Chikol started in the early 1980s with the purchase of fifteen companies in the manufacturing and distribution space.
Most if not, all were in financial distress or bankruptcy – already sick with the flu or worse, without a remedy in sight. We’re thankful now for those days in med school, as we learned which treatments were effective and developed “Business Prophylactics” to quickly return an ailing company to health. After the successful sale of our last operating business to a public company, we chose to focus our full effort in helping business owners, private equity, and lenders.
We see many similarities now to the way companies prepare for growth and setback, to those days in the 80s, 90s and
early 2000s – with the pandemic added to the equation. With history in mind, we prescribe the following “Business
Prophylactics” to ward off the “Financial Flu.”
Earnings: Earnings provides the power to make adjustments and decisions when you are strong and can weather troubled times such as COVID-19. Profitable and sustainable revenues can only come when owners understand
their costs and know what it takes to produce their services or product lines. Business owners must make decisions on the fly, to take an order or not or quickly negotiate pricing on a new opportunity. If you don’t know your costs, those decisions will certainly not guarantee successful earnings power and you could be simply funding losses.
Flexibility: Real estate and equipment values tend to be better when your back in not against the wall. Conduct an
annual “needs analysis” of every piece of equipment, shelf of inventory and real property location. What is the usage,
carry costs, upkeep, repair as well as the opportunity costs for each item under analysis? Is this a “nice to have or a need to have” decision. Have you been storing your boat or excess inventory in that other location instead of selling that property in an up market or getting out of that lease? Selling off idle inventory, equipment, and that auxiliary location when times are good, instead of during a forced sale, will give you some cushioning cash flexibility to ward off the “Flu” symptoms you might incur.
Vigilance: Owners must pay attention to all aspects of the operations looking for profit leakage. In our manufacturing
businesses, Dennis Kebrdle possesses an uncanny “Spidey” sense on all webs of the business. Here’s some guidance to
help you stay aware of the cost and revenue center activities in your organization.
•Review Accounts Receivable weekly with your staff to keep accounts within terms and past due amounts at a minimum. During tough times, A/R collections will be the first area to watch.
• Are you paying vendors too quickly? A/P / 30 days = Daily Cash. Review inventory turn and move to VMI (vendor managed inventories) whenever possible.
• Can you convert BOMs to use similar raw materials? Can you move these items on-line or through 3rd party resellers or return to the OEM for a restock charge? Is your min/max restock levels set to autopilot allowing unneeded material to continue to stream in? – Change it today.
• Review freight bills each month. Are you getting the agreed discount, tariffs, and assessorial charges? Are you treating your logistics department as a profit center by adding a cost to your client’s shipment that you handle? It’s not a sin and
not a pass thru. We recently reviewed over 3000 freight bills to find an overcharge of about $28,000.
Finally, do not hesitate to call a doctor before you get too ill to recover. Chikol: “We’ve been there…Let us help.”