Case Study: A Distribution Company
A Distribution company reached out to New Direction Capital during its 10th year in business. The economy had impacted the growth of the business and revenue was flat for the past 3 years. It was a viable business and doing well, the owner needed to figure out how to grow over the next 3-5 years.
Inconsistent cash flows had made his planning difficult and due to the economy his customers were not paying him as fast as they once did and his bank was having difficulties as well. He also needed to secure his physical location. He had been renting for several years and had a large investment in the location but did not own the bricks. With the landlord considering selling, he needed to work through purchasing the business.
First, New Direction Capital met with the client to understand their vision for the business and understand challenges, together we chose to target four specific areas: 5 year Growth Roadmap, Finance Plan to handle irregular cash flows, Forge a new bank relationship, and secure his location.
5 year Growth Roadmap:
NDC virtual CFO worked with client to prioritize opportunities, cost modeling, and developed a map to handle the rocky economy for the next 5 years. We created a roadmap that saved clients time in evaluating business decisions and saved money by allocating capital to the areas that were going to grow the business.
NDC previewed the value of the business and was able to craft a plan to increase additional revenues over the next 3 years.
Finance Plan to handle inconsistent cash flows
Through analysis and research with the client, NDC was able to find a solution to their cash flow inconsistencies. This plan was developed and communicated to the client’s customers and to the bank. NDC as CFO was able to cut down on the time with bank relations and also have confidence and peace of mind moving forward. We were able to secure a line of credit that would handle larger cash needs in off months and the bank was able to understand the business justification in why the larger line was needed.
Forge a new bank relationship
The client’s bank was having very difficult times and had stopped lending but still was working with client to maintain their business deposit relationship. NDC saved the client time and money by developing a new banking relationship with a bank that was healthy and would work with them over time with additional capital when needed. NDC as virtual Chief Financial Officer worked with the bank to educate them on client’s business model and timing of cash flows. We were able to save the client time by researching the bank and coming up with a final few candidates to select.
Secure his location
The client and landlord had close relationship over the years. NDC as CFO was able to work with advisers and counsel to negotiate and structure the purchase of the location which included negotiations of a private note. During this process, NDC saved client over 30% in the purchase price and was able to secure the note at 4.5%; well below the offered bank rate. This secured the location, added collateral to the client’s net worth and he was able to improve his net worth at the time of closing.