Setpoint Systems is a small automation manufacturing company with revenues raging from 5 million to 25 million annually. Setpoint has always been able to grow to the projects it has. We have learned to flex with the opportunity. In the new work world much of what companies’ do is through outsourcing. Setpoint had always been able to find a way to do that. The other challenge for a small manufacturing business like Setpoint is to keep the cash flowing. In today’s world it is nearly impossible to get financing if you are a small business.
I am the CFO of Setpoint and when I am not at Setpoint I am on the road training people on how to read finance. I have a book published called Financial Intelligence that outlines how to read financial statements and is representative of my training approach. I have done or am currently training companies like General Dynamics, General Motors, Metlife, Visa, Electronic Arts (EA), NBC, and Boeing.
In my experience with these large Fortune 500 companies, I have realized that the issues that these large companies deal with are very similar to the problems we face at Setpoint. One of my clients is that small company called General Electric (GE). As I was struggling at Setpoint to stay cash positive and not exceed our limited credit line on a major project, I was training at GE (I do the finance segment of their MDC, Management Development Course, at their Crotonville training campus.) As I was presenting information on the cash flow statement this last year, an attendee from GE capital talked about how she recently was unable to get funding for a $50 million credit line requested by a borrower. When she called the GE treasury department for the funds they said we are out of funds. With the commercial paper market collapsing, we do not have the liquidity to provide the funds for the credit line. As I heard this I remember thinking this sounds like the problems I am having at Setpoint trying to make payroll. Of course, we always do find a way to make payroll and GE found a way to work around the collapsing commercial paper market as successful companies do. But what was interesting to me was that our problems with cash were similar. GE has over $150 billion in revenue and Setpoint has around $10 million.
Later in that same session, another attendee said that his business was a project based business. He said that during this last year GE management required that all projects must remain cash positive. This means that customers must provide funding up front for GE projects during this same cash crunch period. As I heard this student talk about this issue, I remembered a week earlier telling my team at Setpoint that given the lack of credit out there from now on all contracts had to be completely funded by the customer. I smiled as I thought about how similar my problems were to GE. Now as GE is losing revenue, they are learning more and more how to access the contractor approach for growth just like Setpoint is.
What I have learned by working at Setpoint and watching the struggles of large Fortune 500 companies is that business is the same no matter the size. It doesn’t matter if you are the biggest company in the world or a small sole proprietor. You need to figure out how the make a profit and generate cash if you are to stay in business. GE has been doing that for nearly 100 years. At Setpoint we are approaching nearly 20 years with a lot of good years to come.