Case Studies
Refining & Marketing Segment of Oil & Gas Companies
Company
A well-known Oil & Gas Company was obtaining substandard Revenues in its Refining & Marketing segment this situation was aggravated by higher than typical Operating Costs.
Problem Encountered
Company had two refineries and numerous gas stations. It processed some of the crude oil from their own production, complemented by crude oils purchased in the open market.
Silver Fox Advisors Involvement
The Senior Management of the Company hired my Firm to address the situation.
After an extensive review of their planning process, it was discovered that the optimization of acquisition of crude oils was not timely nor optimum resulting in the purchase of crude oils that did not yield optimum results. In fact, the two refineries were working at cross purposes at times.
A new Monthly Planning Process was implemented with the participation of all parties both refineries, crude and refined product treaters and the study group that owned the optimization tools.
The optimization tools were fine-tuned, the different groups worked continuously together. Preparing a comprehensive and coherent Plan for the Following month.
After a month of “depress rehearsal” the next monthly Plan was executed. The results were excellent. Significant Revenue and cost reduction was obtained.
Conclusions
Based on these results and the testimonial of the Oil & Gas Company our firm implemented this Planning Process in several Oil& Gas Companies Worldwide.
*******************************
Human Resources
Challenge
[Build manufacturing and process sector leadership] A leading strategy consulting firm retained a Silver Fox Advisor to augment its partner‐level talent in the manufacturing and process sectors.
Silver Fox Advisor Involvement
[Collaboratively determine hiring metrics] The Silver Fox Advisor worked closely with the firm’s hiring panel to develop a radar diagram featuring six key metrics on which each candidate would be rated. This process leant objectivity and credibility to the search process and smoothed concerns about the large commitment of resources needed to build up the selected sectors.
[Combine targeted search with expertise screening and culture fit] In addition to screening for consulting expertise, industry knowledge, direct experience and practice building knowledge, candidates were interviewed for a cultural fit with the firm. These interviews were informed by the detailed screening. The Silver Fox Advisor ensured an efficient and positive interviewing process for both client and candidate.
[Identify and secure the best candidates] The Silver Fox Advisor tapped its extensive network of consultants in operations practices and also those who had transitioned into the targeted manufacturing areas. In so doing, we identified top quality candidates and created positive word of mouth about the opportunity to build a presence in key sectors with our client.
Results
[Hired 12 partners in 18 months]
The Silver Fox Advisor’s approach was enormously successful in building positive word of mouth and generating candidates. Our client was able to hire twelve partners in eighteen months as a result of our hiring program. Partners placed were then instrumental in persuading an average of two additional candidates to
interview as well.
[Repositioned firm’s operations capabilities] The “multiplier effect” of hiring the right talent to build
their sector leadership helped our client successfully create a presence in the manufacturing and process sectors. It also repositioned their capabilities beyond their well-known supply chain practice, to include expertise and talent in the targeted verticals.
*******************************
Telecommunications Industry FDIC Coverage
Company
A successful telecommunication company that had been in business over 25 years had a very good year, closing their fiscal year with $1.8 million in their operating checking account. The Federal Deposit Insurance Corporation (FDIC) coverage at most financial institutions is $250,000 per individual entity. The business did not have an arrangement with their financial institution whereby excess funds over the $250,000 FDIC insurance limit would get swept into deposits at other financial institutions in coverage increments, thus assuring protection in the event of an institution failure.
Potential Problem Encountered
This telecommunication company had a $1,550,000 potential loss exposure in the event of their financial institution failure. With the failures of Silicon Valley, First Republic Bank, Citizens Bank, and Heartland Tri-State Bank in 2023 the potential exposure can be real. A $1,550,000 loss to this business, assuming a 10.0% net profit margin, would mean the business would have to generate $15,500,000 in revenues to cover that big a loss and have a no profit bottom line.
Silver Fox Advisor Involvement
This business owner contacted her Silver Fox Advisor, who had former financial institution experience. This Silver Fox Advisor met with the telecommunications business banking relationship manager and put in place a permanent sweep arrangement whereby these deposited funds and all future deposited funds in excess of the $250,000 amount would be swept into other financial institutions in the coverage limitations figure.
Conclusions
It pays to have someone with knowledge and experience be your eyes and ears to watch over and listen for those little things, or in this case – big things, that you are not even aware can potentially cause problems for you and your business.
