“What Happened To My Money?”
An East Coast healthcare startup that had been operating smoothly came to Imperial Advisory confused after the founder/CEO noticed that the company needed frequent cash infusions to cover operating expenses. The CEO had successfully led the startup to a position where it was nearly profitable, so it was surprising to be facing massive cash flow issues. Unsure how to address this financial concern and with no official CFO staffed to handle the problem, the founder enlisted the help of Imperial Advisory to analyze the financial state of the company and help the startup devise a plan to attack cash flow issues to placate investors who had grown increasingly worried.
The first step in finding a solution was to run a deep-dive analysis of the business and its expense drivers. This analysis revealed that the startup’s financial wellness was actually in a much better state than it had appeared, and the primary cause of investors’ and managements’ concerns stemmed from the way financial data was being interpreted and presented.
When misinterpretation is an issue, education is central to enabling better decision-making, so we worked closely with the CEO to segregate general marketing and overhead expenses from expenses that were directly related to customer acquisition. This was important because our initial deep-dive analysis revealed that the expenses tied directly to organizational growth were generating revenue that took months to materialize, which provided a clearer explanation for the business’ cash flow problem. We also built out a robust operating model that allowed the CEO to (a) seamlessly integrate financial projects with actual results and (b) generate a monthly dashboard featuring charts and graphs that lay out the financial state of the startup.
With this new information, the CEO was fully equipped to communicate the financial state of the company to investors and placate their concerns while continuing to run the business respon
“No Free Lunch!”
A family office based out of Nassau County had established a successful investment operation which successfully invested in real estate and other ventures. The office had been able to manage their finances and confidently make financial investment decisions for years, but called on Imperial Advisory to help guide them through an unprecedented situation where they felt unequipped and unprepared to make a decision independently. They were considering partnering with a VC fund to launch an industry-specific coworking space. Details of the proposed joint venture included free access to the coworking space for the VC fund in exchange for them pledging to persuade portfolio companies to become tenants.
To guide the decision-making process, we led an exhaustive analysis evaluating potential startup costs, as well as the market rate for similar coworking spaces. Once all of this information was collected, we used it to run a cost-benefit-analysis on the proposed joint venture. These analyses were presented to the family office. With a robust understanding of the proposal, the family office was empowered and confident throughout negotiations, ultimately coming to the conclusion that the VC was bringing relatively little to the partnership. By giving the VC free access to the space, the family office would be forced to charge other coworking space members more than the market rate to offset startup costs. For this reason, the family office decided not to pursue this partnership. Several iterations of the partnership were evaluated, but the family office was confident that none presented a strong enough investment opportunity, choosing instead to explore other opportunities with the VC.
With more information and a better understanding of the venture’s potential financial impact on the business, the family office felt confident in making the decision to pass on this venture and instead explore other opportunities with the VC.
“The Retail Market From Hell”
In recent years, large healthcare product manufacturers and retailers have been doing notably well. The economy has steadily recovered from the 2008 recession, and demand within the industry has increased. That’s why the manufacturer and retailer division of a major producer in the industry approached Imperial Advisory for guidance amidst the unprecedented situation created by COVID-19. The division’s main revenue stemmed from the sale of high-end devices, and all of the business’ retail operations were physical rather than digital. So as stay-at-home orders were enacted around the world, the manufacturer’s physical retail operations were brought to a halt entirely, causing significant damage to cash flow.
The business wanted to work with Imperial Advisory to outline a strategy for combating these cash flow issues and sustaining operations through the pandemic/economic shutdown. To assist the business in maintaining its financial health, we conducted a cost-benefit analysis to assess the possibility of launching a telehealth platform and driving online sales. Selling the product remotely would allow the manufacturer to reach customers and continue generating revenue despite any disruptions to physical points-of-sale. To best predict the financial implications of putting this idea into practice, we explored the entire process from the remote sale to the possible integration of telehealth platforms with the traditional retail model.
We also worked with the company to evaluate alternative pricing options that would appeal to customers and allow their high-end medical devices to reach the consumers who rely on them, even in this challenging economic time. We defined the true economics of various payment structures and determined that, from a financial standpoint, a subscription model marketed with 0% financing could yield even better sales and profit for the company. Primary benefits included that this setup would not require customers to have cash upfront, and it would allow the company to avoid the tedious and timely task of dealing with insurance companies.
Through our guidance, the manufacturer was equipped with the information and tools needed to restructure the business to dramatically grow overall sales and increase profits per unit. Additionally, the manufacturer used this information to prepare a strong and thoughtful pitch that could be presented as the company sought bank lenders to finance the new subscription program and to reduce risk.