Manufacturing Case Studies
A manufacturer of high-quality hollow metal doors and frames bursts into the market. Within two years they double their sales from $8 million to $16 million annually, but somehow, they are not making any money. Margins fall, cash flow tightens and customer service issues start to rear their ugly head resulting in a 12% decrease in sales for the following year. The manufacturer’s CPA recommends Tom Leckrone and Pathfinders be brought in to investigate.
Pathfinders’ unique, proprietary financial diagnostic reveals a common issue. Namely, the company is not charging enough to cover material costs. Adding insult to injury, labor expenses have ballooned to an untenable level during the period of rapid growth.
Pathfinders develops and implements an operational plan calling for increased product pricing, a decrease to the labor force and a focus on training for the remaining employees. The plan results in a much more efficient work force, producing higher quality product at a lesser cost to the organization. The manufacturer quickly regains profitability resulting in a 75% increase in net worth and an 85% decrease in debt to equity ratio.
Professional Services Case Studies
A 40 year old physical therapy company with locations in California, Oregon and Washington suddenly found their margins eroding. Unable to establish the source of their cash flow issues, Tom Leckrone of Pathfinders is brought in to act as interim CFO. His expertise quickly determines the company’s existing antiquated accounting system doesn’t provide sufficient information to locate the problem. Within the short time frame of three months, Mr. Leckrone successfully transitions the organization to an updated accounting system and identifies the California facility as the culprit. From there, Pathfinders is able to narrow down specific environmental trends, specifically a major change to healthcare policy in the state, affecting the under-performing facility.
Armed with the knowledge that the healthcare changes in California are about to roll out to the nation, Pathfinders makes a bold recommendation to close the California facility and build a marketing plan to capitalize on the new system for the company’s remaining locations. The company implements the recommended strategy and within five years revenues increase by 138% resulting in an annual increase in profits of $15 million.
Transportation Case Studies
Two brothers built a successful LTL Carrier business over a 30 year period based on a model of growth, growth and more growth. The owners were caught in an unending cycle of purchasing new trucks and building new terminals to continue their forward trajectory. Eventually, costs started to spiral out of control and the company began to realize annualized losses reaching nearly $500K. The owners found themselves with a new terminal in mid-construction, credit lines fully extended and barely enough cash to meet the next payroll!
External auditors declare the company’s accounting systems are out of control and suggest bankruptcy as an option. In a last ditch effort to save the business they worked so hard to build, the owners contact Pathfinders.
Pathfinders’ in-depth financial analysis reveals significant flaws in the company’s business model. The organization specialized in speedy cross-country service and targeted industries with seasonal timetables, resulting in considerable downtime when their assets were not generating income. A radical new plan is suggested: divest all remaining assets and restructure the business as an outsourced logistics department.
Profitability is reached by the third quarter after the change. Within three years, the business not only paid off all its’ outstanding debt, it increased annual profitability to $5 million and generated a $6 million cash surplus.