Brush with Business Doom: How 2 Firms Came Back from the Brink of Disaster

SVT and Altel Systems share their tales of tumble and turnaround to help those who may face the same problems prepare for the worst.

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Even the most successful companies have gone through some level of problems on their way to the Inc. 5000. When the recession smothered the U.S. economy starting in 2008, it forced business leaders to come up with new ways to pay their bills, find new work and keep their employees happy.

Many small-to-medium businesses, like those that comprise most of the commercial integration industry, are still dealing with the lingering effects — if they survived the recession.

But it doesn’t take a recession for an integrator to feel the financial heat. Sometimes cost-cutting measures are harsh, but necessary realities of running a business, along with the self-assessment and realization that doing things “the way we’ve always done them” doesn’t quite work anymore.

Two integrators agreed to share their tales of tumble and turnaround to help those who may face the same problems prepare for the worst and limit the length and depth of the downturn.

SVT Spread Too Thin

SVT president Josh Shanahan wasn’t directly responsible for the mess his Brighton, Mich.-based integration company has been trying to clean up for most of the past five years, but that doesn’t take any of the sting out of the decisions that led to the struggles.

Before he took over the business from his father, Shanahan watched as company leaders moved heavily into managed services and SVT found itself with two-thirds of its cash flow and 20 percent of its revenue invested in two Alabama gaming and entertainment facilities, both of which closed within weeks of each other in 2010 because of new legislation forbidding them.

“The company was doing so well, things were swept under the rug,” says Shanahan.

“That left us with a 55-year-old business in need of diversification in serious debt and a lack of working capital,” says Shanahan, who became president in 2011. “We were faced with keeping the house standing when it’s in need of new walls. We were struggling between managing our debt and investing in the business.”

As part of cost-cutting measures at SVT, several family members were shown the door, says Shanahan. It reflected the cold reality of business, triggered by the fact the company had never done a risk assessment and that it had been using an old contract template that didn’t cover SVT in the event its largest client had to suddenly close its doors.

Although SVT got its equipment back from the Alabama gaming facilities when they closed, it was analog equipment, meaning its value was minimal, says Shanahan. SVT was able to repurpose some of the gear but not enough to put a dent in the bank debt, he says.

“The company was doing so well, things were swept under the rug,” says Shanahan. “It seemed like the gravy train was never going to end. If we had done a risk assessment, we would have seen [having so much invested in so few clients] wasn’t a good idea.”

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Even during its darkest days, SVT’s banking partners “remained very supportive,” says Shanahan, but bonding has become “a challenge” and SVT has become limited to pursuing only jobs that don’t involve bonding.

SVT used to offer payment terms that allowed customers to pay within 30 days of the job being wrapped up, but now only offers progressive terms that require payments as certain aspects of the job are completed.

As part of that change in approach over the past three years, SVT brought in a new CFO who has more experience in percent-age-of-completion accounting, says Shanahan. These changes were led when SVT brought in Calderone Advisory Group LLC to review its business from top to bottom, looking at operational deficiencies, helping them create metrics and dashboards and launching a rigorous analytics process.