*******************************
Technology Service Leasing Arrangment
Company
A technology services company that had been in business over ten years had made a successful enterprise developing and maintaining web-sites for the automobile dealer industry. Automobile manufacturers moved to require their dealers’ web-sites to have a standard manufacture brand look and feel which resulted in limiting this technology services business’ web-site development and maintenance business.
Being a true entrepreneur, this business owner changed his product line and developed a turntable that could be installed at a dealer’s business. This turntable would rotate vehicles and take photos as the vehicle spun around. Once completed these photos were uploaded to the dealer’s web-site, using software the technology service company’s owner developed. Consumers shopping for vehicles on-line could then see the vehicles that the specific dealer had for sale.
Problem Encountered
These turntables became a very popular item for dealers and soon sales were booming. Many of the dealers wanted to finance these turntables, installation, software and service contract rather than laying out cash. This technology service did not want to be a finance company so it looked for financing sources for these contracts. After waging an unsuccessful campaign locating a third-party financing source, the business owner looked for assistance.
Silver Fox Involvement
This business owner contacted a Silver Fox Advisor, who had former financial institution experience. This Silver Fox Advisor analyzed the situation and turned to a leasing company that arranged for the technology service company to offer dealers lease financing using co-branded marketing materials and lease contracts so the technology services company could press forward with manufacturing, marketing, selling, installing, and servicing its turntable product line.
Conclusions
When the road traveled ends with the road blocked and there doesn’t seem to be a clear path forward, seek the advice of advisors with experience and expertise in the field of dreams you are playing on and turn those dreams into reality.
*******************************
Price Increases
Company
A 30 plus-year-old profitable high-end landscape design, install and maintenance company offers quality project designs, timely attention to detail installs, and second-to-none ongoing maintenance service. This business has several long-term employees and offers competitive employee benefits. This market segment is highly competitive with the market entry capital cost for new players relatively low. In addition, some competitors use low wage laborers and do not offer employee benefits, thus having lower operating cost hurdles to meet.
Problem Encountered
This 30-year-old landscaping business had not increased its fee schedule in over five years. In that same period of time its payroll, cost of goods sold and overhead expenses all increased, in some cases by double digits. Management was reluctant to increase the fees it charged for fear of losing some of its customer base. However, management also knew it could not continue to absorb increases in all aspects of its business operation.
Silver Fox Advisor Involvement
With the assistance of the business’ Silver Fox Advisor, management analyzed it customer base and determined it had several clients that based on the work it was doing for these clients, time spent on these clients’ properties and individual follow-up, the company was not covering its overall expenses by a wide margin. In addition, most of these clients were on the lower end of the invoicing schedule. The 80/20 rule was in full display with this analysis.
Pricing increase models were run, and it was determined to move forward with an across the board 25.0% fee increase. What the company experienced was several of the clients that is was losing money on left and went elsewhere. Almost all of its larger billing long time clients accepted the increase with little comment. In fact, the company’s employees now had more time to spend on these larger billing clients’ properties and the employees were able to up sell these clients additional services which increased the company’s overall revenues on top of the 25.0% fee increase.
Conclusions
There are a couple of conclusions to make here: 1.) Don’t wait for five years to pass your business costs on to your customers. In fact, it is recommended you increase your pricing at least annually and 2.) Don’t delay decisions based on personal or emotional feeling but rather analyze situations, run what-if scenarios, talk situations over with key employees and advisors, and make educated decisions based on facts and figures.
*******************************
Hospitality Industry Business Plan
Situation
A young entrepreneur with a culinary degree, hospitality industry experience, available cash, and a business experience support group was seeking financing to open a specialty restaurant. A location had been identified and a leased facility was available. The young entrepreneur wrote a business plan using a standard internet business plan software program. This business plan included growth strategies, a marketing plan and financial projections.
Problem Encountered
The young entrepreneur met with a business banker from the financial institution where her personal banking had been maintained for a number of years. Her financing request was declined. Not being discouraged, this young entrepreneur took her business plan and loan request to four other financial institutions, and she was met with the same answer. Because new start-up restaurants have a high failure rate, most financial institutions will not consider providing financing to this market segment.
