A clean-sheet approach to financial controls and operations leads to sustained profitability.

Healthcare services consultancy saddled with debt, a problem compounded by weak cash flow and stagnant sales.
Insights & Opportunities process identified key deficits in organizational structure, sales and marketing, financial statements and compensation.
Advisors implemented necessary strategic and operational processes, while reformatting accounting process for accurate capture of operating expenses, debt service and revenue.
The AMS Organizational Communications workshop helped create a more open, collaborative culture.
Company has rebounded from its “near-death experience,” posting real growth and positioning itself for sustained profitability.

Overview

The company, a consultancy specializing in the development and evaluation of new therapies for clinical disorders had been in business since 2002. It had experienced moderate sales growth in its first three years, but sales were flat in 2003 and 2004. Weak cash flow required the company to add significant debt to maintain operations, threatening its existence.

We began our engagement with an Insights & Opportunities Report, which revealed multiple deficits:

The company owner was the primary sales driver, but worked without a strategic marketing plan and sales accountability.
The absence of a sales process results in unprofitable engagements due to operational constraints imposed by similar projects.
The company’s workload frequently exceeded its operational capacity, interfering with opportunities to develop more profitable engagements.
The organizational structure had staff duplicating tasks.
There was no project review process prior to accepting new projects.
There was no financial management process to measure profitability by project, project leaders or the company, nor were financial statements budget-based.
Profit points were misapplied and the staff bonus model was frequently supported by debt.

Challenges

The company was in a near-terminal position, where it might not be able to withstand the corrective measures needed to restore financial health. Its problems were compounded by the presence of an outside business/financial advisor, who drove a volume-based sales strategy without regard to operational capacity or profitability on individual projects. This advisor’s detachment from day-to-day operations bred resentment among the staff, while preventing the development of effective solutions.

Solution

With the Insights & Opportunities process complete, AMS advisors went to work quickly. They discovered major accounting errors made by the company’s previous financial/business advisor, errors that threatened the company’s existence. These errors were corrected, giving the company a true picture of its financial health, and paving the way for a completely revised accounting process.

This new process recorded operating expenses, debt service and revenue accurately. With these new financial controls in place, AMS advisors established a twelve-month budget, projecting revenue based on current and anticipated project volume. We also installed a flexible burden model, allowing the company to select projects based on a true understanding of operational capacity, revenue potential and project mix.

AMS worked with the client to develop a review team for each potential project, with the team members drawn from senior management. All new projects under consideration now require unanimous consent to move forward. As a result, the company has shifted its focus to long-term, higher-profit engagements, moving away from smaller projects that drained resources without adding significant revenue.

Results

At our suggestion, the company’s owner eliminated the staff bonus model with no accountability to profit, assigned tasks in a way that reduced staff duplication of effort, and strengthened the company’s culture using the AMS Organizational Communications workshop. The entire restructuring took twelve months and today the company has repositioned itself for significant profitability.

For more detailed information on this case history and its relevance to your professional services or consulting opportunities, contact Fred Rappaport, AMS CEO, at 843.422.1610 or email.