Revitalizing Success: A Construction Company's Journey Through Financial Transformation

Business transitions can be both challenging and transformative. One of our most impactful engagements involved helping a construction company navigate an ownership and management shift from the founders to the second generation.

The 300-employee company found itself at a critical juncture as it grappled with the ownership transition. A breached loan covenant had triggered concerns at the lending bank, prompting the need for outside help. We were enlisted to investigate the cause behind the covenant breach and enhance financial reporting for a smoother collaboration with the bank in restructuring the loan.

We quickly determined that while the second-generation exuded confidence, they lacked the expertise needed to run the business without continued guidance from the founders. This was further compounded by a CFO who, though confident, was in over their head. We found numerous accounting inaccuracies which significantly overstated profitability over the previous 2.5 years.

With the problems identified, the group embarked on a comprehensive journey towards the future. The first order of business was rectifying and restating financials accurately. A robust financial reporting system was implemented, instilling a newfound clarity crucial for effective decision-making.

After financial controls and processes were implemented, we were able to identify potential CFO candidates from our extensive network. The selected candidate not only brought competence but also seamlessly integrated with the company, earning the trust and approval of the leadership.

The financial overhaul didn't stop at rectifying errors; it also uncovered hidden opportunities for the company. Unutilized vendor discounts amounting to $300,000 were discovered, providing an immediate boost to the company's liquidity. Moreover, overlooked tax incentives and planning opportunities worth $1.5 million were identified and capitalized on.

The final, and perhaps proudest, achievement of the process was the fixing of a misaligned bonus structure for managers. With incentives better aligned with the company's strategic goals the company saw a 10% increase in labor utilization.  

Ultimately, the transformation yielded tangible results. With a revitalized financial foundation, the company successfully restructured its debt, instilling confidence in the lending bank about the company’s ability to meet debt-service obligations. The ownership transfer from the first to the second generation, once fraught with uncertainty, became a reality, paving the way for sustained success.

This client experience serves as a compelling narrative of how strategic financial management and expert guidance can turn the tide for a company in transition. In the face of adversity, the construction company emerged stronger, more resilient, and poised for a future shaped by informed decision-making and sustainable financial practices.