Case Study 1
Landscape Design and Installation Firm

Background

The client is a privately held landscape design and installation firm serving commercial contractors and residential customers. The company has been in business for over twenty years and has annual sales of over $650,000 and 20 employees. The business is run by a husband, who handles sales and operations, and a wife who manages the office. During the last few years the company focus has been on landscape design, hardscape, softscape, water features, and irrigation systems.

Issues

• More than $100,000 in bad debts from general contractors.
• Tax liens. Line of credit, business term loan, and mortgage loan in the aggregate amount of approximately $200,000, had been called in by the bank.
• Company needed additional seasonal working capital.
• The company was operating at negative net cash flow after debt service but positive EBITDA after owners' compensation.
• There was no sales and marketing plan and no clear market focus or identity.
• The company needed to increase annual sales to about $1.0 million to achieve acceptable profitability target.
• Additional operations foremen were needed to direct completion of jobs on schedule and on budget.
• Operating expenses, particularly general insurance and group medical insurance, needed to be reduced.

Results and Benefits

• Analyzed historical operating results to identify available cash flow. Prepared comprehensive refinancing proposal and company documentation to present to lenders.
• Determined that real property value was substantially under-leveraged. Fair Market Value was $356,000 but mortgaged at only $104,000.
• Established a new with a local bank for cash management purposes and a line of credit.
• Arranged for a $90,000 bridge loan to pay-off all outstanding payroll tax liens and to restore credit worthiness of principals.
• Paid off all business and personal debts through refinancing of commercial / residential property with a no-documentation 30 year mortgage loan at reasonable interest.
• Arranged for an unsecured personal loan of $20,000 to purchase a used truck and for working capital.
• Prepared annual budget to track performance of the business, cash flow, and debt service under new financial structure. Established sales target of $750,000 and EBITDA target of $42,000 after owners' compensation and debt restructuring.
• Clearly identified business niches to pursue, and developed comprehensive sales and marketing plan including a web-site; solicitation of former customers through direct mail campaign; advertising internet, bill-boards, and newspapers; and developed a marketing brochure.
• Assisted in hiring of new operations foreman to allow owner to concentrate on sales.
• Assisted in getting lower medical insurance rates.

Case Study 2
Small Printing Company

Background

The company was started in 1992 by a husband and wife team. She retired in 2002 resulting in a reduction of internal executive skills—specifically in fiscal management. The company engaged help from the Institute for Independent Business as a result of being confounded by banking procedures, persistent vendors, alarming bad dept load, and lack of experience in seeking external funding. In addition, the owner was suffering signs of depression, including sleeplessness, overwhelming anxiety, and agitation.

Initial Goals

1. To refinance accumulated debt
2. To improve staff accountability to procedures and management
3. To increase sales

Challenges

1. Immediate attempts to refinance debt were hampered by many payments the company missed and the personal credit score of the owning family.
2. The owner’s relationship style has historically centered on paternal generosity and leniency with staff. Communication to establish collaborative goals and review employee performance and provide supervision was a personal struggle that pushed against a disdain for structure and critique.
3. Business controls have been difficult to implement due to inadequate accounting and operational information tracking. Too many essential processes still are performed manually.

Business Support Program

Two IIB Associates have worked together to assist the owner through this difficult growth period. One provides weekly coaching and personal support for developing business disciplines. The other (a CPA) provides accounting assistance and performance analysis, and has taken over the company’s accounting services. The performance accounting has provided regular feedback on management behaviors.

Understanding the meaning of EBITDA (Earnings Before Interest, Taxes, and Depreciation) has taken the owner more than a year, but now the company’s EBITDA exceeds industry benchmarks and has supported the total re-financing of the debt load. The owner now has a new attitude to go with his vastly improved cash flow.