Not all growth is healthy or profitable. We began working with a well established company that complained about losing money while simultaneously bragging about record sales. If you can’t make money on record sales, something’s wrong. Solving this scenario is what CFOs do. If the company goes from a 5% loss to a 5% profit, that’s a 10% improvement. On $10M in sales that’s $1M to the bottom line.
ROI: Approximately 14x on investment.
A fast growing capital equipment manufacturer landed the largest contract in their history, but with it came a major problem: the customer’s payment terms were 90/10 – meaning 90% paid when approved to ship, 10% after runoff at the customers location. This created a huge working capital need with very little tangible collateral to borrow against. With exceptional financial modeling and a good reputation with banks, we secured a 5x increase in the revolving line of credit. Without the additional loan capacity, the project could not have been completed.
ROI: Technically negative, since additional interest was incurred. Practically however, the entire value of the project (which would’ve been lost) vs. our fee was 334x investment.
A $8M manufacturer contacted us because something “just didn’t seem right”. After we investigated, we discovered the Controller was double invoicing certain customers by mistake. After notifying the company’s bank of the error (which affected their loan collateral), the bank called the notes due and shut the company down. Unfortunately, they brought us in too late. As the owner was packing his office belongings he said “If I would have known what was happening, I would’ve done something about it!”. What’s more, he had poured his entire retirement savings into the company to keep it afloat, and lost that too.
ROI: n/a. Loss due to inexperience: >$2M