When an office supply retailer, a boat repair company and a manufacturer of spy-proof computers found their businesses seriously ill and in need of resuscitation, they all took the same action -- they called John M. Collard, a corporate version of Marcus Welby M.D.
Mr. Collard is the founder and president of Strategic Management Partners Inc., an Annapolis-based transition and management turnaround company that tries to rescue businesses suffering from such ailments as anemic sales, inadequate cash flow and swelling overhead.
His clients may not be in their death throes but many are on the verge of slipping into bankruptcy.
Air Works Inc. is one example.
The Annapolis company repairs inflatable boats -- everything from a tiny tender to ferry passengers to 44-foot-long rafts, capable of carrying 20 passengers, used by the Coast Guard.
"We didn't know much about business when we got started," said the company's president, Howard L. Shure. "We made every classic mistake of a small business. We grew too rapidly. We didn't cover our overhead. We didn't set prices properly.
"We had dug a deep hole for ourselves. I had this bunker mentality that if I worked harder, we would get out of this situation, but it wasn't working. Our creditors were upset and we were close to bankruptcy."
That's when the call went out to Mr. Collard.
"In the beginning, I was very skeptical," Mr. Shure recalls. "John didn't know a thing about repairing air leaks in inflatable boats. But within a half-hour I knew he understood business and he was at the heart of our problem."
"I thought my business was unique, but John said 'All businesses are the same -- if you don't have enough sales volume coming in to cover your overhead, you're in big trouble.' "
Mr. Collard beefed up the marketing program and put in a computer system to assist in pricing and to monitor costs associated with repair jobs.
"He told me to get out of the shop and do more selling. I went on the road, calling on military and commercial customers that used inflatable boats. We bought a list from the state of everybody in Maryland that has a boat. We made a direct mailing to everyone that had inflatable boats. We visited each of my creditors -- in person -- and worked out new terms."
The result, Mr. Shure said, was "our sales jumped from $280,000 to about $500,000 almost immediately." This was in 1988. Today, he said, sales are running about $1 million a year and growing.
"We were on the brink," Mr. Shure said. "We were going down and John really pulled us out."
Even when the situation is more dire, clients say Mr. Collard lends a critical hand.
George R. "Randy" Stevens, for instance, ended up losing his business, but he credits Mr. Collard with saving his home. Mr. Stevens was a part-owner of the Help Office Supply store in Annapolis. Increased competition from such industry giants as Office Depot was killing his business.
To make matters worse, Mr. Stevens had used his home as collateral on a personal loan to fund the office supply store. There was nothing Mr. Collard could do to save the office supply store, Mr. Stevens said, but the turnaround specialist assisted an out-of-court liquidation of the business, thus saving his home.
For his role in reviving Air Works, Mr. Collard received a 51 percent interest in the company. Mr. Shure takes a philosophical approach to the price he paid to save his company.
A piece of the business
"At the time we couldn't afford to pay his consulting fee so we offered him a piece of the business. They way I see it, it is better to have 50 percent of something than 100 percent of nothing," Mr. Shure said.
Mr. Collard has taken equity interests in about 15 percent of the companies he has worked with and he said it is usually done in a move to lower his normal $250-an-hour consulting fee.
"There are times when I take less salary, if I have an interest in the company or if there's a bonus based on how successful we are," he said.
Mr. Collard is not the only business doctor making house calls these days.
The Turnaround Management Association, a national trade association based in Chicago, has about 2,000 members. Mr. Collard is vice chairman of the group and one of just 24 in his profession to have passed the association's newly implemented certification testing program.
Turnarounds & Workouts, published by the Beard Group, a Bethesda-based research firm specializing in insolvency and financially troubled companies, listed Strategic Management as one of its 12 outstanding turnaround companies for 1993.
The publication selected Strategic Management for its work in defense conversion, particularly for its efforts in transforming federal government contractors into companies able to compete new commercial markets both in the United States and abroad.
Mr. Collard, 47, went into business for himself in 1988 after his employer, Computer Sciences Corp., reorganized and offered him a transfer to Boston or California.
A graduate of Southern Illinois University with degrees in architectural engineering and financial management, he pondered his experience at Computer Sciences and Martin Marietta Corp., where he had been involved in the transition of company divisions from government to commercial markets, and came to a conclusion: What he did best was take divisions that were not doing well and turn them around.
"Once I realized that, things happened fast," he said.
"I decided in 20 minutes to start my own company. My product was taking a troubled company and turning it around and there was a market for that product." He said the majority of his clients are mid-Atlantic defense contractors or companies doing business with other parts of the federal government that have been hit hard by budget cuts in recent years.
Although he has aided several smaller businesses in the Annapolis area such as Air Works, Mr. Collard said most of the companies he works with range in size from $10 million to $75 million in annual sales.
Mr. Collard said he has worked with about 30 clients since starting his company, and annual revenues totaled about $500,000 last year. He said about 85 percent of them improved after his intervention.
"It is hard for me to say if the patient would have lived or died. Whether a company is a success or a failure depends upon the management team because they make the decisions. I might prescribe the medicine -- move them in a new direction or change something else they are doing -- but they may not take the medicine," he said.
Looking back on his experience of doctoring companies, he said the most common mistake made by clients is to deny having a problem.
"It takes a mature manager to say 'Hey, we're doing things wrong and we need to change.' This goes against people's nature.
"I can't remember how many times I have gone into an office and heard the head of the company said, 'There's my problem -- that bank.' I would say, 'No, the bank is a symptom. You have a cash flow problem.' "
He said his goal is to preserve the value in a company for its future sale. He usually works alone, but Mr. Collard said he can tap into a network of people with other skills to help a client. Another tactic is to bring in equity investors if an infusion of capital is needed to help rescue a failing company.
When Mr. Collard is called in, his preference is to take over temporarily -- about six months -- as chief executive rather than to serve as a consultant.
Not a control freak
"I like to have control. I'm not a control freak, but when I spot a problem it is easier to make the decision to solve it if I have the authority to make those decisions."
He did this with his first client, Delta Data Systems, a Columbia company that produces security computers for use by the military and other government agencies. Unlike standard computers, the Delta equipment featured special metals and screening to prevent spies outside the building from using electronic equipment to tap into the computers.
Delta had prospered but by late 1988 it was being hurt by increased competition from such giants as AT&T;, which had recently won a big contract to supply the government with the same type of computer equipment.
Robert Cross, chairman and chief executive of Delta at the time, hired Mr. Collard to help reverse a downward trend. But things did not turn out as well as they did at Air Works.
"You can't blame John," said Mr. Cross. "I think we came up with a plan that would have been quite good for the company by expanding into the systems integration business. But we were never able to fully implement it." He said Delta's parent, TeleVideo Systems Inc., in San Jose, Calif., was opposed to change and did not want to put any more money into Delta. As a result, Mr. Cross said, Delta filed for bankruptcy protection and was taken over by another company.