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Challenge
A general contractor, had his contractor’s license for some time, but had recently gone out on his own (2-3 years ago). He had been a Carpenter since high school and had worked in all phases of construction for twenty years from remodeling a single Master Bath, to Building customs homes. He is a meticulous craftsman and did great custom work.
He had always wanted to go into business for himself and knew he could do it; he started back in about 2003 when the market was still on an uphill climb. He quickly grew out of his garage office into a one acre lot where he parked his trucks and all the equipment. He built a nice shop and plenty of office space.
He hired several new employees including an office manager. His wife did the books and they used an accountant to handle their taxes.
His average annual gross sales for the past 3 years tracked over $3 million. But this year, business has slowed down and he found himself off track by about 15 – 20% in gross sales.
He was able to draw his salary, but he has had to dip into his credit line and has increased the limit twice. The timing on Accounts Receivables had gone from 30 – 45 days to 90 + days. He was delaying Accounts payable by 30 – 40 days, and his Net income was actually negative for the first time ever since he has been in Business
While financially things were not in proper order his prospects looked fairly good; there are a lot of bids coming in and proposals going out, he had some great projects set up for the next 18 months.
CrossBow Solution
Within the first 2-4 weeks of fact finding, we were able to put a summary and Initial Findings Report together which would be the basis for our plan of action.
It was necessary to look at every nook and cranny to save money. His profit margin had decreased substantially. We reversed this negative trend by creating savings in line item accounts to stabilize the decline and turn that around. We also decreased the level of expenses to turn the Net Income figure into positive territory.
Result
The client did not realize his Business Plan needed to be formalized but the solutions to his cash flow and accounts payable/receivable issues were found in the discovery by executing a complete financial analysis on his business from top to bottom.
He needed a Fresh Set of Eyes!
We used this process as a lesson plan to build a well thought out and formalized Business Plan which included expected increase in near term as well as longer term cost and expenses.
We included the potential risks vs. rewards of future expansion as he continues to grow his business, increase revenue as well as increase his market share in that segment of the local building market. |
