A Search For Redemption!
January 5, 2010
Type here
Saddled with $480,000 in debt, plumber Bob Ansel became so depressed he refused to go into the office and stopped answering his phone. With bankruptcy a foregone conclusion, he mustered one final effort to find redemption. Would he succeed?
Bob Ansel remembers when money flowed from a faucet.
He had started his plumbing business from his garage with his wife Cheryl and Drain Solvers, based in Longmont, CO, grew by leaps and bounds.
With virtually no operating expenses, Ansel and his wife paid cash for his trucks and everything else, and his profitability went through the roof.
He rode a Harley-Davidson motorcycle, indulged his hobbies of rock climbing, hunting and boating, and traveled far and wide to attend sporting events around the country. His kids went to the top schools and enjoyed the best of everything.
“Our business was just smoking,” Ansel said. “We were making all this money and we really didn’t know how we were doing it …
” When Ansel decided to move the business out of the couple’s home, he bought out a larger competitor so he could grow more quickly.
From Cash Cow To Cash Starved
With a seeming unending supply of cash to cover expenses, Ansel borrowed $300,000 from the bank at a high interest rate. But what he didn’t understand is the entire overhead of owning the business, paying down debt, and taking on the labor costs for his now 17 employees.
Ansel had also developed a habit of putting materials, supplies and other expenses on his credit cards, with little regard for the monthly balance. That was not a problem when he had no debt; he and his wife paid off the balance easily.
Now, they could no longer do so.
“I was paying interest rates of 13 to 17 percent,” Ansel said. “I met with my banker and told him I couldn’t afford the interest rate on the ($300,000) loan … they had to do something to help me!
“He just looked at me and told me that the bank had a legal document signed by me and they expected me to abide by it … they weren’t willing to do anything to renegotiate the terms of the loan.
“Cheryl and I were working 24/7 trying to make things work. We always had a phone in our ear. And for what?
“I just got to the point where I could not do it any more … I could not go into the office and I could not answer my cell phone.
“I was totally burned out!”
The final straw? He learned Drain Solvers was $480,000 in debt.
“I was the owner, and for so long, my pride said that I should have all the answers,” Ansel recalled. “But I really had no idea how to run the company and be a business owner.”
During the fourth quarter of 2007, Ansel learned about an organization that helps plumbers run their businesses successfully, create wealth, and have a life outside the office. He scraped together money for airfare, got on a plane, and flew to a “Profit Day” meeting sponsored by Plumbers’ Success International® in Seattle to learn more.
He joined, but there was an immediate challenge. PSI members meet twice a year at summits to learn how to manage their companies more effectively. But Ansel couldn’t wait months until the next summit. While on his way to the airport to fly back to Colorado, Ansel phoned PSI.
The Turnaround Plan
“I was desperate and I told PSI I wasn’t going to be around in a few months (to attend a summit),” Ansel said. “I needed help NOW!”
PSI Business Consultant Eric Spence took that call and, together, he and Ansel would develop a turnaround plan for his business over the next few days that was painful to execute, but necessary to have any chance for Ansel to save his company.
- The components of the plan included:
- Focusing on residential service – Drain Solvers had focused more on commercial accounts than residential service. But Ansel wanted to change over to 100 percent residential service now because he was tired of the horrible cash flow. At any given time, the company’s account receivables were $60,000 to $80,000. Was it any wonder the company was struggling? The business plan that Spence and Ansel developed called for Drain Solvers to become a residential service company only. “I really liked the idea of getting paid right after I completed work,” Ansel said.
- Taking the most difficult step of all – Upon returning from Seattle, Ansel let go the majority of his team. He went from 17 employees to three … him, his wife and one plumber. He said it was one of the most difficult things he has ever had to do, because he, as a business owner, had failed them. But it was necessary if he was going to start over.
- Running the company the PSI way - One of the first things he received fromPSI is a methodology that let him know how a model company his size should be run and what things should cost. For instance, before, Ansel spent up to 30 percent of revenue on advertising. In the new system, he spends eight to 10 percent. He also used all of the proven marketing pieces made available to him by PSI; he did not have to generate any marketing or advertising. Another example: he knew, immediately, how much he could pay his techs and his office staff, as a percentage of the revenue he would generate. The formula and methodology would help him keep his costs in line, and provide a roadmap for how to run his company. Based upon his business plan he developed with the help of PSI, he also realized he was under pricing his services, something that had been masked at startup by his low operating costs.
- Negotiating with suppliers/vendors – Ansel negotiated with suppliers to make payments on what he owed rather than declare bankruptcy. He is still negotiating with the bank to reduce his percentage rate on his loan, without making much progress. None of his suppliers cut him off.
- Putting down on paper what’s expected – Before, Drain Solvers was always experimenting with service, frequently changing the way they did things to find what worked best. Now, there’s a set way to do everything, right down to how the phone is answered. Each role within the company has a very specific job description along with measurable goals.
- A focus on training – Because the company was so financially strapped, Ansel could not afford for he, his wife and the one plumber to attend training at The Success Academy®, but the three of them have watched videos from the academy to improve their service to the customer.In addition, as his residentialbusiness improved, and moreplumbers were needed, Ansel relied upon PSI to help him with hiring.
- Daily progress reports – Drain Solvers did not get in trouble over night, and it wouldn’t get out of debt over night, either. But the company has a daily management essentials report that it reviews every day of the week. How did the company perform today, and where is it in terms of meeting its monthly and yearly goals? Identifying problems today before they become major issues tomorrow is the key.
It has not been easy, and the Ansels are not out of debt. By February of this year, they had reduced their debt $130,000 to $350,000.
Ansel says, though, brighter days are ahead.
“My pride kept me from asking for help,” Ansel said. “I almost lost my business because of it. But I did everything Plumbers’ Success International said to do and it worked.”
Drain Solvers now has seven employees. Based upon its performance last year and early results from the first quarter this year, Ansel projects revenue of $1 million in 2009 with a net profitability of at least 20 percent.
Redemption? Not yet, because the company is still in debt.
“But now, I can breathe, I don’t have all that stress, and I feel good about where we’re headed,” Ansel said.
If your plumbing company is in trouble, and you would like to know more about designing a turnaround plan, call toll free at 1-800-763-1062.