Silver Fox Advisor Involvement
This young entrepreneur was introduced to a Silver Fox Advisor with former business banking financial institution experience. This Silver Fox Advisor reviewed the young entrepreneur’s business plan and loan request materials and revised the business plan and loan request to focus on the strong points of the business plans, the experience and backgrounds of the individuals involved, highlighting their industry and general business experience, and scaled back the growth projections to a more probable scenario. This revised business plan and loan request was then presented to five different financial institutions, and five approvals were obtained.
Conclusions
First impressions and how situations are presented can make the difference between success and failure. It pays to get advice and assistance from advisors with experience and knowledge to set the stage for an idea to become a reality and a success story, not a disappointment.
*******************************
Entertainment Industry Service Bidding
Situation
An established entertainment industry business operation annually would renew specific contracts for services (like insurance coverage and merchant services) provided by third parties. The business did not have a policy or procedures in place to review and/or analyze the actual service provided or fees related to providing the said service. Instead, the owner assumed that the third parties had the business’ best interest at heart and would provide the best service available at the lowest pricing.
Problem Encountered
Over the course of several years the annual fees continued to rise, but the owner accepted this as normal because the revenue of the business were steadily increasing. The business’ accounting firm mentioned to the business owner that the business’ insurance costs as a percentage to revenues were continuing to increase and were becoming a double-digit percentage of annual revenues.
Silver Fox Involvement
This business owner contacted his Silver Fox Advisor and asked for assistance with this situation. The Silver Fox Advisor spread the business’ income statement for the previous three years and identified all those line-item expenses that had been increasing. The Silver Fox Advisor recommended putting the insurance and merchant service out for bid. The result was the business got more insurance coverage and saved $80,000 in annual premiums. The merchant service bid resulted in additional savings of $20,000 per year. These two items netted a $100,000 reduction in annual expenses without having to cut any expenses or do away with any services, a real “Win Win” scenario.
Conclusions
Paying attention to details, or having someone do that for you, can often result in savings that drop right to the bottom line without the necessity of having to make cuts or sacrifices.
*******************************
Entertainment Industry Cash Is King
Situation
A start-up entertainment industry business became very successful in its first two years of operation. When fixed assets (trucks and equipment) or inventory build-up was needed in the business, the owner would pay cash for these items, because the cash was available. The business had seasonal slow periods when sales levels were reduced but payroll, operating expenses and overhead still needed to be paid. The business soon was nearly out of cash and was struggling to stay in business during these seasonal slow sales periods.
Problem Encountered
The business owner obtained some cash from family and friends, but not enough to cover the cash flow deficiencies. The business did not have any lines of credit in place to draw on except for high interest rate credit cards with small balance available limits on them.
Silver Fox Advisor Involvement
This business owner was referred to a Silver Fox Advisor with former business banking financial institution experience. This Silver Fox Advisor reviewed the business’ financial statements and quickly determined the business had sufficient profits and cash flow availability on an annual basis, but the balance sheet assets and liabilities were mismatched. The owner was using short term assets (cash) to acquire long-term fixed assets and inventory build-up.
The Silver Fox Advisor assisted the business owner in preparing a business plan and loan request package to present to the business owners’ financial institution requesting a three-year term loan secured by the business’ fixed assets and inventory. This provided the business with more than sufficient cash to carry it through the seasonal slow periods and cover payroll, operating expenses and overhead. The business owner changed the business’ fixed asset purchasing strategy, and this strategy remains in place some twenty years later.
Conclusions
Having a proper well through-out financial plan and strategy from the first day of operation of any business is a critical element to its success. Cash is kind and should be perceived and used wisely. Something all business owners should keep front and center of their decision-making is “When a business needs cash, it likely will not be able to get it” and “When a business does not need cash it is usually not available”.
*******************************
Dealing with Patent Trolls
Problem Encountered
The news has been full of stories about “Patent Enforcement Entities” (sometimes called “Patent Trolls”). These are entities that send demand letters to large numbers of people without any investigation to determine if the letter recipient is truly infringing any patent. Typical tactics these entities use is to demand sums of money that, while significant, are usually far less than the cost of fighting a patent case. In many cases, the recipient of the letter is left feeling that the patent assertion is merely extortion.
Silver Fox Advisor Involvement
A Silver Fox Advisor member who has years of experience in the Intellectual Property Legal Practice has been representing businesses of all sizes and market segments, and he has been able to help his clients in responding to these “Patent Trolls”.
