Case Studies

A Sports Memorabilia Company Almost Strikes Out

The Challenge:

A sports memorabilia company had enormous success from its inception, growing from $15 million in sales to over $300 million in its first seven years. On the strength of its success, it went public early on. Before the end of its first decade, however, the company’s sales were slipping and the value of its stock was sliding downward. As the company plummeted toward extinction, its board of directors called in Hardesty Hackett & Partners to stop bleeding.

The Comprehensive Business Analysis Hardesty Hackett conducted showed a company whose infrastructure had not kept up with its growth. The company did not have in place the structures and processes that would have enabled it to weather the softening of the market that it was experiencing. The business was somewhat unusual in that it was based on licensing agreements with a number of athletes. The products bearing the names and likenesses of these individuals rose and fell in accordance with the popularity of the performers. Yesterday’s hero could be today’s nonentity, making great quantities of merchandise difficult or impossible to sell at a favorable price. Along with the distinctive nature of the business, the company had some more common problems, including high turnover. Hardesty Hackett recommended developing a new business plan and a different management structure, the combining of three dispersed business units in one location, the institution of strategic planning, standard reporting methods, formalized job descriptions and employee performance reviews. Hardesty Hackett also recommended tightening up security at the athletic events where much of the product was sold, and locating another source for some of its products, rather than relying on a single source.

Together with a new CEO, Hardesty Hackett implemented most of its recommendations. Rather than go out of business, as seemed likely, the company got back on course. Operating soundly, it became attractive to suitors, and was purchased a few years later by a company in the same market.

A General Contractor Buys Time During a Recession

The Challenge: A healthy residential contractor company was caught in the economic tide that engulfed virtually all residential builders in the recession that began in 2007. Despite excellent management, this company found itself unable to sell or build more houses, and unable to make its interest payments to a total of five banks. The owners feared that the company would not be able to survive the deep and continuing economic downturn.

To their credit, the owners recognized the problem early, before there were late payments or property liens. Hardesty Hackett was engaged on a consulting basis. The first step was to craft a strategic plan for weathering the recession. The success of the plan would depend on forbearance by all five lenders. Alongside management, the Hardesty Hackett partner contacted the bankers, apprised them of the situation and presented the plan to survive the downturn. Over a period of several months they persuaded all five lenders to agree to the same terms for restructuring the loans as well as to provide additional funding to cover the plan shortfall. All of Hardesty Hackett’s experience and skills were needed to negotiate these complex agreements.

The development company was saved and is adhering to its new business plan. It has been able to make the agreed-upon payments to its lenders. The lending institutions, which were unaccustomed to working together in this manner, were able to see that desperate times called for different options. The developer is poised for a strong comeback when the housing market rebounds and the lenders should ultimately be paid in full with interest. What could easily have been a situation in which all parties lost out was turned into a win-win solution.

 

A Restaurant Franchise Improves Its Cash Flow

The Challenge: A national chain franchisee with 35 restaurants was under pressure from its bank, which had frozen its line of credit at 75% of availability. Stuck in a high-interest loan with no availability of additional loan funds, the company was forced to operate on a cash basis. Though this franchise business had been outperforming the corporation-owned restaurants, it was now experiencing a cash flow crunch, and was unable to pay back its long-term debt or finance its expansion plans. Exacerbating factors were that the venerable restaurant chain’s product offerings had fallen out of favor because of a new emphasis on low-carbohydrate and “heart healthy” menu items, and that competition was fierce. The franchisee engaged Hardesty Hackett to solve their problems.

Hardesty Hackett conducted a Comprehensive Business Analysis, and looked closely at product offering, pricing, and promotions, as well as at the restaurant chain’s large and small competitors. Hardesty Hackett also identified the franchisee’s top performers among its restaurants, analyzed what contributed to their greater profitability, and recommended that those practices be extended across the whole group of restaurants. Hardesty Hackett recommended closing one restaurant, which had little likelihood of rebounding, and implementing point of sale systems, pricing and promotions at most of the others. The temporary promotions – tailored to the profitability picture of the particular outlet – were financed through price increases. All Hardesty Hackett’s recommendations had to be made within the product, pricing and promotion regulations set down by the national company.

The franchise accepted Hardesty Hackett’s recommendations. The company was able to implement operational improvements and increase cash flow by 20%. The improved cash flow permitted the company to get out from under the stifling interest rate it had been subjected to, and seek a new lender.

Reorganized Church Able to Realize Its Long-Range Vision

The Challenge: A large, long-established church experienced severe setbacks when a major capital project turned sour. Design flaws and construction problems in the new building created significant cost overruns. Donors were appealed to again and again to fund the increasingly costly project. Law suits were brought against both the general contractor and the architect. The physical plant expansion was part of a long range vision that also included upgrading of the staff of the church and its pre-school program.  Staff lay-offs, along with the problems with the building program, had the effect of polarizing the congregation and causing some members to leave the church. A vocal protest group emerged, and there was a general questioning of the competency of the church’s lay leadership and administrative staff. As the situation deteriorated, employee relations, record keeping and information systems were in shambles. Cash was suddenly scarce, and staff morale was dismal.

Three Hardesty Hackett staff members were involved in a six-month turnaround. They first conducted a Comprehensive Business Analysis, and recommended sweeping organizational and information systems changes, all of which were accepted by the governing board. To alleviate the cash flow crunch, they arranged for a line of credit. Taking on the role of interim administrator, the Hardesty Hackett team helped and advised on the search for a permanent administrator. They recommended and oversaw the implementation of a business control software system, and added an Information Technology position to the staff. Staffing was improved by replacing some of the employees who had been laid off, relocating some of the incumbents, and reducing the level of staffing by four positions. A new human resources director position was added. The Hardesty Hackett interim administrator also participated in the hiring of a director of endowments.

With staffing matched to the actual needs of the organization, and a new discipline instituted for cash management, the church emerged from its period of turbulence and trouble. Confidence in the church’s leadership was restored and staff morale took an upward turn. The congregation responded to the improved management by increasing contributions by 15% over the previous year.