Focus Management Group

Distribution and Logistics Industry Experience

Household Appliance and Audio/Video Accessory Distributor

Company:

A supplier, distributor and importer of household appliances, automotive products, and audio/video accessories

Situation:

The Company, a supplier, distributor and importer of household appliances, automotive products, and audio/video accessories, was in a cash crisis. It faced a myriad of problems, including the following:

  • Sales declined by half over the past twelve months.
  • Gross margin compressed to 25% of the gross margins four years before and half of the gross margins from the prior year.
  • A lack of credibility in the market due to its inability to deliver on time and keep commitments regarding new product launches.
  • Burning $500,000 to $1,000,000 per month
  • Empty new product pipeline
  • The five top managers (and founders) were deemed unreliable and removed shortly before Focus arrived.

The leadership team engaged Focus Management Group to serve as Interim Chief Executive Officer, Chief Financial Officer and Chief Operating Officer to stabilize the business.

Focus Scope:

As Interim Managers, Focus developed and implemented a strategy to maximize the value for key stakeholders, grow a profitable business, as well as shrink unprofitable lines.

Tasks Performed:

Stabilizing the Business

Focus Professionals led the Company in stabilizing its business through the following initiatives:

  • The Company regained the confidence of key constituencies -- employees, customers, vendors, rep organizations, and licensors.
  • Focus restored the Company’s credibility by consistently communicating the positive changes and plans.
  • Managed the team of employees and significantly improved morale by providing firm and positive direction regarding the Company’s future.
  • Recruited and filled key managers for finance, sales and product development.
  • Filled the empty product pipeline with a multitude of new SKUs.

Implementing Financial Management

Focus Professionals implemented disciplined financial management through the following:

  • Rationalizing the expense-base of the Company to minimize the cash burn by cutting expenses (25% reduction in FTE’s; $500K annualized salary reduction), consolidating from two warehouses to one, and moving offices (which generated a save of approximately $50K/month).
  • Tightening controls and significantly improving the veracity and soundness of the accounting environment.
  • Implementing major improvements in the reporting environment to ensure continued attention on major issues of product returns, customer discounts, and advertising allowances.
  • Improving operations and logistics management, thereby significantly reducing late orders.
  • Improving an error-filled forecasting process with an automated solution comprising a statistical forecasting system and an interface used by the sales team that instantly provided numerous views of the key forecasting data.
  • Updating a time-consuming, manual process with an automated pricing solution, thereby improving the Company’s ability to respond to customer requests as well as its accuracy.

Maximizing Value

Focus Professionals developed a strategy to maximize the value for key stakeholders, which included:

  • Developing a business plan detailing required operational initiatives and their financial impact.
  • Working with the Company’s Board of Directors to bring in permanent management.
  • Growing a Profitable Business (and shrinking unprofitable business lines)
  • Implementing rigorous profitability requirements for new sales.
  • Developing several new blockbuster brand licenses.
  • Developing two new product categories for the Company -- electric cleaning devices and hand tools.
  • Updating the existing product line -- with a special focus on drills, the Company’s most important single product.  The Company began improving its value proposition by upgrading the product, packaging and accessories.

Results:

As a result of Focus involvement:

  • Costs were cut, reducing the headcount by one-third, and the expense base by $500K on an annual basis.
  • This reduced the cash burn approximately $50K/month.
  • Staffing was upgraded and stabilized.
  • Customer relationships were saved.  No meaningful customers defected.
  • New products were developed and are being brought to market.
  • New brands were secured for future product placement.
  • Permanent management arrived in early March, and Focus exited shortly thereafter.
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