From serious cash shortages to a lean, profitable emergency equipment business
Background/ Situation
Our client, a family business in operation for over 25 years, was experiencing rapidly declining sales and cash flow shortages. The business manufactured and assembled emergency equipment which was mostly sold and distributed throughout Queensland. The owners’ children were apprenticed in the trade and the whole family worked in the business.
Initial Findings
Upon engagement, MACHUS Solutions undertook a preliminary investigation of the business. The investigation revealed:
- Absence of a management structure
- High costs of local production which in turn meant the business could not compete with Chinese imports
- Numerous family conflicts, some of which took place in front of staff members
- Poor leadership
- Some family members were paid below award rates and they had no equity in the business
- Too many production and administration employees
Solutions, Strategies and Recommendations
MACHUS Solutions recommended the following strategies:
- Structure the business equity to ensure each member of the family received the same number of shares
- Appoint all family members as directors with each having a distinct area of operational responsibility
- Appoint the youngest family member as CEO as he had shown management potential
- Retrench all administrative staff and replace with a single bookkeeper
- Close local manufacturing and assembly with the tooling to be sold to the highest bidder
- All emergency equipment to be sourced from a Chinese manufacturer
- Refocus the business from an equipment provider to a service organisation providing preventive and reactive maintenance. Equipment would be sold to service clients and others, but it would not be relied on to support the business’ on-going cash requirements
- The business be Quality Assured to position itself as a reliable provider to businesses and government
Implementation and Results
As is often the case, a great deal of resistance to change was experienced. However, with the on-going mentoring and frequent hands-on assistance from MACHUS Solutions, all recommendations were eventually adopted and implemented.
Due to MACHUS Solutions’ recommendation, the business has successfully secured a high number of maintenance contracts and it has a strong cooperative relationship with Chinese suppliers. Headed by a CEO with great business and government relationships, it is now a lean, profitable company with its core business being service work and preventative maintenance.
