Manufacturing Firm Cost Structure Optimization
The Problem
A family-owned manufacturing company with $12M in annual revenue had seen margins decline for three consecutive years. They lacked granular cost tracking and didn’t fully understand product-level profitability. The internal controller managed day-to-day accounting but couldn’t dedicate time to strategic financial analysis.
Leadership wanted to regain profitability but feared making cuts that could hurt growth.
The Solution
We stepped in as fractional CFO, working alongside their existing accounting team to:
- Implement job costing in their ERP system, capturing direct and indirect costs per product line.
- Develop a product profitability analysis that revealed two SKUs with negative margins due to underpriced contracts.
- Lead renegotiations with those customers, increasing prices by 18% while preserving relationships.
- Identify $450K in annual savings through process improvements and vendor consolidation.
Within six months, gross margins improved by 7 percentage points, adding over $800K to annual profit.
“We finally understand which products drive our bottom line. The changes we made paid for the CFO engagement in less than a quarter.”
Conclusion
By focusing on profitability analysis and cost optimization, the business reversed a three-year decline in margins and set a foundation for scalable growth.