Union Electrical Contracting Company (Texas)

Overview

Two partners, each with over 20 years of experience in electrical contracting and distribution, purchased a union electrical contracting company. The majority (80%) of the company’s customers are government and commercial entities. Despite being good friends and having an excellent reputation in the industry, the business was on its way to having a net loss of over $400,000 and the owners had not taken a paycheck in a year.

Challenges

Even though the two partners were good friends, there was a severe lack of communication between them. One partner was constantly fighting fires while the other was waiting to be told what to do. Sales were off by 40% and the business was in a constant state of crisis. Controls were not in place to manage the cash, the line of credit was maxed out, and the quality of services performed dropped severely, causing a large amount of unprofitable rework.

Solution

Upon review of the financial statements, we divided each partner’s responsibilities by line item; creating clarity of each owners accountabilities.

Key Performance Indicators (KPIs) were implemented to manage the critical areas of the company. A companywide communication plan eliminated ambiguity between the partners and all departments in the company. Daily Cash Management meetings were implemented to ensure that A/R collections and purchasing were in alignment.

Results

The company is now profitable and growing. Within 60 days, the client collected 90% of accounts receivable that had aged beyond 120 days, providing a badly needed infusion of cash. After two years, the company has grown 214% and is realizing a net profit of 12%.