Regional Wine and Liquor Distributor
A McShane Group partner was referred to this multi state wine and liquor distributor in loan covenant defaults by the company’s lender in July. Revenues exceeded $200 million annually, the company had suffered two consecutive years of losses and it was on track to lose $5 million in the current calendar year. McShane Group performed a top to bottom review of finances and operations and quickly prepared a 13 week rolling cash flow forecast. This was followed by development of a turnaround plan and complete financial forecasts for each of the 6 companies in the operating group for the balance of the current year and the following 2 year. The forecast confirmed losing $5 million on the current year but forecasted a $2 million loss the following year and a return to profitability thereafter.
The Company was burdened with a bifurcated accounting system, both parts quite old. A new system required resources beyond the company’s foreseeable financial and manpower capability. Margin detail did not exist. Cost factors in margins were complicated by varying freight arrangements, varying tax and duty situations and a wide variety of vendor incentives including volume rebates, free goods, free freight and marketing support. Further complication resulted on the revenue side from an equally wide array of incentives to customers. McShane Group organized a team of operating and IS managers and code writers to construct a system to give deep and timely insight into product margins. With the new information, management was able to begin righting the ship.
The turnaround plan included a reduction in force, management realignment, dismissal of poor managers and improvements in warehousing, customer order and incentive policies, distribution and employee benefits. The company stayed on the turnaround plan and three years later had improved to annual loss of $5 million to an annual profit of $5 million.
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