Details matter. And, as we heard on Friday, September 16 when turning around an operationally-challenged business, you have to be relentless about measuring what matters and improving it daily.
G2 Capital Advisors’ Jim Wiesen took attendees of a CTP Lunch and Learn session hosted by Aaron Hammer of Sugar Felsenthal Grais & Hammer, through two impressive examples of how he and his teams have used financial and operational tools to deliver remarkable cash improvements to business owners. In an award-winning example, his team produced a $40 million swing in EBITDA that turned cash losses into exceptional positive cash flow. He discussed how throughout the process, the constituents have choices to make that evolve as the turnaround case proves up through performance. The owners could either 1) limit their risks and sell as soon as enough value was created to recover their investment; 2) wait longer, take the additional measured risk that time can bring and earn a slight ROI or; 3) wait even longer, let the full turnaround take hold and potentially be rewarded with a multiple of their investment. There was an enlightening discussion about sales agreements that explained how, if thoughtfully crafted with solid understanding of cost and performance drivers, terms can lead to managed contract risks (e.g. commodity price index, delivery windows, quality/quantity elements) or if not create extremely costly problems such as input cost overruns, costly schedule changes or even loss of customers and stranded capital investment.
In the second example of a large seafood company, we learned how with good data in hand (a subject to be covered in our October 14 IT Lunch and Learn session hosted by Kirkland & Ellis), prioritization of corrective actions and using proper metrics, a business’ liquidity, capital structure and value can first be stabilized and then improved drastically over time. In one example, he showed how proper calibration/ investment in a food portioning machine led to significant yield improvements that had immediate payback. In another example, we learned how gross margin reporting used by the sales teams indicated a much higher margin than the financials reported. By pulling on the thread of that inconsistency, his team saw how management reporting was leading to misguided behaviors on the front end that generated under-performance throughout the supply chain.
This was the third in the TMA/Midwest CTP Committee’s Lunch & Learn series. The sessions focus has been on select challenges within Sales, Finance, Operations and IT. The 2016 goals of the Committee were to provide education for Certified Turnaround Professionals and to add value to certificate holders by creating greater brand awareness of the CTP.
For additional information contact:
Allen Pratt, TMA Chicago/Midwest CTP Co-Chair
FGMK, LLC
630-800-7545
Tony Natale, TMA Chicago/Midwest CTP Co-Chair
Shepherd Partners, Inc.
312-543-4493