Welcome to the third story in our series, "Business Struggles and Solutions," where we explore the common challenges faced by small to medium-sized business owners and offer practical solutions through the lens of a fractional CFO advisor. Our goal is to provide insightful and relatable scenarios that demonstrate how you can overcome these challenges and streamline your business operations.
A few months ago, we met Jeff, the owner of a large construction business. From the outside, it seemed like he had everything together. His company was growing at an impressive rate of 20% year after year. New projects were coming in, and with the growth came a larger team to manage the increasing volume. Things looked great on the surface. But something wasn’t right.
Despite the growing sales and the expanding staff, Jeff was constantly struggling to make payroll. Each month was a scramble. He couldn’t figure out why, and neither could his team. His company was generating plenty of business, but there was barely any cash left at the end of the month. So, we took a deep dive into his numbers. It didn’t take long to spot the problem.
The Real Issue: High Costs, Low Profit
Jeff's company was making around $15,000 per job, but he was spending nearly 80% of that just to service the work. Between paying subcontractors, purchasing materials, and other project-related expenses, there wasn’t much left to cover his overhead, let alone make a profit. In fact, his company had been losing money for several years in a row.
This scenario is all too common for small and mid-sized businesses. It's relatively easy to grow revenue, but keeping that revenue—making sure it translates into profit—is a whole different challenge. As we always say:
"It doesn't matter how much you make. It matters how much you keep."
For Jeff’s business, it was time to stop focusing on top-line revenue and start prioritizing profit.
The Action Plan: Focus on Gross Profit
Our first step was clear: increase gross profit.
We didn’t advise Jeff to chase more sales or expand faster. In fact, we had him stop focusing on growth entirely. Instead, we worked together to improve profitability on each job. This was a process that took several months of careful adjustments:
Job Pricing: We evaluated pricing structures to ensure each project provided a higher margin.
Better Management of Subcontractors and Materials: By reducing the number of jobs they were juggling, Jeff's team was able to manage projects more efficiently, improving cost control.
Advertising Cuts: As profits improved, we reduced the company's advertising spend, further boosting overall profitability.
The Results: Less Stress, More Profit
By the end of the first year, something amazing happened. Jeff’s revenue had actually dropped. But that was expected—it was part of our plan. The real success came in the form of his bottom line: his profits were higher than they had ever been. He was no longer struggling to meet payroll, and his team was less stressed because they weren’t stretched too thin.
Instead of being reactive, constantly chasing the next job, Jeff's company had found its groove. They were working on fewer projects, but each project was far more profitable.
The Next Step: Sustainable Growth
With a solid foundation in place, we gradually shifted our focus back to revenue growth—but this time, it was different. Now, Jeff's business was positioned to handle growth in a sustainable way. They had the right processes, the right pricing, and the right level of control over their costs.
By the end of the second year, Jeff’s business had gone from losing hundreds of thousands of dollars to turning a healthy profit in the same range.
If this story resonates with you, and you think your business might be experiencing similar challenges, let's have a chat. I'd love to learn more about your business and explore how we can guide you toward a more profitable future.
Talk soon,
Fred - CEO - Founder,
Vista Biz Solution
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