Situation

A three-year-old company that marketed and distributed branded small appliances to promote a healthy lifestyle was growing rapidly. They had grown to $28 million of sales in their existing channels of seminars and direct response TV (infomercials). The company wanted to launch a catalog and rapidly expand into wholesale on a nationwide scale. The CFO, now a NextLevel executive, joined the executive team just as the company was creating its first catalog and beginning its expansion into wholesale.

The NextLevel executive immediately organized an analysis of the company’s financial position and cash flow. Upon completing the analysis, he let the owners know that they were quickly running out of cash and showed them the projected inflows/outflows after integrating the potential new sales channels into the projections. The company did not have a bank line of credit as its sales to date were via customers’ credit cards or personal checks. They had about six weeks of operating cash available.

Solution

The NextLevel executive helped the company identify the shortfall that they were facing over the next 6 months and identified three areas where they could potentially obtain cash:

    • Customers – specifically large national retailers
    • Vendors – Factories and suppliers
    • Banks

A member of the executive team was assigned as the point person for each area.

Results

The company was able to get advance payments from some of the national retailers in the form of letters of credit or cash advances. They negotiated extended terms from their largest factories and suppliers. They also obtained a substantial working capital line of credit with a large national bank.

Because of these financing solutions, the company successfully launched into the wholesale business. Their sales grew from $28 million to $60 million that year and the company enjoyed record profits.

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