The Second-chance Man

July 04, 1994|By Ted Shelsby | Ted Shelsby,Sun Staff Writer

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.

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