Case Study IV - Margin Call

    I was asked by one client to “simply” help them find their way back to profitability.  In this case the company was run by a successful salesman who kept growing sales and revenue every year, but kept going deeper into debt and had now fully extended his line of credit.

    Again, we reviewed all the basic business processes from sales, through delivery and billing and found very little to improve.  I started documenting the company strategy, which was in the owners head and creating a five-year business plan that would lead to profitability.  As part of this I needed to study recent and current financials, but had a little trouble getting this information from the incumbent operations VP, who had been instructed to give it to me.

    Once I had the financials I soon discovered a fairly obvious error in calculating gross margin – actually a fairly straight-forward algebraic problem.  We changed this in the pricing formulae and “problem solved”.  Once the pipeline of improperly price sales was purged, the company started being profitable again, and they had a documented business plan that they could share with their employees, the bank and each other.