Case Study: Designing the Exit for a Construction Company

The Situation

The owner of a substantial construction company was at the age where he was deciding when and how to exit his business.  He was torn between leaving the business to his son, and selling the business.  If he were going to leave the business to his son, he wanted to fix it up so it would last his son a long time.

With the intent of working out what his best strategy was, he hired The Exit Eagle to come in as General Manager and get the business ready to either sell or transition to his son.

Known Problems

Coming into the situation, the known problems were:

  1. Revenues were falling.
  2. The son had a learning disability that interfered with his ability to do calculations and read print.

Could these issues be gotten around?

Discovered Problems

The first thing The Exit Eagle started to investigate was the bookkeeping.  The bookkeeper of this business had been with the company for several years; it was astonishing what an excellent job she did of tracking contracts, contract payments, and managing Receivables and Payables.  However, the accounting system wasn’t used to track estimates, inventory, and bids; nor expenses against accepted bids and payments.  Indeed, million dollar jobs were still bid by pencil scratchings on loose-leaf notebook paper.

The first order of business, then, was to upgrade QuickBooks to the construction version, enter inventory, and customize the estimating features to the needs of the company.  The son’s best friend was hired to learn the estimating job from the soon-ready-to-retire foreman who had done the bidding for years and years.

Action was taken to replace the foreman’s supervisory responsibilities. There were some real challenges here; the company typically hired from homeless shelters and halfway houses, and wasn’t pre-disposed to changing that.

To complicate matters further, the son had an addiction issue, and demonstrated poor judgment making regarding safety of the workers.  Nor was he well-suited to pursuing new clients.

Discussions with the son and father revealed that the deep desire of the son’s heart was to move to Colorado and operate a chicken farm.  He actually was already raising chickens in their suburban Connecticut home; and had interned out west.  He really wanted to move there.  In truth, the father (and mother) were attracted to this idea, too.

All of this considered, it was decided that the business could not be managed “as is” by the son.

Meanwhile, based on industry research and interviews with experts and other practitioners in the industry, a strategic plan was developed for bringing the business current with industry standards.  The owner was the second owner of this 30+ year-old business, and had owned it for about 25 years.  The work was still being done the same way as it was when he bought the business, even though the technologies and design standards had gone through multiple transitions in that time frame.  Therefore, upgrading the business would not only involve changing operations, materials used, but also progressing to computer technology-driven applications that would require a completely different type of employee than currently working in the business.  In other words, it would require significant capital expenditures and would hold not place for the son.

Recovering the investment alone would wipe out the profit from an outright sale of the business; and the business was so far behind in technologies and practices that running the business out, as is, would bring greater profit than selling it.

The Solution

The family determined that the best alternative for the father was to run the business out “as is.”  The son did not want to move out west until his parents were ready to go with him.  In the meantime, the son wanted to be more than just another worker.

Fortunately, during the research phase, a new technology introduction of a much smaller scale had also been identified.  In fact, a business could be built around this troubleshooting technology that could capitalize on the customer list/ relationships that had been built by the father over the last 28 years.  This less complicated technology was packaged into a preventative maintenance subscription service (with recurring revenues) that could be carried out by the owner’s son and his best friend, with a little help from an administrative reader.  We packaged the offering, sent the young men to training, and a new revenue stream was born, with the son managing it.