Case Study 1 (Hardware Distribution Business received surplus S$726,254)
This client is in the business of distributing hardware. It was established some 20 years ago. Over the years, the business has overcome several recessions and emerged from each of them successfully. It has been a roller coaster (feast and famine) ride for the management over the last 20 or so years.
Not too long ago the business was handed over to the next generation and it was business as usual because the founders still hold much decision power in the company without realising that the market has shifted under their feet.
This client was referred to me and the new management wanted to know why they are facing cash shortages when they are being profitable in the business.
I explained to the new management that cash flow and profits are two different things. They are not the same and never will be. Further I make them understand that a profitable company can run out of cash and vice versa. It all has to do with how the management manages the cash component of the business.
I then started with financial analysis and discovered they have a Debtor-Creditor problem like most businesses.
Annual Sales: S$17,150,210
Cost of Sales: S$9,720,000
A/R: S$3,120,100 (9.4 Weeks)
A/P: S$1,250,750 (6.7 Weeks)
Our calculations show that this company has a Cash Gap of 19 days or 2.7 weeks. This results in the company needing S$517,624 to fund the cash gap to stay in business.
We suggested to the management to do a matching for the A/R and A/P. This suggested was approved and implemented.
We decided to reduce the A/R to 8 weeks and the A/P to be extended to 8 weeks to match accordingly.
This resulted in the A/R receiving cash of S$481,620 (S$3,120,100 – S$2,638,480) earlier into business and the A/P funded by the suppliers of S$244,634 (S$1,495,384 – S$1,250,750)
Total cash surplus generated from this idea was S$726,254 (S$481,620 + S$244,634).
Case Study 2 (Restaurant owner laughs all the way to the bank)
John has been working in a 5-Star hotel restaurant for more than 15 years. His passion for food has brought fame to this hotel. He has been interviewed on several occasions over the mass media.
It was then he decided to leave the restaurant employment and started his own restaurant. He did this to capitalize on his fame thinking that it would bring him all the attention he needed on the opening of his restaurant.
He refinanced his private property and together with his own personal savings, he tendered his resignation and ventured forward to setup his own restaurant.
True to his expectations, there were publicity on his restaurant and he was happy about it. Business were doing well in the first 6 months of opening but John began to feel puzzled and financially stressed with his business. He wondered why but he had no answers to his questions.
It was then his friend arranged a meeting for us over coffee to talk about his business.
Having met him at his restaurant for our initial meetings, I must say that John had put in a lot of time and money in its decorations and furniture, and equipment. This observation was a cause of alarm for me.
As we talked further, I realised that he did not have the answers to my questions as follows:
- The exact food costs of all his items on his menu;
- The saleability of each item;
- The breakeven sale amount he needed on a daily basis;
- The revenue he needed to generate on a per chair basis;
- The average dollar spent per receipt;
- His target customers for his restaurant;
- His current marketing activities;
- His pricing and salaries to his employees etc.
Within 3 months, we did the follow strategies with John and his restaurant.
- We discard products that did not meet our profit margin requirements especially those that we classified as “Low Margin, Low Turnover”;
- We determine the daily breakeven amount, and translate that into the revenue needed to generate on a per chair basis;
- We determine the dollar spent per receipt needed for John to breakeven within the first 2 weeks of every month;
- We did market research to determine the customer profile for his restaurant;
- We collect basic information from all diners to build his customer data base;
- We launched targeted campaigns over the social media with promotions and gifts to attract our ideal diners;
- We increased our prices by an average of 7.5% per item on the menu.
After 5 months, John has never been happier about his restaurant.
- His cash flow has never been smoother;
- John has started collecting his monthly salary from his restaurant;
- His net profit increased 250%;
- His overall costs decreased 35%;
- He has more than 200 new targeted customers added to his customer base;
- At times he achieved his breakeven within one week and the rest of the month is pure profits.
Case Study 3 (Insurance Director received S$20,000 reward from her company)
I was being referred to this insurance director who had been with the life insurance for more than 35 years. Now in her sixties, she has retired and her business has been transferred to her daughter.
When I first met her at her office, I felt a sense of champion within her group of 35 insurance advisors. She came across to me to be very open minded and growth oriented. She want to know how I can help her agency grow to the next level as she claimed that her energy had been on the decline which I doubted so.
I conducted personal interviews with each and every one of her advisor with the sole purpose of finding out what will move them to their next breakthrough in their insurance sales career.
To my surprised, I found that they were all very highly motivated and they had all done well in their business. The average number of years advisors stay with the Insurance Director was 17.5 years. This was impressive.
Later I discovered that while they were all what I called “work horses”, they lacked direction and strategy for their next breakthrough.
Based on my findings, I proposed the following strategies to the Insurance Director and she concurred with me and approved all that was required for my implementation.
- I asked each advisor to list out all their customers as well as those considered “orphaned”;
- We keyed all information into a data sheet and started to analyse their profile;
- We looked into products that were most in demand;
- We calculated the commission and profit margin to sell a particular product;
- We targeted the most profitable products with the ideal customer profile;
- We did sales training on those products;
- We studied similar products from other insurance companies and made the advisors subject matter experts in those products;
- We reconnected with all past customers, generated new leads, and increased our conversion rate;
- We conducted talks, seminars, and get-together etc. to generate even more sales.
After 9 months, we had 15 new MDRT qualifying members and 2 Double MDRT qualifying member from the group of 35 advisors.
This improvement caught the attention of the company and the Insurance Director was rewarded with S$20,000 for her contribution to the success of the group. She was generous enough to share her reward of S$20,000 with all of the 35 advisors and myself.
My services was later retained by the insurance company for another 5 years.
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