B2B CFO HELPS FOOD MANUFACTURER TO FIND ADDITIONAL CASH

BACKGROUND

An Indiana family – owned manufacturer of apple butter, jellies, and preserves has established itself as a high quality producer of natural, made in Indiana food products. The business has historically been seasonal with most of the revenue coming in the second half of the year.  Primary customers are owners of small specialty stores and fruit stands, most of which use Dillman to produce its products under a private label.

Typically, the business generates a significant amount of cash flow during the busy season, but consumes cash during the slow season.   After one particularly successful busy season, the owner decided to reinvest the previous year’s profits into re-branding the product (new labeling and upgrading the company’s web site.)

Unfortunately, the cost of the rebranding left the company with insufficient resources to purchase raw materials and build inventory for the upcoming season.

The owner asked his bank for additional financing to support the inventory growth.   The bank suggested a B2B CFO partner to take a look at the operation and help to determine if the loan request was valid.

FINDINGS

The B2B CFO partner was engaged by the owner to perform a Discovery Analysis (no charge to the company.) The initial findings included:

• A tight cash position
• Negative cash flow
• Bookkeeping errors
• An incorrect internal balance sheet
• Significant amount of excess capacity
• The owner was reluctant to expand product distribution into other markets.

INITIAL PROJECT

The owner engaged B2B CFO to prepare a Business Plan with projections to support the requested increase in the line of credit. In addition, the owner asked B2B CFO to analyze the financial records and make the necessary corrections in the books, and establish procedures to keep the internal records accurate and reliable.

INITIAL OUTCOME

Unfortunately, the bank did not agree to increase the line of credit – primarily due to the normal negative profit performance in the first half of the year (caused by the seasonality of the business.) The additional funds needed were provided by loans from the family owners.

The owner agreed to use excess capacity to expand distribution into the grocery market.

SUBSEQUENT DEVELOPMENTS

Later in the year, the bank declined to renew the line of credit because of anticipated covenant violations. The company was given 90 days to find another lender.

The B2B CFO partner worked with the owner to revise the Business Plan and the Projections. The financing opportunity was marketed to six regional and community banks.  All six banks visited the facility.

Three banks provided Term Sheet Offers including funds to refinance plus additional working capital to fund growth into the grocery market.

ONGOING WORK

Monthly review of the business, including financial performance, cash flow projections, customer and product margin analysis, inventory management, and strategy for future growth of the business. Client is very happy with B2B CFO.

The company has improved profitability and increased sales during the period of the B2B CFO engagement.

COMPANY TESTIMONIAL

Cary Dillman, President, remarked “Ken came in and saved our business.  He helped us with a presentation to our bank and helped us get a handle on our costs and pricing structure.  Ken gave us the confidence to service markets we previously were not in.  Thank God for Ken Knapik and B2B CFO!”