TSM - Business & Logistics Consulting

Our client

The project

Our client is a metal working enterprise in Neunkirchen (about 60km south of Vienna), which specialized primarily in the whole range of surface processing since 35 years as service to other manufacturers. The company is a typical owner-managed middle-class enterprise that acquired its cus-tomer base through its long term participation in the market, especially in the plant construction market.

TSM was appointed to financially consolidate the company in 2004. Company structur-ing, quality control and up-to-date benchmark numbers were not present sufficiently at this time. The company experienced a backlog of orders in a volume of multiple months of work. Due to a big investment into new CNC machinery without proper hedging through a key account, the company reached a liquidity shortage and bankruptcy was threatening the company. Personal liabilities of the owner up to 80% of the debt of the company not on jeopardized its future but also the future of the owner and his family. At the time, the company was overindebted and had a substantial negative net equity. Although the ability to pay remained intact in principal, the payments were temporarily halted.

The goal was to bring the company back into the profit zone without stopping produc-tion, without losing any partners, while restructuring the production processes and while resolving the personal liabilities in the best interest of the owner and his family. Furthermore TSM set out to restructure order processing, quality control, human-resource allocation, customer structure as well as the whole financial processing.

At the end of the restructuring phase, the company should achieve a Cash Flow I of 12% neither without stressing the financial reserves nor without extending outside financing. These results should be achieved without one-time balance sheet tricks.

As mid-term goal, the company should cooperate with enterprises in the same market to extend services and to harvest synergies.

As primary service, we assisted the executive manager on a day-to-day basis to ensure permanent feedback for management decisions. TSM also developed on a short-term basis a concept to reduce the backlog on orders of almost 4 months by an overtime plan (fully negotiated with the staff). Up to this point, the backlog was reduced successfully. At the same time TSM conceptualized and implemented controls for production quality as well as order dead-line tracking. TSM also carried out final book keeping checks. TSM processed and controlled financial transactions. A further improvement was that the average number of days till payment of customers was lowered from 60 days to 30 days. The whole customer structure was modified with the result of increased productivity by focusing on more profitable products. The product mix was subsequently shifted to higher valued goods with a better contribution margin.

The headcount dropped from 23 to 17 due to natural retirement, while keeping produc-tion stable and raising turn-over by 30%. Switching to high-developed and more precise machinery is the next milestone in the development plan of the company.

In the last year, the company achieved a Cash Flow I of 17%, the negative net equity was turned around reaching about 10% of the annual turn-over.

The whole improvement of the financial standing was achieved without one-time effects in book keeping. In the current business year, not only the company earned substantial revenue due to debt conversion, but also all family members not involved in the business were relieved from their liabilities including lien on private estates without further obligations. The executive manager is now also 100% owner of the company. Not only TSM was able to fight off the looming bankruptcy, the company was also turned around and restructured with the consequent commitment of the owner.