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2020 Case Study - Cherry's Industrial Equipment

Location:
Elk Grove Village, IL

2019 Revenues:
$15.5
million

Employees: 17

Critical Numbers™: Fixed Charge Coverage Ratio

Cherrys Logo

Organization Background

Cherry’s builds and sells specialized equipment used in warehouses to transfer product on and off pallets. The company, which sells primarily to Fortune 500 companies, also manufactures equipment used to clean and maintain pallets.

Challenge

When CEO John Costello made the decision to buy out his business partner after an earlier buyout of the company’s founder, he needed to leverage everything he had to make it happen. That also put enormous pressure on the company to pay down its debt—ASAP. But Costello was concerned about what his associates would do once they learned the truth. “I was scared as hell,” he says, “but I knew that I had to share the numbers.”

Solution

Use Great Game™ as a system to communicate with the associates the state of the business and engage them in helping turn the company’s financial fortunes around while paying down its debt.

Results 

Cherry’s celebrated two years of playing The Great Game of Business® (GGOB)—and one primary result is that the company’s forecasts are now predictable and accurate. Unlike the old days, when information was passed from the top down, inaccuracies today are questioned and discussed in huddles. Corrections are then made and communicated the same day to the team. That’s helped the team map work more efficiently together, which has helped drive sales to record levels and net profit to soar. That’s helped the company make a serious dent in its long-term debt, to the point where Costello is hopeful that the company can pay off its remaining notes in 2020. “One thing that has been consistent from the very beginning is the level of employee engagement and the positive, uplifting vibe during each of our huddles,” says Costello. We continue to invest in The Great Game of Business because it provides financial literacy for all employees, great transparency, and visibility. It just works.”


“The company culture is night and day compared to before we started playing the game. Employees are immensely more engaged, informed, and financially literate. Everyone looks forward to our weekly huddles, not only to see where the company is but also for the social interaction that takes place. People have gone from focusing on their everyday tasks to a ‘what can I do to help the company’ attitude.”

~ Herb Taylor, Director of Sales & Marketing


Spotlight on the Pandemic

March 2020 wasn’t the best month for Cherry’s—or for Costello. He, along with his wife and son, contracted the corona virus. Then, so did several of his employees. That forced the business to close for several weeks so it could be cleaned. The good news is that everyone recovered, and the business was able to reopen with social distancing rules in place. That included holding weekly huddles virtually. “Employees are energetic, forecasts are accurate, and people are excited to see and talk to their co-workers working remotely,” says Costello. Business is also booming, as demand for Cherry’s products remains high. That said, Costello made the decision to scale back on additional principal payments on their debt in 2020 to help preserve cash until the recovery begins in earnest. What helps is that prior to the pandemic, Cherry’s had prepared for a downturn in 2020 by setting aside some $400,000 as a safety net.

MiniGame™ Spotlight

Back in June 2019, the Cherry’s operations team noticed a recent surge in warranty claims on new equipment that was both a point of friction with customers and an unexpected bump in costs to cost of goods sold (COGS). The operations team identified that most of warranty claims were related to nuisance calls for loose hoses, fittings, electrical connections, safety devices or startup problems. But servicing these minor claims was expensive. So, the team created a MiniGame they called “Bank It” whose goal was to track the production and shipment of 25 machines and focus on better quality control and testing. The result of the game was a savings of over $5,000 and a process change that continues to reap lasting benefits even today.


“The game has had a positive effect on the culture here at Cherry's. Everyone has a more supportive attitude and more willingness to help out their fellow employee.”

~ Alex Vargas, Technician


What’s Next

Costello says Cherry’s is a remarkably different company today than it was when they started their GGOB journey. “Two years ago, we would have been in serious trouble,” says Costello. “I think people would have rallied to the cause, but now they already know what they need to do to take action. There is safety in everyone knowing the numbers. If things start going down, we know exactly what we need to do to fix them. I feel so sorry for the business owner who keeps secrets to themselves. It’s so empowering now that our whole team knows the numbers rather than just me or our accountant.” In the coming year, Costello plans on continuing to invest in his team’s understanding of their business by doubling down on open-book management. “The greatest decision that we have made as an organization was initially to get in The Game,” says Costello, “and now we hope to be considered as the best of the best in playing The Game.”


“GGOB has helped me come into a new company and really know where the company stands financially. This is a nice perk. I like that I can trust upper management.”

~ John Peiffer, Sales & Marketing