Change Your Business Model If It Is Not Generating Cash Anymore

Although the business has been generating negative cash flow since 2 years ago, the couple is still very passionate about their business, and are planning for their only son to succeed them in business.

Their business is subcontractor to another downstream contractors which front the final customers, hence they can’t really influence their selling prices.

Their business is very machinery heavy that it needs a full range of machines to be lined up just to do the required part numbers.

Certain part numbers are seasonal in demand. Hence, certain machines are only being utilized for a few months in a year.

To add to the woes, when downstream contractors add new part numbers to their demand, new machines need to be purchased, hence new space needed to store and operate them.

Some 2 years ago, selling prices are slashed to catch Orders. Rentals are going up. Foreign worker quota is being tightened. Workers need work Overtime to meet shorter lead time, hence Wages have gone up tremendously. Cash has been depleting.

The couple has not been drawing salaries since 6 months ago so that workers can still draw their salaries.

I was engaged to help analyze the business model, re-align Machines Capacity and Utilization with Customers Order Mix so as to dispose off the low utilized machines to convert into Cash, to re-size space Utilization so as to free up space to be returned to JTC to save Rentals, to plan for Employee Share Scheme to retain loyal staff to help save the company, to help in Funding Plan to sweeten the deal for a potential Investor to inject into the company, and to do a 5-year Business Plan to revitalize the Business Model so that their only Son sees hope in the company to agree to succeed them in their business soonest.

It’s not an easy assignment.

After a week of working through the numbers and running through iterations with the aged couple, they finally see light at the end of the tunnel using the magic of Numbers.

I convert everything into Numbers to convey all my points.

I managed to encash a sizable amount of cash from their idle machines, negated a few rented spaces to cut rental, redone Production Scheduling to avoid Overtime Premium, Recomputed Minimum Order Quantity from Customers to avoid Material and Inventory Wastage, Recomputed Inventory Reordering Points to bring down Inventory tie-up and free up Free cash, etc

The couple thanked me profusely, and they made a comment:

“We never knew CFO is able to save our business”

My heart was so warm when I heard these words.

Never before my ex bosses had told me such ears-soothing words.

I nearly teared…..

I have found meaning in my work again…