We were engaged by this large independent truck stop located on Interstate Highway 55, to solve a variety of problems. Chief among the problems was a serious shortage of cash inflows and the inability to manage the cash that did flow in. These problems were just symptomatic of larger problems in the areas of sales insufficiency, the theft of money and materials. A larger problem for the owner was to increase his enthusiasm for the business and building employee morale.
The business was originally started in 1969 and bought by the present owner in 1972. He then sold the business in 1985 and reacquired it in 1998 for his children. In short the children did not want the business and the owner had been stuck with his purchase. While the owner has considerable personal net worth over the years the business had become a millstone around his neck.
Upon arrival we found internal theft rampant, morale nonexistent, reporting incomprehensible (where it existed) and no planning or controls in place. We immediately began work getting the cash under control and eliminating the theft of company assets. This had an immediate effect on both cash inflows and morale. Retention of the cash started easing the cash flow crunch. Removing the thieving employees also sent a powerful message to the loyal employees about control and acceptable behavior.
A second contributor to the poor cash flow was poor credit granting and collections practices. Both of these practices prevented needed money from coming in the door. This was especially true with diesel fuel sales where the gross margins are less than 6 or 7% which means that for every dollar written off in bad debts the client needed to generate $15 or $16 in additional sales to cover those losses. Immediate correction of credit granting policies and quick action on outstanding receivables had a positive impact on cash flow.
One of the largest areas for improvement in a business that largely sells commodity style products with high volume and low margins is product mix. We began immediately to re-merchandise the inside of the store to increase sales dollars per customer and improve the margin per sale. Our efforts were rewarded with additional suggestions from the staff as well as a great "buy in" internally. As an adjunct to the re-merchandising our consultant worked with the client and his people on marketing and advertising that worked and generated positive cost/benefit ratios. The result of that effort was increased sales of higher margined items and significant increases in average margins.
A restaurant facility is always an area of exposure for truck stop owners. Our client was no exception to this rule. To solve the restaurant problems our consultant developed and implemented with employee's personnel, ordering and pricing protocols and reporting procedures for inventory receiving, shrinkage and losses.
Any truck stop always faces problems with maintaining a clean, well lit facility. While that sounds like a small problem, it actually encompasses many areas of responsibility within the organization. We used several elements of organization structure to bring this problem under control. First, we wrote duties lists for people in all areas of the business with specifically assigned tasks. Second, we prepared check lists that must be accomplished each shift in each area of the business and signed off on. Third, we recognized that each employee needed to be trained and cross trained in order that all work got accomplished every day. The success of our mission was attested to by the ratings of Ambest. This independent rater of facilities had routinely given this client ratings in the mid sixties (65%), but on their first rating during the course of the consulting project, our client received a ninety-six percent rating (96%).
Having solved the immediate problems, we then began filling the company with structure and accountability so that these results would be repeatable. We increased utilization of the electronic accounting systems to improve inventory turns, get meaningful financial reports, eliminate theft loss and more effectively manage accounts payable.
We further dealt with the issues of planning, by sitting with the client and developing one and three year business plans, budgets, capital budgets, plans for future utilization of facilities and similar issues that escape most American small business owners.
You will note one recurring theme throughout this entire case study; we were acting as the agent of change in the client business. In his letter of opinion on our services, this client wrote, "I believe that one of the most valuable parts of your program is the hands on work that you did with us and all of our employees. It made all the difference in the world when you worked side be side with our employees and managers. It gave them confidence that will allow us to continue on the CA profit path of success."