Business Transformation - Turnaround of small technology company

Context

A small outsourced manufacturer of a technology product was turned around in a matter of months. This is the smallest company (revenues <$5 mio) I have had to restructure

The company, which had created the market ten years ago, had failed to launch any new software, updated hardware or new products/services during these ten years. In 2020, the market was growing at 15-20%, other startups had gained a strong foothold and many had raised between $10 mio and $120 mio in equity with which to grow robustly however this company saw a decline in sales of 30% pre COVID 19 and a further maximum dip of 80% two months into the COVID pandemic.

Technically, the company was in an undeclared bankruptcy with an incomplete roadmap.

Solution

The immediate focus was in three areas: analyse correctness of all business operations, manage cash flow and define and implement a strategy to get the company back on track.

• Some key accounting functions were corrected. A cash flow management model was developed that incorporated budgeting, forecasting, inventory management as well as payables and receivables.
• Debt was restructured.
• Cost reductions were incorporated: headcount reduction, outsourcing of some functions, leverage of external resources and assets, management of receivables and payables, debt restructuring.
• New business model that placed emphasis on realizing revenue, services and value at point of consumption rather than at end of assembly line. A roadmap towards a platform and subscription based model was developed.
• New software was released extending product usability to multiple platforms including tablets.
• More engaged distribution, sales and community models were developed and being executed.
• Private equity injection model was developed and recommended.

Benefits

• Cashflow was stabilised. The company is now liquid and out of bankruptcy. Debt has started to come down.
• However the board needs to accept the need for private equity injection in order to ensure sustainability, growth and realization of new business model.