Success Story

Reducing debt and booking family holidays

For many businesses, reducing debt is the first step that needs to be taken on the way to success. Read how Graeme helped this business to reduce their debt so that they could move forward and achieve bigger and better things. 

Established more than 25 years ago, this leader in the provision of sheet metal roofing and plumbing requirements in Newcastle and the Hunter region saw strong growth when the business first started before things began to change for the worse. For many years, the business operated profitably allowing its owner to secure a modest income. However, from the mid-2000s, business conditions began to deteriorate in the construction sector in the Newcastle region. The profitability of the business was impacted by strong competition when independent smaller’ businesses began trading.

By early 2013, the 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 from building companies at unprofitable rates and eventually going bust with the building companies just moving on to the next.

For two years, the pain continued with losses of more than $250k and serious cash flow problems caused by non or late payment for work completed. More than $900k was injected into the business just to stay afloat.

In April 2015 a ‘business diagnostic’ assessment of the business showed more than $260k of potential profit leakage and more than $100k in one-off cash recovery. Graeme began working with the business to help improve profits, growth and value of the business.

A strategic plan was developed focusing on defining the ideal client and an unrelenting approach to collection of payments for work completed and reducing debt. In May 2015, a market opportunity became available to complete a major commercial building development. Given the financial circumstances and the risks, Graeme worked with the owner on the strategic approach to the client and getting the project ‘across the line’. Partnering with another roofing company to ensure the timely delivery of the project (whilst not jeopardising the capability to service its existing client base), they secured the project which provided a cash injection instrumental to ensuring the operations of the business.

The problem:

  • Operating losses
  • Increasing debt
  • Overdue payments
  • Stress
  • Unable to take time away for family activities

The solution:

  • Developing a strategic approach to operating the business
  • Eliminating the overdue debtors
  • Reducing debt
  • Avoiding the sector of the market where payments are slow or subject to write-offs and litigation
  • Establishing a strategy to secure industrial and commercial clients
  • Building discipline for reviewing the financial performance of the business
  • Coordinating a review with the business accountant to ensure an appropriate approach to tax was taken

The results:

  • Almost immediately profit lifted from loss at the end April 2015 to $70k+ by the end of June 2015.
  • The focus on overdue debtors resulted in an immediate injection of cash of more than $50k within three months.
  • New ideal client focus resulted in an increase in the job size and a corresponding decrease in the amount of cash overdue for payment.
  • Payment of $200k cash was able to be made nine months after starting the strategic plan (allowing the owner to recover 40% of the cash injected over the previous two years), without impacting the ongoing management of the business.
  • Business profitability increased by more than 500%
  • Capability to take break from business for family holidays
  • Significant reduction in stress as the call for cash has been eliminated
  • The business is now positioned to maintain its productivity and build the capability to be operated by a manager without the  business owner. The next few years will see the transition from working in the business to overseeing operations.

If you’d like to speak to Graeme about how he can help you with reducing debt in your business, get in touch here.

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