Knowlton — the oldest, continuously operating paper mill in the United States — was poised for bankruptcy in 2003, explains Ronald Castor, a partner at JC Jones.

Several factors contributed to the 200-year-old firm’s declining revenue, Castor explains. First, in June 2002, an explosion in the manufacturing plant killed one employee and destroyed 40 percent of the facility, he says.

While the firm owned commercial-property policies from two tier-one insurance carriers, one company refused to reimburse Knowlton while the other limited its payout to a negligible amount, Castor contends.

The blast caused a $2 million loss in annual revenue.

The second factor contributing to Knowlton’s troubles was the stagnant economy of the early 2000s and an industry-wide slump in paper sales.

Third, two unnecessary, external plants burdened the company’s production. Management was distracted from its core business while figuring out how to use these facilities, Castor says.

JC Jones employs 12 full-time and 11 part-time employees. While the firm is based in the Rochester area, two turnaround-management specialists work from their homes in the Syracuse area, Castor explains. They are John J. Bellardini and Matthew C. Lumia.

Lumia, who was actively involved in Knowlton’s turnaround, says he is currently working with the management teams at about a dozen distressed companies in Central New York. For confidentiality reasons, he won’t name the firms, but says they are mainly in the manufacturing, distribution, and construction industries.

Most referrals come from banks interested in recouping their outstanding loans, Lumia says. M&T selected three turnaround-management firms as candidates for the Knowlton project and JC Jones won the bid, Castor says.

JC Jones assigned two specialists, including Castor to the case. The firm charges a daily fee for its services depending on project scope.

In 2003, JC Jones set out to fix issues with four items it saw as the source of Knowlton’s problems — core operations, cash flow, personnel, and customers.

JC Jones’s advice to Knowlton included recommending it sell off-site locations, update its products to eliminate variances, increase its prices, and lay off and replace some employees.

Knowlton once employed 130, and now has a 100-person staff. Knowlton returned to profitability in 2004 and 2005. In addition to his leadership at UNYTMA, Fiegel is also an auctioneer and appraiser with Michael Fox International, Inc., where he has experience with ailing businesses that, unlike Knowlton, do not make a comeback.

Fiegel’s firm provided auctioneering services during the shuttering of part or all of the business operations at Carrier Corp., Rome Wire & Cable, and Telergy, Inc., he says.

Fiegel says he helps a defunct business sell off its manufacturing equipment to pay off some of its debt. Often, he works on behalf of the U.S. Bankruptcy Court.

“There are some businesses that have run their course,” Fiegel says of some of the firms with which he has worked. He attributes the failure of some manufacturers in Central New York to an increasingly unfriendly business environment in the state due to higher taxes and more stringent regulations.

“All these … increase overhead and the cost to comply with all the requirements,” he says.

During his years of dealing with businesses that have failed, Fiegel noticed similarities in many of the downfalls.

First, businesses often succumb to “silver-spoon syndrome,” he says. Company founders pass the family business to a second generation whose work ethic and business savvy leaves something to be desired, Fiegel contends.

“The parents are down in West Palm Beach, and the kids tell them the business is doing great. Meanwhile junior is out burning money … the business is crumbling around him, while he’s out playing golf,” Fiegel quips.

The second mistake businesses make is failing to diversify their customer base, Fiegel argues.

With increasing overseas competition, manufacturers cannot afford to base their entire business on one or two clients who may choose to shop elsewhere at any time.

“If your top five customers [make up] 50 percent of your sales, you’re in trouble if they go out of business [or change vendors],” Fiegel says. “Even if everything is wonderful one day, when you lose that key account, it’s enough to take you from profitability to losing money.”

The third important pointer Fiegel has for manufacturers is the need to update their products with the times, he says. Companies that ensure that their products match or exceed competitors and identify changes before they become the norm, have an advantage over firms that react to what others are doing, Fiegel argues.

UNYTMA has 70 members and an annual budget of about $125,000. Nationally, the Turnaround Management Association claims more than 7,000 members and has an approximately $4 million annual budget, Fiegel says.