Case Study #1
STATUS OF COMPANY BEFORE BLUESTEIN, MICHAEL & CO.:
A Philadelphia area specialty contractor had negative equity in excess of $500,000 and was consistently losing money from year-to-year. Operations were not running smoothly, jobs were not being managed properly, and a faulty computer system was not giving ownership the correct information. Vendors were constantly pressuring the company for payment and the owners were ready to call a bankruptcy attorney.
When the owners told their bonding company they planned to file for bankruptcy, the bonding agent told them to contact Bluestein, Michael & Company before calling the bankruptcy lawyer. Hal Bluestein and Jeff Michael went to the contractor’s corporate headquarters to talk to the owners, review internal financial reports, and discuss internal operations with company owners and select employees.
BLUESTEIN, MICHAEL & CO.’S PLAN:
After gathering all the information, Bluestein, Michael & Company came up with a plan with three major parts:
1) Focusing on more profitable job categories – The contractor had a variety of types of jobs, some of which were managed poorly, therefore not as profitable as they should be. After gathering data and personnel information, Hal and Jeff used their industry knowledge and experience to determine that the contractor did not have the correct staff to manage certain types of jobs. Hal and Jeff recommended staffing changes, elimination of an unprofitable cost center, and a focus on smaller jobs with a higher gross profit margin that the restructured staff would be equipped to manage.
2) Approaching vendors – Bluestein, Michael & Company devised a two part payment plan with ten key vendors a) repay the existing accounts payable balance in equal monthly installments over three years; b) these key vendors extended 30 day credit terms on new purchases. This provided the contractor extra working capital, fewer collection calls from vendors, and improved cash flow.
3) Changing the internal operations – Bluestein, Michael & Company scrapped the existing computer system and implemented a new construction oriented software program to better help the owners manage the jobs and the company.
STATUS OF COMPANY AFTER BLUESTEIN, MICHAEL & CO.:
Within one year of implementing Bluestein, Michael & Company’s plan, the contractor became profitable. Equity went from negative to positive in 2.5 years, the ten vendors were repaid early, and within five years the company was offered a sales price in excess of $4,000,000. The contractor did not sell more than a decade ago, and is still operating profitably with a great reputation in their field.