Background:
Restructuring and Growth: A Board Member’s Role at TermCon
I served on the board of TermCon during a critical transition period, as the new owner, with strong product knowledge (solderless terminals and connectors), was taking over from the previous owner. While the new owner possessed deep technical expertise, business acumen was lacking.
Implementing Strategic Guidance
From the outset, I provided strategic guidance focused on achieving alignment between sales activities and inventory levels. This ensured that sales activity did not outpace available inventory, a common pitfall for new businesses. By the close of the first year, TermCon had demonstrably improved its financial health.
Navigating Financial Challenges
However, the owner expressed frustration at the lack of readily available cash, perceiving that the Internal Revenue Service (IRS) had taken “all the money from the firm.” To address this misconception and encourage a more strategic financial approach, I presented him with a series of questions:
- Did you complete the acquisition of the company on schedule? (Yes)
- Did you increase inventory levels to support sales growth? (Yes)
- Did you successfully grow the business? (Yes)
- How are you managing your accounts receivable? (The owner acknowledged an outstanding receivable period exceeding 90 days)
I then explained the concept of “a free float,” highlighting that collecting outstanding receivables essentially provide an interest-free loan to the customer. This realization was a turning point, leading to the implementation of a cash-only business model moving forward.
A Sustainable Foundation for Growth
My role involved establishing four key performance indicators (KPIs) that were monitored weekly. Regular review of these KPIs enabled timely identification and correction of any potential issues. During the owner’s 17-year tenure, TermCon achieved significant milestones:
- Consistent positive cash flow
- Development of nine patents
- Sustainable business growth
