Coping with Business Contraction

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Coping with Business Contraction

The Situation

Our client is a healthy and profitable metal fabrication company. Earlier this year, our client had growth initiatives, including leasing new production equipment, hiring additional skilled labor, and initiating software upgrades when a sudden change occurred. The Governor’s Pause order, a result of the COVID-19 virus, creates an unusual time of economic uncertainty and business interruption.

While the company was exempt and could continue to operate, new concerns arose:

  • Will my customers still be here?
  • Will they be able to pay their bills?
  • How do I maintain my labor force?
  • How do I maintain relationships with my venders and lenders?
  • What are my liabilities in accepting the PPP stimulus?
  • What does my available cash flow look like today and into the future?
  • What impact will this have on my personal net worth?

Our client’s focus shifted towards making the tough business decisions required to adjust to the ever-changing circumstances.

The Process

Next Point’s vast experience in turnaround and crisis management guided our process for handling the situation. We approached the contraction of revenue as an exercise focused on right-sizing the business operations. Next Point provided templates for cash flow and breakeven analysis and coached our client on how to utilize the information to manage the business. We met (virtually) with the owners to build a dynamic proforma built on “if, then” scenarios and connected pre-determined reactions to possible events using a wide variety of modeling assumptions. The model is updated with actual business performance metrics during weekly virtual meetings as our client reacts to conditions with deliberate actions.

We continue to collaborate on the decision-making process, assigning responsibility for specific actions and deadlines for completion, and providing a sounding board and an alternative business perspective for our client.

The Turning Point

The process is succeeding in driving strategic business decisions based on analytics and has limited emotional reactions to the events.

With most of our assignments, there is a beginning, a middle, and an end – with this situation, we don’t know when there will be an end, but our expertise has improved our clients’ skills and confidence to right-size the business and to remain profitable during contraction yet agile and ready to return to normal post-crisis.

Services Performed

  • Turnaround Services
Turnaround Services for Mechanical Fabrication Company - Next Point LLC