Situation

A food processing and consumer packaged-goods company was growing rapidly but experiencing negative cash flow and violating loan covenants. This triggered the company’s lender to place the company in its workout group. One obvious cause was significant delays in the buildout of a new manufacturing facility, needed because the company struggled to fulfill sales orders using existing facilities. The company had also taken on significant new debt, and this financing imposed restrictions that were too tight at its current stage of growth.

Solution

The bank pushed the company to engage a NextLevel partner to lead a more rapid transition to the new facility, move cash flow to positive, and support the company’s efforts to obtain bridge financing and raise additional capital. Company management then expanded the engagement scope to include leading daily operational meetings and providing overall executive guidance for key business decisions.

The NextLevel partner investigated the performance of each business channel and key drivers for the cash burn. He soon discovered the reasons for the facility delay and formulated a new transition plan. His investigation of other reasons for the fulfillment problems led him to design a new product-distribution model. This also allowed him to establish new metrics for production, customer daily/weekly fill rates, and back order performance. Daily operational meetings enabled him to hold key managers accountable for the targets.

Results

Within two months, the company stabilized and had significantly enhanced enterprise value due to improved performance, including a 40% increase in fill rates to 90% performance overall. This helped increase sales by 30%. The new distribution model improved customer service and demand planning, generating $1.2 million in annualized savings. Cash flow quickly became positive and a new operational plan reflected improved annualized cash flow by $6 million over a 24-month period. This improved performance strengthened the company’s hand as it successfully closed on bridge financing and an equity investment soon thereafter.

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