Case Study 6: We’re an established firm but the marketplace has morphed, as have our financials. How do we get back on track?

Not your grandpa’s beef

Overview: A regional meatpacker specializing in branded meat products for Western regional distribution had battled successfully with much larger competitors for decades. Recently, however, the business was struggling to compete as the market became more commoditized. The strategic shift for this business was to develop a new economic model that incorporated a premium natural meat product line, a new pricing model for the line, and enhanced relationships with key professional advisors to support the shift.

Analysis: This 100-year-old, privately-held business faced dire competition with much larger national competitors. Despite having a superior product reputation in its local markets, the company’s profitability had suffered over several years as their staple beef products became a commodity. Many of the professionals advising the firm were smaller firms that were not proficient in the complex business areas the company was encountering. New legal advisors and CPA’s more fluent in these matters with national exposure were added to support the transformation of the company.

A major area of effort was enhancing of working capital management. Formal cash forecasting and monitoring processes were put in place, improved cash management services were implemented, and customer credit terms and credit policies were revised to support the emphasis on cash flow.

Operational efficiency was also placed under the microscope as the company attempted to reduce costs. Significant savings were realized in transportation costs as well as utility costs. Additionally, excess assets were identified and sold, with proceeds being used to retire higher cost debt and strengthen the liquidity of the company.

The company also enhanced its information systems to generate greater details on its profitability by product line and geographic market. Finally, to placate lenders, more sophisticated business forecasting and monitoring tools were also implemented, providing financing sources a better understanding of the profitability improvements.

Result: With all of these financial measures in place, the company secured enhanced financing that accelerated development of its natural meats product line. This financing was achieved only after upgrading key professional relationships, such as the CFO, CPA’s, legal team, and business insurance professionals, to support the credit extension and monitoring processes.