Company Overview
A Chicago-based distributor and manufacturer of customized and standard CPAP, Oxygen, and other respiratory products
The Company provides services across the US and globally in over 150 countries.
The Company received a $13MM LOC after posting revenue growth of approximately 16.2%. The Company planned to enter a new business segment by investing in its Acute Care (Hospital) division.
Engagement Overview
Rippling effects from the COVID-19 pandemic presented complicating factors for the business, including fluctuating demand for certain products, increased procurement lead times, increased shipping costs, and supply chain disruptions. Subsequently, the Company's capital was spent hastily, jeopardizing its liquidity.
The Company was compensating an absent owner and was seeking advice to liquidate his equity ownership.
FDP was engaged to review and revise the Company's existing 13-week cash flow, suggest improvements to increase profitability and cash flow, and refine critical strategies and tactics for stability and growth.
We advised management to suspend investment in their Acure Care division and reduce headcount in the department to comply with the economic restrictions. FDP concluded that additional capital was required for the project to be profitable and that the Company must swiftly return to positive cash flow to secure further capital.
FDP performed market analysis over historical, existing, and future supply and distribution costs and formulated a break-even analysis to determine the Company's needs on a margin and volume basis prior to requesting additional capital and resuming its Acute Care business.
Results
Instead of suspending and reducing headcount, management alternatively deferred and accepted FDP's initial recommendations to reduce their future compensation, both in payroll and distributions. These actions would create approximately $500,000 in estimated annual savings.
- After failing to meet its sales targets in the next quarter, the Company verbally agreed to suspend the Acute Care division and reduce headcount.
The third owner was successfully bought out and terminated without litigation consequences.