I own a small manufacturing shop with about 40 employees. We were bleeding cash last year. A consultant who specializes in turnarounds came in and promised to cut overhead by a third in a month. I was skeptical but desperate. He did it. Most of it came from renegotiating supplier contracts, cutting overtime, and eliminating a layer of middle management. I'm sharing because I know a lot of owners are resistant to outside help. Happy to answer questions.
Cost Cutting
How I let a turnaround guy cut my overhead by 35% in thirty days
What did his fee structure look like? I've talked to a couple of these guys and they wanted a percentage of savings plus a retainer. That adds up fast.
Middle management cuts are tricky. Did you lose anyone you actually needed? We tried something similar and ended up with supervisors doing three jobs and burning out.
Fee was a flat project fee plus 10% of first-year savings. It was steep but the savings were real and documented. On the management side, two of the three let go were near retirement and we gave them a decent package. The third was a surprise but the team adjusted.
Thirty days is aggressive. How much of that 35% was one-time stuff like liquidating inventory or delaying Payments? Those don't stick.
Supplier renegotiations can backfire if you push too hard. We lost a key vendor that way. Did he secure long-term terms or just short-term discounts?
Fair point on one-time vs recurring. About 8 points were one-time. The remaining 27 was recurring: lower rent on a warehouse we weren't using fully, renegotiated freight rates, and a big cut in overtime which we addressed by shifting schedules. Supplier terms were two-year contracts with volume commitments.
How transparent was he with your team? I've seen these guys come in, slash, annd leave before the dust settles. Morale takes a hit.
Did you have to give him access to your financials? That's the part that makes me nervous.
Also curious about the middle management part. Were those people replaced or were their duties absorbed? If absorbed, you might see productivity issues down the line.
The 10% of savngs could be gamed if he defines savings loosely. Did you have an independent audit?
Morale was a concern. He held weekly all-hands and was upfront about what was happening and why. Not everyone was happy but there was no surprise. Financials were shared under NDA. On the audit: we had our CPA review the savings calculation before paying the success fee. It was within 2% of his number.
That's a reasonable outcome. Still, I'd want to know what happens after he leaves. Who maintains those supplier relationships and schedule changes? If it all falls apart in six months, the 35% was just a loan.