Our most recent posts from The CapEx Compass:
Oct 29, 2013 Know Greatness When You See It?
Do you really think so?
Sep 30, 2013 Decision Overload
Better big decision by timing big decisions
Aug 27, 2013 The ROI of Follow-Up
Making time to review earlier proposals is still your best investment
In the course of more than two hundred and fifty projects, Dave has successfully navigated a wide range of complex situations and delivered clear recommendations to CEOs and boards.
Opportunities have ranged from a few hundred thousand dollars to more than half a billion. Regardless of the project’s cost, his approach ferrets out waste and focuses resources on the most effective and profitable solutions.
Lowered Project Cost more than $15 Million (60%) and Increased Return by Exposing Non-Productive Components:
- Client was considering a proposed expansion of a production facility. The project was initiated by a desire to improve quality to meet new customer expectations but had broadened to incorporate a substantial volume increase. Dave was engaged to validate their final calculations (at a satisfactory return).
- Dave’s analysis revealed that the 40% of capital solving the quality increase generated very high returns that were masking the very low returns of the additional volume components.
- The client re-scoped the project to focus on the high performing product quality components, saved 60% of the project’s capital cost, and boosted the project’s return from 18% to 43%.
Exposed Inflated Returns and False Crisis on a Major IT Project:
- Client was a basic materials manufacturer with revenues exceeding $1 billion. Anecdotal accounts from sales staff fanned fears that fully 10% of sales would be lost if a large B2B initiative was not immediately implemented, but other critical projects would be mothballed if the B2B initiative was fast-tracked.
- Dave worked with the sales staff to reveal only a modest margin erosion on a much smaller portion of sales, and much of that could be mitigated for several months.
- This clarity allowed the client to maintain focus on the more pressing current projects and avoid costly disruptions.
Reduced Acquisition Cost by 24%:
- Client was in a competitive bidding situation on multiple manufacturing assets. Dave coordinated the due diligence and performed a robust analysis of the projected operating performance. The client had also engaged an investment bank that developed their own recommended bid using simplified calculations, comps, and other rules of thumb.
- The bank objected strenuously to Dave’s 24% lower bid and predicted failure to acquire the assets. Dave’s clear and compelling walk through of the fundamentals demonstrated his price was fair and that a significant increase to the bid would destroy shareholder value.
- The lower price was bid and the seller accepted the offer.
Designed and Delivered a System for Evaluating Business Opportunities:
- Recipient was a Fortune 500 company with multiple divisions and an annual capital budget exceeding $700 million. Senior leaders were frustrated with inconsistent and often inadequate practices of evaluating and deploying capital as evidenced by underperforming business results.
- Dave worked with the Project Management Office to establish a comprehensive approach that broadened the options surfaced, applied consistent valuation principles, employed effective communication to decision makers, and tracked results. The new process was rolled out with highly effective training seminars to key personnel to maintain skills across the corporation.
- The company experienced improved business investments by surfacing lower-capital solutions that generated higher returns and improved accountability.
Focused Activities on Key Performance Metrics:
- Recipient was a sales and distribution business with facilities across the United States and Canada in a highly competitive industry. Local managers were held accountable to a performance scorecard that had grown to incorporate twenty metrics. As this list grew, so too did the frustration of local managers as they attempted to address this myriad of measures with little progress on business profitability and returns.
- Dave’s analysis revealed that only two of the twenty metrics were reliable predictors of strong financial performance. The remaining metrics were useful as diagnostics when investigating lower performance, but the business would improve returns by focusing efforts on the two key metrics.
Developed Effective Recruiting Program for Finance Talent:
- Weyerhaeuser had a small but highly effective program for developing top finance and operating talent for the company. This group developed and assessed business cases for all major endeavors representing initiatives of $1 billion annually including acquisitions, divestitures, joint ventures, major plant investments and product commercialization.
- For several years the team had suffered chronic understaffing due to disappointing results from recruiting efforts. Dave assumed leadership of the group and applied marketing concepts that used highly personalized approach for the most promising segment of candidates, focused the recruiting message on Weyerhaeuser’s strongest values, and secured the optimal number of acceptances.
- Thereafter, staffing needs were consistently met with highly talented professionals.