IPA Business Case Study

Who:

A cleaning solutions manufacturing and service company with more than 25 years in the US industrial market.

Challenge:

The core business remains the manufacturer of environmentally safe cleaning agents. The three owners had loss in market share in the past four years by as much as 63% and expressed a need for structure, staff accountability and exit planning in a two to four year period.

Analysis:

Although the firm maintained a strong position in the markets served and had a strong reputation for a quality product and service; sales had decreased over the past several years and created a need for an active and aggressive marketing and sales restructure.

The former distributors had not produced results and were not protected by agreements. Properly set up distributorships would increase business, but should be coupled with a proper support staff and inside sales team to provide a backbone to the sales effort. The company must be able to handle this business without causing damage to its reputation and image.

General accounting had been handled by an outside firm in a very reactive manner, rather than proactive manner. Business works software was in place, but the company was not progressive in their manner of accounting.

No budgets or forecasts were used to operate the business. Financial planning was done as needed and although the business had a good idea of where they wanted the firm to go, a clear roadmap was not in place.

Employee responsibilities and company policies were not clearly defined or written down. All responsibilities were falling on the key operators.

The business did not have a clear, written plan of where it was headed which led to productivity issues in the field and difficulty converting opportunities to profitability.

Finally, an action plan was not in place to solve the problems facing the declining growth of the business other than adding more field hours which took time away from directly handling the business.

Results:

Financial Systems and Processes: The company needed to increase the overall level of financial expertise in the firm. The system of profit and expense controls developed and installed by IPA included general accounting, accounting by profit centers – job tracking, equipment tracking and costing and bid tracking. IPA also installed a budgeting process for financial planning and a cash management process. IPA taught key personnel, including the owners, how to use projected costs and draw budgets with variances, costs of goods, general and administrative expenses and be able to determine the company’s break-even point. This has aided in establishing productivity goals to ensure the profitability of the company. IPA also designed, implemented and trained the proper personnel in the preparation of a weekly position summary report, enabling the owners to quickly look at a “snapshot” of the operations, as well as all pertinent financials information such as accounts receivable, accounts payable and sales data. Job tracking and bid tracking tools were also designed and implemented to aid in job budgeting, setting goals and sales development. The adoption of these tools has resulted in an increase in the value of the financial statement of the company, thereby enabling our clients to be pro-active, rather than reactive in controlling costs and expenses.

Sales and Marketing: IPA designed a Marketing and Sales Plan that will achieve growth of 25% in 2005. The benefits of planning are many, the most important one was that realistic goals were set and a methodology for tracking performance was established. This was done by establishing short and long term sales goals, unit volume and target markets for the firm. The use of a clear set of goals will provide a target to shoot for, a means of communicating and a tool for measure performance. The focus was on certain targeted industrial bases and then moved forward to secondary industrial bases, such as government opportunities, industrial safety associations, and cleaning associations. Efforts were also focused on creating brand awareness, informing and convincing their customer base that this product has the highest value; as well as maintaining consistently high standards of production, services and the most modern methods of distribution at a reasonable cost.

Production Department and Accountability: The primary problem with the production department was the Production Manager and his unwillingness to change the way he did his job. A Production Assistant was hired, and the Production Manager was put on an exempt employee status, with bonuses for production. This will save the company over $45,000 annually in overtime cost overruns. Additionally, he was charged with cross-training the newly hired production assistant, which resulted in increased flexibility in the production area. IPA documented all of the production procedures for all of the products that the company manufactures. The secret formulas are intact as the procedures were documented by a code key, which is needed to decipher them. IPA also documented all of the job descriptions for the production and service positions, as well as computerized the production tracking records formerly done manually by the production manager.

Expand the Market and Customer Base: IPA developed a presentation model to be used by the owners in presenting and demonstrating their products to new distribution channels. A regional approach in the search for new distributors was utilized. IPA developed a commission structure for sales to distributors and it was finalized and approved. The new distributors will receive an exclusive limited area and a non-exclusive regional area until other distributors and manufacturing sales reps in the surrounding states can be brought on board. IPA provided them with a listing of over 2,500 industrial supply distributors, in an effort to re-direct their focus on the automotive industry. IPA also recommended that we begin an attack on the federal contracts markets, using the HUB Zone and Women Owned Business certification that the company has, in conjunction with our client’s ability to prepare successful government contract bids and government grant proposals. This product has the only environmental “Green Seal” approval, and because of the effectiveness of the product, the potential market explosion is exceptional. Finally, IPA made contact with a potential person who is interested in implementing a franchise system for the service of industrial and automotive customers.

Overall, the changes made in the pay structures of the productions manager, and the director of sales and marketing will realize an annual savings of $67,000. It also increases their ability to earn more with the bonus and incentive plans in place, while holding them accountable for reaching the company’s production and sales goals. With the implementation of the sales plan, new distributors will generate over $300,000 in revenue this year alone. With just four franchises, the new revenue generated will be $240,000. The total annualized savings and additions to revenue for the completed project will be over $600,000, and this does not include additional sales on governmental contracts or as suppliers for other businesses with government contracts.

"In the time that IPA has been with us, they have put in place significant positive changes in our organization structure, manufacturing control, sales and marketing process and cost control. What a fantastic experience! Everyone working with my project was professional and in fact, brilliant. The consultant was sharp and wonderful. He was patient, easy to work with and good communicator. Everyone working with us had a difficult job trying to teach us how to improve our business, but they were all so patient and understanding!"
--Vice President