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Success Stories - Clients our consultants have helped:
Mullen Plumbing
Ed Mullen, the President of Mullen Plumbing, had never finished high school, opting instead to enter into an apprenticeship position, and earn his master plumber’s license and earn an income for himself. An ambitious young man, he soon mastered the trade, and along with his Father and Brother, he decided to open his own plumbing business. He hired his Father to manage the financial end of the operation, and his Brother to oversee operations, while Ed himself continued to work hard, taking up the slack where the plumbers he employed fell short. This was the start of Mullen Plumbing.
When Ed first met our consultant, he was fully informed of the cost of the engagement to him and his company, and viewed this investment not only as a value-add to his business, hoping to increase labor and materials efficiency, and be better able to delegate some of the responsibility and maintain better accountability from his employees; he also saw the investment as a form of tuition, teaching him, his Father and Brother, the tools they needed to continue the growth the company had experienced in its early years, and teach the three of them to become better business managers.
During the entire engagement, Ed had a full daily work load on his hands, doing several tough plumbing installations while we worked with his business, but despite the hard daily physical schedule he kept, he never missed a scheduled meeting with our consultant, nor did he fail to complete the daily assignments he was given to complete for the following day’s meetings. Each day Ed struggled to complete the extensive reading material, understand the complex business models we presented, and to absorb the conveyance of procedures and knowledge that we brought to his business.
Nevertheless, Ed was excited about the new concepts he was learning, insisting each day to be a part of the meeting of the entire crew, conveying himself to his employees the progress we were making, and the changes they could expect. Some of the changes met cheers from the employees, such as the implementation of a bonus based on the efficient use of inventory materials and labor resources, while others met with jeers, such as the implementation of stricter inventory control, and the tracking of the inventory carried on the work trucks.
When we met Ed and his company, his gross annual revenues were approximately $4,800,000.00, with a 51.3% material cost, and labor of 26.6%. His profits had slid from 10% two years earlier, with $4,4M in sales, to 6.75% with the current annual increase of $400,000 since the prior year. The decrease in profit represents approximately $156,000 in lower profits compared to the prior year. In other words, Ed was still quite profitable, but had he remained at a 10% profit, his bottom line would have been $156,000 higher in the current year than it was.
Our Gross Margin Test showed us that if the company formula for bidding had been strictly followed, ensuring that all labor and materials had been properly billed to the customers, gross revenue should have been $5,2M, or $400,000 higher than the $4,8M where it was. This translated into an overspending of labor to the tune of 9,391 hours – OR – $317,415 in overspending on materials for jobs.
The truth is that it is never all labor, or all material that is the culprit. Usually there are inefficiencies on both sides, and Mullen Plumbing was no exception to the rule. At the end of our engagement we had documented specific steps to better control the inventory, saving $210,000 in the cost of materials that were unaccounted for, $71,078 in non-effective marketing strategies, and structured an employee bonus system that paid employees for ensuring that every labor hour that the company paid a plumber for, would be billed to a client job, allowing the company to recover approximately $595,000 in labor revenue.
Ed had also been toying with the idea of adding underground utilities service for new construction to the services his company offered. We helped him calculate the benefits to the company, showing him that one two-man crew working exclusively on underground utilities, would add over a half of a million dollars ($500,000) in revenues to the company, with only 12.6% in labor cost, making this a hugely profitable proposition. The net added profit in adding the underground service alone amounted to more than $200,000.
In all, if Ed and his team followed through on ALL of our recommendations, many of which were already implemented when the engagement concluded, Mullen Plumbing would realize over $900,000 in added revenue, and more than $360,000 in added NET profit. Compare that to the $45,000 including expenses Ed spent hiring our consultant, Ed was very pleased with the results, saying that even if he was unable to make all of our programs work in his business, it would still have been money well spent.
| Our value proposition: Our engagement will pay for itself twice every year. |
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|---|---|
| Client annual revenue: | $4,800,000.00 |
| Total Job Billing (not including expenses): | $ $ $ 34,000.00 |
| Promised annual profit increase: | $ $ $ 68,000.00 ( 2x) |
| Total documented potential profit increase: | $$ 360,000.00 (10x) |