me on COD or pay in advance … I don’t have that kind of money right now.  How do I increase my company’s cash-flow in order to stay in business, and how do we get back to the point where we’re making money, again?

A:  A three-step program for recovery:  1. Sell  2. Cut  3. Plan

1. Sell (after a stroll down memory lane…)

I love family-owned manufacturing companies.  I love the heritage that goes with them – all the memories the principles have of where they’ve been, what they’ve been through together, the dreams they had of what their business would one day become.  I love sharing the visions that owners and executives still have today for what their companies can become tomorrow.  I feel particularly protective of my clients who let me inside those dreams in order to help turn their visions into reality.

But one of the problems that often accompanies strong perceptions of heritage is a nearly compulsive attachment to the past.  It’s wonderful to have memories:  they give us bearing and perspective to guide us in future decision making, among other things.  But I’ve seen some plants with presses, tooling, parts, etc., that are literally caked with dust and oil because they haven’t been used or moved in years.  Yet these plants hold onto these relics because the principles are attached to the perception of value these assets held in their former hay-days.  In many cases, the reality is those assets have associated carrying costs that continue to add up even though the ability of those assets to generate revenue has long-since been depleted and will likely never return.

So, the first step in increasing cash-flow is to accept the reality of your company’s situation, today.   In doing so, take a look around your plant and see what you truly need to make money today; these are the true value-adding assets that you want to keep.  Then, take a look at how much ‘junk’ from the past is left over, which is everything else; now realize that past is sucking resources away from the parts of your company that are trying to make money for you.  If you truly want to increase your cash-flow and ensure the longer-term survival of your plant, you’re going to have to sell those unutilized resources.

If you can get money for those assets in a ‘working order’ condition, great; but don’t be afraid to sell unutilized assets for scrap value.  Even at scrap value – and don’t forget that metals prices in particular are fairly high right now – you will have that much more cash to work with in the interim while you’re planning for a longer-term recovery.  Moreover, you will have freed up other resources in your plant for reinvestment:  available floor-space can be leased or used for value-adding storage; aisles can be freed up, reducing traffic flow; staff can focus more effectively on current and future goals.

If you’re interested, call 815-728-1710 or email (dmarsh@bcsbydm.com) to schedule an appointment to go over the unrealized revenue power laying around your plant.

Step 2.  Cut

If your company is experiencing serious cash-flow problems that are threatening the survival of your business, now is the time for Targeted Cost Reductions.

Business Consulting Services by David Marsh will work with you and your accounting resources to determine your current financial situation, which includes your immediate three months fiscal projection.  We’ll use all the resources available through our experience to help ensure your company’s survival until permanent business planning improvements can be implemented.

As you may have previously experienced, cost reduction activities can be painful.  This is where our experience in over 400 plants around the world can really benefit you.  Having seen cost reduction measures implemented in dozens of settings, Business Consulting Services by David Marsh can help you minimize the pain those measures cause your company and its constituent parts, and we can ensure you have all the resources necessary to be fully informed in all your decisions.

Call 815-728-1710 or email (dmarsh@bcsbydm.com) to schedule an appointment to assess your plant’s needs and opportunities for targeted cost reductions to improve cash-flow.

Step 3. Plan

Cash-flow is the lifeblood of any organization.  Without cash, you can pay neither your employees, your vendors, nor your expenses.  Without cash, the lights would literally be shut off in your plant, and no one would show up to run the machines, anyway.  So, like blood for the body, your plant cannot effectively operate without sufficient cash-flow.

As such, you have to plan to ensure sufficient cash is available to the appropriate parts of your plant’s operations when needed.  This planning is primarily covered in the short-term (<12 months) section of your business plan, but should also be taken into longer-term considerations.  Business Consulting Services by David Marsh will help you establish controls to ensure short-term business plan requirements are fulfilled and not circumvented, and we’ll help you understand market opportunities available to you for longer-term planning to ensure improved future performance.

Call 815-728-1710 or email (dmarsh@bcsbydm.com) to schedule an appointment for business planning activities that will help keep cash-flow off your mind so you can concentrate on what’s really import to you – your goals.

Business Consulting Services
by David Marsh
Helping Your Business Achieve Its Goals._™

Special Offer!

We want to know what you think, and we’re willing to pay you for it!

Was this article useful to you?

Do you have additional questions or comments?

Would you like to share more information with other McHenry County manufacturers?

Write us with your questions or comments (qom@bcsbydm.com) and receive a 15% discount on your first scheduled consulting service – 5% discount for repeat customers.

As always, our initial consultation appointment is free.

Offer valid for services scheduled thru June 30, 2006.