Management Consultant Strategy

Client was 60 days from bankruptcy. Turned it around in 90 days. Here's the crisis management playbook: The Situation (Day 1): Company: Manufacturing business, 120 employees, $15M annual revenue Crisis: $2.8M cash burn, 2 months runway Problems: Losing money on every sale, payroll at risk Called me: "Can you help or should we shut down?" The Assessment (Week 1): Spent 5 days diagnosing: Financial Review: - Gross margin: 18% (should be 40%+) - Fixed costs: $280K/month (way too high) - A/R: $1.2M outstanding (45+ days overdue) - Inventory: $800K (much of it obsolete) Operational Review: - Production efficiency: 62% (should be 85%+) - Quality issues: 18% defect rate - Customer concentration: Top 3 = 67% of revenue - Pricing: Hadn't raised prices in 4 years The Problem: They weren't dying from one thing. They were dying from a thousand paper cuts. The Plan (Week 2): Built 90-day survival plan with leadership team: Phase 1: Stop the Bleeding (Week 1-4) Immediate actions to preserve cash: 1. Pricing Fix - Raised prices 15% across the board - Lost 2 customers (who were unprofitable anyway) - Improved margin: 18% → 28% 2. Collections Blitz - Called every customer with 30+ day balance - Offered 5% discount for immediate payment - Collected $680K in 3 weeks 3. Inventory Liquidation - Identified $340K obsolete inventory - Sold at 40% discount ($136K cash) - Freed warehouse space 4. Cost Reduction - Eliminated 3 management positions ($240K annual) - Renegotiated supplier contracts (12% savings) - Reduced facilities (moved to smaller space) Month 1 Results: - Cash collected: $816K - Monthly burn reduced: $280K → $160K - Runway extended: 2 months → 5 months Phase 2: Fix Operations (Week 5-8) Operational improvements to improve profitability: 1. Production Efficiency - Implemented lean manufacturing basics - Fixed quality issues (defects 18% → 7%) - Increased efficiency: 62% → 79% - Labor cost per unit: Down 22% 2. Process Standardization - Documented production processes - Cross-trained team (reduced dependencies) - Implemented quality checks - Reduced rework: 18% → 4% 3. Customer Profitability Analysis - Analyzed profit by customer - Found 40% of customers unprofitable - Raised prices on bottom 40% - 12 customers churned (good riddance) Month 2 Results: - Gross margin: 28% → 37% - Monthly burn: $160K → $80K - Runway: 5 months → 11 months Phase 3: Growth Foundation (Week 9-12) Strategic positioning for sustainable growth: 1. Customer Diversification - Landed 4 new customers (replacing unprofitable ones) - No customer over 15% of revenue - Better terms (50% deposit, net 30) 2. Product Mix Optimization - Identified highest-margin products - Shifted sales focus to profitable lines - Discontinued 3 low-margin products 3. Sales Process - Implemented proposal process - Added pricing discipline (no more discounts) - Required 50% deposits (improved cash flow) Month 3 Results: - Revenue: Flat (expected during transition) - Gross margin: 37% → 42% - Monthly cash flow: Positive $40K - Runway: Infinite (cashflow positive) The 90-Day Transformation: Vor: - Revenue: $15M annually - Gross margin: 18% - Operating margin: -23% - Monthly burn: $280K - Runway: 60 days - Outcome: Bankruptcy After: - Revenue: $14M annually (down 7%, but profitable) - Gross margin: 42% - Operating margin: +8% - Monthly cash generation: $40K - Runway: Infinite - Outcome: Profitable What Made This Work: ✅ Triage mentality: Stop bleeding first, then fix root causes ✅ Cash focus: Every decision optimized for cash preservation ✅ Ruthless prioritization: Did 10 high-impact things, not 100 things ✅ Leadership alignment: CEO and team bought in completely ✅ Speed: Made decisions in hours, not weeks What I Learned: Most struggling companies aren't doomed. They're just doing too many unprofitable things. Stop doing unprofitable things. Double down on profitable things. Survive first. Optimize second. Growth third.