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The Value of the WCashPlus Process™

The Process is particularly valuable in the following circumstances :

  1. At the beginning an investment : enabling debt to be paid down early  in the life of the investment, reducing interest expense and providing headroom for covenants.
  2. Towards the end of an investment : where the Process generates cash to pay down the debt prior to the planned sale of the company, capturing value for the owners that would otherwise have been transferred unrecognized to the buyer.
  3. When the company is debt-free, or can be re-capitalized as a result of the WCashPlus Process : allowing the cash generated to flow immediately to the owners through the payment of a dividend.
  4. When a company is going through a troubled period : where the cash generated can alleviate problems with the lenders and avoid the need for a further injection of cash by the investors.

The Process Itself

The WCashPlus Process is designed to generate a significant amount of cash within a relatively short timeframe. It achieves this through creating an intense, rigorous focus on:

  1. Reducing the Accounts Receivable DSO’s in partnership with customers
  2. Reducing Raw Material & Finished Goods Inventory
  3. Increasing Accounts Payable in partnership with vendors

The “Plus” part of the Process has the potential to create additional value by increasing EBITDA through:

  1. Reduction of the price of Goods & Services
  2. Reduction of Obsolete Inventory Write-Off
  3. Reduction of Bad Debt

Implementation of the WCashPlus Process

The basic steps in the Process include:

1. Signing of a Confidentiality Agreement.

2. Discussion and agreement with the company on the financial goal for WCashPlus.

3. Briefing of those Management Team members who have an equity position or other vested interest in the transaction value of the company: to present the benefits of WCashPlus for them personally and secure their commitment to it.

4. Detailed outline of the WCashPlus Process for the CEO, CFO and head(s) of Operations and Purchasing.

5. Implementation of analytical and measurement tools; setting of targets for Working Capital components.

6. Internal communication meetings with all staff having vendor/customer contact.

7. Implementation of WCashPlus procedures and action plans for AR and AP.

8. Review of RM and FG inventories and creation of Action Plans to reduce them.

9. Strategic Review Meetings with current and potential major vendors.

10. Implementation of Action Plans for smaller vendors.

11. Weekly Progress Reviews and Corrective Action Plans.

12. Monthly and Quarterly Reviews with the CEO.

Implementation of the WCashPlus Process is hands-on. If the client company prefers to provide this resource, Graham is prepared to act in a consultative role to assist execution of the Process. To realize its full potential for the shareholders, however, Graham is personally prepared to provide the necessary dedicated resource and focus to ensure the success of WCashPlus. He is available as required to play a pivotal role of change-agent with vendors, and to support internal cultural and operating changes.

Graham remains extremely close to the Process’s implementation over a sustained period of time, helping drive results in conjunction with the Management Team with whom regular progress reviews are conducted.

A typical project requires:

  1. An intensive period during the first four weeks to customize the Process to the client company’s particular market and circumstances, and to implement the first eight steps.
  2. Two weeks to conduct Strategic Vendor Meetings.
  3. Four days a month for Weekly Reviews.
  4. Monthly and Quarterly Progress Reviews.

The amount of Graham’s personal time depends on the potential, degree of difficulty and overall time-frame of each project. His time is guaranteed for all critical stages of the Process. A Senior Associate may be used as additional resource as required.

Fee structure

  1. The WCP Process is totally self-funding. It pays for itself from just a portion of the savings in interest costs in Year One alone. Thus the client receives the full benefit of the Working Capital reduction dollar for dollar, as the resultant cash provides debt reduction and/or dividend payments.
  2. The only outlay is a modest Engagement Fee, after which the Process is funded purely on the basis of a Success Fee based on an agreed, low single digit, number of cents on the dollar. The rate per dollar may be adjusted up or down, dependent upon an assessment of the degree of difficulty, the overall potential, and the agreed-upon term of the contract.
  3. Calculation of the Success Fee is based on the $ reduction in Basic Working Capital: defined as Trade Accounts Receivable plus Inventory minus Trade Accounts Payable, as reported in the company’s Quarterly Balance Sheet. It is payable no later than the 21st day of the month following the end of each Quarter and is non-refundable.
  4. The benefits to EBITDA are recognized through a “Plus” fee representing a small percentage of the annualized savings that result from the Key Vendor Strategic Meetings, and of the Bad Debt & Inventory Write-off improvements. The “Plus” fee is payable by the 21st day of the month after the savings start to be realized.
  5. Reasonable, agreed expenses including travel & lodging are reimbursed at cost.
 
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