In dealing with many of these situations in the last few years this Silver Fox Advisor has developed methods to counter these tactics, relieving the letter recipient of the worry involved when facing an infringement suit, and our Advisor methods have forced the troll back under the bridge. In other cases, his Firm has been able to work with supplies and insurers to take the burden off the firm’s clients.
Conclusions
The important thing lesson to be learned is to be prompt in responding to these letters with one from an outside law firm -- before significant sums have been spent.
Understanding the Bigger Energy Picture
With average gasoline prices in the United States passing $5 per gallon this month for the first time ever, energy has really captured the headlines showcasing the very real impact on many people’s pocketbooks and way of life. This has reenergized the dialogue and debate over oil’s usage, the primary feedstock for gasoline, and politically the need to switch more quickly to wind and solar.
Unfortunately, our modern information world of cable news, twitter, and other forms of media showcases unbalanced snippets. Having spent my career in the energy industry, over the years I have found it rather appalling at the naivete and lack of depth of understanding for such a complex energy/environmental system that fundamentally powers our standard of living.
In my blog of October 25, 2021, on Understanding the Energy Quagmire, the focus was on climate change highlighting the issues around renewable energy and fossil fuels. My overall conclusion was we needed a more thoughtful balance of the risks and rewards of different courses.
Then in my blog of March 4, 2022, we looked at the concept of energy security being made up of economic security, national security, and environmental security. In other words, energy security plays a major role in the other three primary securities which are central to daily living. Today, we are seeing the impact on economic security which doesn’t receive much attention until energy prices rise significantly. In the blog, I referenced a presentation that I had given in August of 2021 before Russians invasion of Ukraine. I made the point in that presentation that we were underplaying the role of energy security in terms of its potential impact on national security, in other words, a lack of balance and foresight. The Russia/Ukraine war has brought this reality to the forefront.
Today, I received an e-mail from Scott Tinker, Director, Bureau of Economic Geology & State Geologist of Texas who is a Professor at the University of Texas. I met Scott through my role at the University of Houston’s Global Energy Management Institute at the Bauer College, and my leadership role in the GHP’s Energy Collaborative. He is incredibly knowledgeable and insightful on the energy/environment complexities and recently produced a YouTube video entitled TEDx-The Dual Challenge: Energy and Environment.
Scott really addresses the bigger energy picture in a balanced way. He has requested us to share this 17-minute video with friends, colleagues, and social networks. It will give you much greater insight into the big picture reality of energy beyond simple snapshots through the media. Please listen to his insight:
A Tale of Two Companies
Company A
The main line of business is the repair and service of large centrifuges for use in the maritime and oil industries. This Company is owned by two individuals who have been business partners for a number of years. To protect each other and assure the Company would be able to remain in business if either individual became disabled or passed away, a buy/sell agreement is in place whereby each partner could buy the other partner’s shares in the business. There is insurance in place to assist in this event when and if it occurs.
Company 2
Company two operates as a furnace rebuilding business. It has been in business a number of years. It has a good client base and has enjoyed much success. However, the Company’s owner has been diagnosed with Multiple Sclerosis.
Problems Encountered
In Company number one the insurance that was in place to help with the buy/sale event was in the name of the Company; if the policy paid out, it would create an Alternative Minimum Tax issue for the Business as well as a personal tax for the individuals, should if the policy payout be used for the intended purpose.
The problem in Company number two was twofold. One, the Owner could not get any new insurance; two and the policy that he had in place had large premiums which were becoming difficult to pay due to his medical condition.
Silver Fox Advisor Involvement
A Silver Fox Advisor member who has years of experience in the insurance business was able to help both of these Companies with their respective issues.
In Company number one this Silver Fox Advisors did an in-depth complete review of the buy/sell agreement and the insurance policy; he
In Company number two this Silver Fox Advisors reviewed the insurance policy that was in place and discovered that the policy had a Waiver of Premium clause. Several years of past premiums were able to be covered. In addition, the Business Owner did not have to pay additional premiums’ and the policy remained in force. With these savings the Business Owner was able to buy insurance to insure his key employee could keep the business going for his family until they could learn to operate the business, or it could be sold.
When it seems as if the best of times has been turned into the worst of times there just may be a silver lining that achieves a happy ending. Silver Fox Advisors are available to put their expertise and years of real-world business experiences to help you work through your problems.
