Running head: MANAGING GROWTH ASSIGNMENT
Managing Growth Assignment
Name of the Student
FIN/571
Date
Faculty Name
1
MANAGING GROWTH ASSIGNMENT
2
Managing Growth Assignment
Abstract:
This paper will analyze the processes and phases involved in the journey of Sunflower
Nutraceuticals’ (SNC) company to increase their growth, revenue and working capital in the
coming decade. This paper will also discuss some of the additional points like:
The different phases through which SNC’s will pass to become a market outperformer
How all the phases will affect the working capital and growth of SNC?
And also, how the problem of limited financing affects SNC operations and guidance in the
future
Overview
This section will describe the operations of Sunflower Nutraceuticals (SNC) in detail. SNC is a
privately owned distributor company that provides different dietary based supplements and
tablets to individuals, private firms, small local distributors and retail shops across the country.
The company is a well reputed one that is functionally involved in production of different kinds
of medicinal herbs, minerals and vitamins which acts as a dietary supplement to those who lacks
essential vitamins and minerals in their body system. They are the leading and most sought after
manufacturer of nutraceuticals products for woman of all ages (Harvard Business Publishing,
2012). SNC first started its full-fledged operations in the year 2006 and have been continuously
growing in both operational terms as well as on expansion front. The management is keen on
opening new retail outlets which allows them to introduce the newly developed brands belonging
to different categories such as sports drinks and women special metabolism boosting health
powders.
MANAGING GROWTH ASSIGNMENT
3
SNC has lost out a bit in this fast competitive environment and have even taken a huge
debt of $3, 20,000 to meet financial and operational needs. It got many opportunities to become
one of the leading distributors in nutraceuticals industries but due to industry history and the high
risk business model, the management failed to garner enough funds to grow and expand. “They
have a very restrictive financing option which limits their ability to expand and explore new
business opportunities to approximately to 12%.”(Harvard Business Publishing, 2012)
Phases:
SNC Phase 1 (Tenure 2+ years: mid 2013 – 2015 ends)
SNC phase 1 is meant to identify different areas of opportunities and improvements required to
achieve higher growth and accelerate the operations. Some of the areas where improvement and
opportunity lies are listed below:

Analyze all the products and discontinue those which are under- performing – the
company deals with many products which are either very popular with the clients or are
very slow moving. Almost a 100 products are there which can be categorized in the slow
moving products and the company needs to shell out those as soon as possible. The
products are liability on the company and stopping their production in the future will help
the company to decrease its DSI to 87 days and also the EBITA by almost $65,000. This
will also create a pressure on the sales figures and the sales will drop by almost $1
million but removing these products from the production line up will ultimately create
room for those products which have been popular with the customers and are fastmoving. This will also help SNC to rationalize its SKU counts.
MANAGING GROWTH ASSIGNMENT

4
Leveraging Supplier Discount – There are various clients lined up for the company
which will boost the sales and the revenue for SNC. Atlantic Wellness is one such
collaborator which will basically collaborate on the nutraceutical product line which has
the potential to boost the sales by up to $2 million. Also, one more company “Ayurveda
Naturals’ is offering a new contract which if utilized properly can lower the AP and
increase the revenues. The company will offer a favorable payment term of 2/30 with a
net gain of 60. There is also a provision of additional 2% discount if the payment is made
within 30 days.

Tighten Accounts Receivable – There are several companies which are paying their
payments to SNC after the 90 days average time period. Not all the companies are huge
customers for SNC and so there is not much impact here. The biggest customer of SNC
in these criteria is the Super Sports Centers which accounts for almost 20% of the SNC’s
annual sales. This company is paying their dues after 90 day average and sometimes even
takes more than 200-days to complete the payment. Removing or dropping Super Sports
Center will decrease the annual revenue of the company by almost $2 million but it will
increase the DSO of the company.

New Customer building opportunity which will also include new clients and increase
exposure –The health food giant Atlantic Wellness is a major industry oriented player in
the US markets and acquiring it will mean a host of benefits for SNC. The clients and the
products of Atlantic Wellness can be incorporated in the daily operations of SNC which
will improve the EBITA by more than $260,000 and the annual sales figures to almost $4
million. This will have a huge impact on the growth and bottom-line for the company and
will be a huge boost for further acquisitions. There will be a major improvement in the
MANAGING GROWTH ASSIGNMENT
5
sales figures and EBITA of the company but the net working capital and the profit will
have slight to zero impact. Also, increased demands from new clients will put a lot of
pressure on the inventory and can result in higher AR period. For daily operational
expenses, SNC must keep a minimum balance of $300,000 on hand and higher inventory
and R period will affect the daily operational processes for the company in a negative
way. Acquiring “Ayurveda Naturals” will significantly help them to balance out their
inventory and AR period with proper guidance and management
SNC’s Phase 2- (Tenure 2 Years from 2016- end 2018)
In this phase of operations, SNC has three opportunities that can take the company to a newer
dimension by providing accelerated growth.

The overwhelming and overhauling Online Presence – Today is the world for online
digital marketing and without it I don’t think that any company would survive for
long. Online market and expansion will provide SNC an opportunity to reach to
newer customers and retail markets easily and in a better turnaround time. Online
digital presence will provide a diversified customer base for SNC and in the future it
can also collaborate and create a business alliance with Golden Years Nutraceuticals
– the online giant of this business, which has larger, and more diverse customer base
at hands. There are several benefits of forging this alliance as it will reduce SNC’s
DSO by a margin of 2-3 days as online sales are faster and the production to dispatch
time of online retailing is usually two- three days as compared to seven days
turnaround time for traditional production processes. Golden Years has also shown a
significant rise in the sales generated from a period of 2016-2018 and this could be
MANAGING GROWTH ASSIGNMENT
6
beneficial as it will help SNC to improve their annual sales figure without impacting
the company’s stock of working capital and operational expenses.

