Out of Court Restructuring

Situation

A $50MM construction contractor in Nevada found itself in need of corporate renewal. The enterprise faced challenges related to revenue collection, accurate accounts receivable and inadequate visibility into the financial performance of the company.

The company had four key product divisions – concrete, framing, stucco, and steel. A co-owner of the steel division suffered health issues and had to step back from his responsibilities, hindering efforts to keep financial reporting on track. Though work opportunities flowed in, a lack of organization and structure in periods of growth contributed to disorganization and insufficient cash-flow management.

After shareholder capital contributions of over $2MM and a failed attempt at restructuring by employing a less capable consulting firm, management at the contractor company knew they needed to utilize a firm with more experience and proven tactics for success.

Strategy

Resolute immediately jumped into action, deploying multiple team members on-site to fully dig in and diagnose the challenges this company was facing. It quickly became obvious that the accounting group lacked the resources to monitor and report on revenue, working capital, cost of goods sold, or any margins and ratios. Without this information it was impossible to produce bids for work that addressed key challenges like rising labor costs and inflation, as well as project-specific or divisional budgets and profitability benchmarks.

The first strategy was addressing significant turnover that had taken place, including controller, assistant controller, accounts receivable supervisor. Senior Managing Director Nate Curtis served as CRO for the company while creating a solutions plan to quickly staff key vacancies. The enterprise went from 100% G&A turnover to four months in a row without any resignations.

To address operational issues related to cash flow, Resolute worked to create crucial documents related to sound fiscal planning, including yearly budgets and established a budget processes. Consistent data entry protocols were addressed, drastically reducing projects with inconsistent job codes in the accounting system to enable more accurate and timely invoices to be submitted to clients.

The steel division of the company had particularly struggled with a lack of active leadership. Resolute worked with middle management to empower their restructuring efforts. To enable a thriving department, specific accounting software and staffing was dedicated solely to the steel division.

Operational structure was a key area to reducing inefficient managerial placement. Workgroups typically experience declines in productivity and increases in error rates when having to manage too many direct reports. Resolute worked with management to create a growth plan for how to properly evolve and staff management in all four of their product divisions.

Result

Change happened swiftly after Resolute’s involvement. Within the first month of our engagement, the average invoiced revenue per day increased by over 1400% — allowing critical cash flow to finally begin flowing. Shareholder capital contributions were no longer necessary and the company has been cash-flow positive since Resolute’s intervention.

Resolute implemented a fully functional accounting system for the company within the first 60 days of our engagement, segmented by product division. With changes to the constructions company’s operational and cash flow challenges, the yearly budget’s anticipates revenue growth of over 60% and gross profit increase of over 200%.

The company is finally poised to rise above the challenges faced from their rapid growth and continue as a viable enterprise in the future.