Caso De Estudio 1 Solve Your Cash-Flow Problem To Stay In Business

Caso de estudio 1
Solve Your Cash-Flow Problem to Stay in Business
Section: Small Business THE TURNAROUND ACE
Bad financial management can be hard to overcome. Adopting an airtight plan tocontrol costs now is the first step to recovery .
Editor's note: This is the first in a new series of case studies about business turnarounds. Names and identifying details of the company used as theexample have been changed.
Problem: The Cash Cow Is Dead
Hot & Cold Inc., a plumbing and heating supply company in the heart of Virginia's Shenandoah Valley, is headed for the slaughterhouse. As thehousing boom grew, so did sales, from $7 million a year to $14 million over four years. But as the company expanded, its problems multiplied, and no amount of sales could cover the warts. As the economyfaltered and poor management continued, revenue started dropping by more than $2 million a year. There were no easy sales to be milked that would carry the company through to the next quarter.Instead, it has been leaking hundreds of thousands in profits and cash.
Crunching the numbers over the past five years shows lost opportunity and bad financial management have cost the company about $5million in profits. Overtime alone is about $250,000 a year. Today Hot & Cold is at $6 million in sales and is running at a loss in excess of $1 million. The bank is nervous, and ready to pull the plug onits line of credit. The steady supply of new business has dried up, and the three owners' lives are on the line. The old cash cow is chopped meat.
To keep the company alive, they've mortgaged theirhomes, maxed out their credit cards at usurious interest rates, and cashed in their 401[k]s. With college-age kids and wives with expensive taste, money issues are creating serious tension on the homefront, and the desperation and panic that the owners are feeling is transferring to their employees. Worker morale is low, and employees are phoning it in because they are convinced they'll be out...