Expanding Distributions channels to bigger and better domain – There are several
big- box distributors which are ready to take as much inventory pressures from big
manufacturers. SNC should try to involve one of these distributors to potentially
reach to almost the entire world and increase their sales and revenue. Mega-Mart is
one such big-box distributor and a strategic alliance with this company will make
SNC products globally available to almost every country and that in turn will increase
the sales and revenue in 2016-2018. Now, engaging a big box distributor will impact
the profit margins of the company and in SNC case, it will decrease it to 6.84% from
the current 7.5%, but it will help to improve SNC’s DSO, as their bills will be paid on
time.

Importance of developing a product which is privately labeled – CSNC should try to
develop a wholly subsidized private label product that can be sold without any
regulations as such. Fountain of Youth Spas is a major private label developing
company and SNC must collaborate with it in order to develop their special private
label nutraceutical products line which will impact the sales and boost it as the
customer base will widen due to more and more collaborations with private online
and non-online businesses. According to estimates we can say that in 2016-18 time
gaps, SNC will increase its operational margins by 2.2% together with improving its
processing capacities, DSI, dispatch systems and DSO. Effectively we can say that
this collaboration will increase the EBITA and operational margins for the company
at a cost of additional pressures from higher accounts receivable cost.
MANAGING GROWTH ASSIGNMENT
7
SNC’s Phase 3- (Tenure 2 Years from 2019-21)
SNC has many opportunities to expand and grow in phase 3 but I will only explain two of the
strategies that are viable and more profitable for the company in the longer run:

Good Management decisions- Strategies to expand globally –
Viva Familia the new partner cum distributor for SNC is a Latin America based company
which will drive growth for the company in those untapped potential economies of the
world. Viva Familia is a distributor company and will look after all the necessary
processes involved in proper and timely delivery of products and will look after any
delivery based charges in Latin America Region. The collaboration with Viva Familia
will decrease SNC’s DSO by almost 2 days which is a major boost for the company’s
bottom-line. It will also help the company to increase its annual sales by 2.5% at current
operational margins on the expense of an extra 2 days in DSI.
Different Supplier Credit Terms must be standardized and renegotiated –
The various suppliers and their credit lending terms needs to be standardized and
regulated as quickly as possible for better year end performance of the company. SNC
used its prime China Based Dynasty Enterprises as a reference for good regulation of
credit terms because it was one of the most important and financially stable vendors of
the company. Similar credit lending terms needs to be negotiated with other smaller and
bigger vendors to ensure transparency in the account books. Other vendors need to be
negotiated on a cost of 2/10 with a net of 30 as the china based Dynasty Industries was
doing for a long time. This reduces SNC’s costs of sales by $200,000 and their AR by
$817,000.
MANAGING GROWTH ASSIGNMENT
8
Simulation's Final Matrices Results
Final Metrics Results (Figures Reflect 2013-2021):

EBIT (An Increase of 600%):
Figure went from $440 to $3,080,

Sales (An Increase of 213%):
Figure went from $10,000 to $31,340

Net Income (An Increase of 986%):
Figure went from $156 to $1,694

Total Firm Value (60% Increase):
Figure went from $3,248 to $5,209

Free Cash Flow (An Increase of 599%):
Figure went from $264 to $1,847
Effects of Limited Access to Financing
Entrepreneurial startups are based on vision and often these startups tends to go down
very quickly because of crunch in financial acquisitions and funds, they suddenly want to expand
and they don’t have enough cash and asset to do so. This is due to the fact that these startups are
at a high risk of failure and often does not get the support of industry majors. Limited or very
small access to financing have severe damaging effects on startups and other companies and
some are listed here:
1.
If someone approves finance for these companies, they have to pay huge interest and
lending rates to the brokers involved.
2. Such startups are force to comply with the unnecessary, costly entry and exit procedures
(Parrino, Kidwell, & Bates, 2012).
MANAGING GROWTH ASSIGNMENT
9
3. One time funding is not the solution for every acquisitions and further expansion for a
startup based business. These companies ultimately face the heat of global pressure and
ends up with slow performance and growth. Customer base depletes and the company
sometimes even goes bankrupt.
4.
Intellectual property rights in today’s world are huge and very critical as well as costly.
Company’s fights for patent rights and a less financially stable company will end up
losing their own intellectual rights and the ability to claim product uniqueness.
Conclusion
This paper dealt with several important points regarding managing of working capital and the
impact of proper financing and management strategies on the growth of a company. The
simulation was really helpful for students to learn to manage capital and processes within a
company. There are various hands on experience in this simulation on different sets of
challenges faced by new entrepreneurs and businessman. The lack of finance and its effect is also
clearly explained in this simulation assignment which will be definitely useful for future startups.
MANAGING GROWTH ASSIGNMENT
10
References
Harvard Business Publishing. (2012). Working capital simulation: managing growth. Retrieved
December 9, 2013 from, http://forio.com/simulate/harvard/workingcapital/simulation/?#page=dashboard.
Parrino, R., Kidwell, D. S, & Bates, T. W. (2012). Fundamentals of corporate finance (2nd ed).
Hoboken, NJ: Wiley. Retrieved December 9, 2013 from, FIN/571 Foundations of
Corporate Finance student website at the University of Phoenix (UOPX).