Established in 1989, this family-run business is a leader in the provision of sheet metal roofing and plumbing requirements in the Newcastle and Hunter region. The operation has completed over 2,000 roofing projects and has a strong reputation and relationship with customers and leading suppliers.
Their goal is to let you see the quality in service through experienced tradesmen, quality materials and solution-driven advice based on many years’ experience. The have a long running commitment to delivering only the best commercial, industrial and residential roofing solutions and are consistently focused on ensuring “every job is our best work and delivered on time”.
The owner established the business in 1989 and growth over the first years was strong, based on a good understanding of the industry and the use of metal sheeting as an increasingly attractive option for commercial, industrial and residential uses.
The owner is a qualified plumber with skills developed when learning a trade meant really understanding all aspects and being able to translate that knowledge to serve your customers. Coupled with a traditional plumbing business, the owner developed a reputation for delivering quality products for the projects they delivered.
For more than 20 years, the business operated profitably allowing its owner to build a solid financial position. From the mid 2000’s, business conditions began to deteriorate in the construction sector in the region. The fundamentals of business profitability were impacted by a lot of competition from ‘cowboy’ small businesses.
By 2012-13, the modest profits that existed had been eroded to the point where financial results were operating losses. The economic situation was characterised by a number of competitors winning work at unprofitable rates and building companies using these businesses until they went bust, then moving to the next one.
For two years, the situation existed with significant losses and serious cash flow problems caused by non or late payment for work completed. More than $300k was injected into the business just to stay afloat. In early 2015, a member of the BSPA team was told that the owner was looking for help, but was not sure if he would stay in business given the last two years.
In April 2015, a Business Diagnostic showed more than $260k of potential profit leakage and more than $100k in one-off cash recovery). BSPA was engaged to help improve the profits, growth and value of the business.
A strategic plan was developed focusing on who was the ideal client and an unrelenting approach to collection of payments for work completed. In May 2015, a market opportunity became available to complete a major commercial building development. Given the financial circumstances and the risks, our consultant worked with the owner on the strategic approach to the client and getting the project “across the line”.
By partnering with others to ensure the timely delivery of the project, whilst not jeopardising the capability to service its existing client base, securing this project provided a cash injection fundamental to ensuring the operations of the business for the next four months.
The strategic plan whilst focused on securing the short-term business objectives, was targeted at returning the cash injected by the owner as early as possible and making it enjoyable for the owner to go to work.
The initial “quick wins” proved very effective, focusing on eliminating the overdue debtors and not creating more. Avoiding the ‘builder’ sector of the market where payments have previously been slow or subject to write-offs and litigation was a key factor.
Almost immediately improvements followed, with Year-To-Date profit lifting from loss at the end April 2015 (after 10 months) to moderate positive profit by the end of June 2015 (12 months). The focus on overdue debtors resulted in an immediate injection of cash in excess of $50k within three months.
The establishment of a strategy to secure industrial and commercial clients and limit exposure to the builder/residential market has seen an increase in the job size and a corresponding decrease in the amount of cash overdue for payment. Payment of cash was able to be made in within eight months to the owner to recover 50% of the cash injected over the previous two years, without impacting the ongoing cash management of the business.
The focused and strategic approach to operating the business and building discipline in who the business worked with, resulted in a strong cash generation. Underlying profitability of the business returned markedly, with operating profit prior to abnormal items increasing by more than $400k compared to the previous year.
Having established a discipline of reviewing the financial performance of the business, a coordinated review was able to be facilitated with the business accountant to ensure an appropriate approach to tax was taken. This resulted in positive tax effective strategies being identified.
A major consequence of the return to profitability has been the return of cash injected and an improvement in the balance sheet repair commencing in the year. The business is now stable and secured for a sustained return to profitable operations.
The implementation of the Business Success Program with a structured approach to business improvement was the foundation. The business diagnostic identified a number of important areas requiring early attention, including:
The major outcomes of the program to date have been widespread and significant:
The business is now positioned to maintain its productivity and build the capability to be operated by a manager without the approval of the business owner. The next few years will see the transition from working in the business and doing, to overseeing the operation.