Restructuring and diversifying a major 100-year-old family steel fabrication companyConstruction Industry
For a 100-year-old family steel business, the future was uncertain as contracts ended and leadership passed. To tackle the challenge, a three-pronged strategy was created to improve revenue streams, processes, and planning.
Internal reforms improved cash flow and banking arrangements while front office initiatives secured major new clients. As a result, the business expanded into a larger facility to meet its diversified offerings and was recognized as the best steel contractor in 2018 by a major regional developer.
challenge
A long-standing steel fabrication family business had endured over the years but faced immediate and long-term challenges: A shortage of work from a concentrated client base; aged accounting and reporting systems; and labor and shareholder challenges. The company’s future and direction was unclear.
solution
The formidable range of tasks needed to be prioritized into three activities:
- Front Office: Most critical was an immediate focus on the front office. The generation of new business through the securing of a major “anchor” project to buy time. This provided a window to rebuild a broader customer base with a focus on developing client relationships while targeting known new work through aggressive bidding, and by following through with improved customer service and project performance.
- Back Office: The back office focus concentrated on cash management; project tracking; and establishing an operations plan and budget, all supported by a simple but improved accounting system. This was followed with a restructuring of banking arrangements and debt.
- Long-term Goal: Established a 5 year framework for expansion, recognizing that the current business was essentially a commodity business. This diversification was aimed at expanding with complementary, but higher end and greater margin product capability, while broadening into supporting services. Combined, the goal was to grow the company by acquisition through a Holding Co structure with a portfolio of production capability; high end products; and complementary support services. All with differing revenue streams and pricing structures. Growth through diversification
The overall direction was driven by first dealing with a multitude of management and personnel organizational matters followed by relocating the operations to achieve greater capacity for future expansion of the business while reducing overhead cost.
results
A 2 year “anchor” project was secured and the customer base expanded, fueling the growth of new project work. Most important the company reputation and service orientation was restored, culminating in an award for the “best subcontractor” of the year from a major regional developer. Moreover:
- Cash and project accounting improved
- Company operations were successfully relocated and management issues addressed
- An “Expansion through Diversification” road map was agreed with the shareholders and key targets identified, with an initial step of joint venturing put in place.