Case Studies - Part-time CFO

Downturn Impacts Home Fashion Company

A $10 million distributor of home fashion products was negatively impacted by the downturn of the housing market.

Challenges

  • Bank was growing nervous and cash flow was a critical issue.
  • A major supplier accounting for 60% of revenue gave notice that they would not renew the distribution agreement.
  • The owner separately owned the 27,000 sq. ft. building. After the downsizing, only 6,000 sq. ft. were needed.
  • Financial statements were prepared by an outside firm and there were no forward looking financial tools.
  • The bank called the operating loan and reduced the term of the mortgage on the building.

Solution

  • A Part-time LauberCFO with industry knowledge was engaged. The first step was to develop an assumption driven breakeven model. This model was use to evaluate the impact on cash of staffing decisions and continued shrinking volume.
  • Taking advantage of a unique Wisconsin law, an analysis of the damage caused to the business by the non-renewal of the distribution agreement was used to negotiate a favorable settlement with the manufacturer.
  • Given the depressed real estate market, the breakeven analysis was used to show the cash impact of carrying the building for an additional 3 years.
  • A projection was completed to provide a road map of how the proceeds from the nonrenewal settlement could be used to fund restructured operations until a 3 year non-compete expired and the building could be sold.
  • Financial statement preparation was brought in-house.
  • Throughout this difficult period, the LauberCFO served as a sounding board and reality check.

What this meant to company

  • The financial information allowed the business to survive. The building was sold and overhead was restructured resulting in profitable operations.
  • Being able to hold the building until the market improved averted a significant loss.
  • The business is on a growth track and 7 jobs were maintained.
  • The internally prepared financial statements have resulted in better and more timely information.

The value of a Part-time LauberCFO

  • Extensive domain expertise in senior financial position.
  • A trusted advisor to owner/CEO on many matters.
  • Looks at business through perspective of maximizing competitiveness and long term enterprise value.
  • Extended tenure with clients helps develop stronger financial and business acumen for client’s leadership team.