Patrick Finn is an Irish immigrant who came to America to build a better life in the land of opportunity like so many millions of immigrants before him. When he first arrived in the United States, he found a job doing construction. But Finn had more than just the ordinary skills of a construction worker, he had the ambition of an entrepreneur to build a business.
So Finn did just that—he went into business for himself and formed Patrick A. Finn, Ltd. Patrick Finn’s company builds custom homes and does home remodeling. It is an industry notorious for its ups and downs and for crushing the dreams of many business owners when the boom and bust nature of the housing industry trends downward into an economic recession.
But, Finn was smart enough to admit, “I didn’t know what I didn’t know.” Finn said of himself and many other entrepreneurs who own their own construction companies: “We are great technicians, but nobody taught us about ‘the business of the business.'” So, Finn brought in the experts from ABS to teach him what he needed to know to run his company more productively and profitably. What he found from the business analysis surprised him—he had been running a business for 20 years without the proper financial and operational controls.
While Finn had built a business with a reputation for quality workmanship and attention to customer needs, which included hiring his own designer, he soon came to realize that his failure to build a strong management foundation for his business left him vulnerable to the external forces of the economy. What Finn saw in ABS was that it offered him a way to gain control of his own destiny, rather than having everything he had worked for being subject to the ups and downs of the volatile housing market and construction cycles.
ABS professionals were able to show Finn how he was failing to calculate his overhead correctly, which meant he was not setting his prices to properly reflect his true costs, ultimately reducing his profitability. Moreover, he was not utilizing the concept of break even analysis internally within the business, which would allow him to more aggressively price his bids to get more work. With the confidence he gained from the new financial tools ABS developed for him, he now had the confidence to make money, rather than lose money, on every single bid.
Moreover, ABS consultants established a system of “pre-planned profits,” so that the profits would not be something to hope for at the end of the year, but would be carefully calculated into every job Finn undertook. No longer are the profits of Patrick A. Finn, Ltd. left up to chance, as they had been in the past.
Before ABS, Finn said he was “running the business on a hunch.” His CPA provided him with financials, but they were of limited use in helping him make the right decisions needed to move forward. The reports his CPA gave him focused on how he was doing in the past. It gave him a rearview-mirror look at his business. During the construction industry’s ups and downs, what he actually needed was information to help him look ahead to the future.
The ABS team established weekly management reports that his administrative assistant can prepare for him in approximately 20 minutes. Finn can review these reports every Friday using only about 10 minutes of his time. Instead of wondering and worrying over the weekend about his business, he knows exactly where he stands going forward.
Moreover, ABS consultants developed a rolling cash flow report that shows, for the next 12 weeks (at any present point going forward), how much money is coming in and how much money is going out. This report allows Finn to not only manage his cash, but but just as importantly, manage his vendor relationships.
“Vendors trust us now,” Finn said. “[When I see a problem] I can call them to tell them when they are going to get paid, and we pay them when it’s scheduled to be paid.” Finn said this has been a great benefit to his company because it helps him keep solid relationships with his vendors.
Contemporaneously, Finn also implemented an “open book” bidding process to gain the confidence of potential customers. “We don’t hide anything,” Finn said. He shows his potential customers what his costs are and that he will make a reasonable profit. Finn said that even though he is not the least expensive, he is winning jobs from competitors with lower bids because of the positive way in which he runs his business.
“People want to do business with companies who are positive,” Finn said. “Someone who they can trust,” he added. No contractor can survive over the long term if he does not have good relationships with his vendors. The financial systems installed by ABS have allowed him to maintain a trusting relationship with his suppliers, even during the economic downturn.
While controlling his costs and managing his cash flow have been top priorities for Finn during the past recession, he has not been one to hunker down and wait for the storm to pass. Rather, Finn utilized the expertise of ABS to install new metrics in his business to track and improve worker productivity, while, at the same time, instituting a productivity-based excess profit incentive system to drive profits, even as revenue declined during the recession.
Finn said that he would not have been able to implement the “gain-sharing” plan without the expertise of the ABS consultants. His consultants were able to set the benchmarks needed to ensure that he would make a profit on each job, and then earmark the excess profits to be placed in a pool for the employees who were responsible for producing them.
Finn said the productivity-based incentives have allowed his employees to work smarter while maintaining a high level of quality in the work they produce. “The employees like it better because I don’t have to micromanage them anymore,” Finn said. He also indicated that the employees now hold themselves accountable because they see how they will benefit with an increase in their pay.
The pooled money made from the productivity gains achieved by his employees is paid out in small checks each month to keep employees on track throughout the year. ABS has found that this method of regular incentive payments has proven to be much more effective in motivating desired employee behavior than waiting until the end of the year to distribute bonuses.
Even though the revenue of Patrick A. Finn, Ltd. dropped from more than $3 million a year prior to the recession to under $2 million last year, Finn said he had his most profitable year ever!
Finn’s success during a time when so many other contractors were failing wasn’t from simple good fortune or from good luck in “wearin’ the green.” Rather, Patrick Finn was successful because he didn’t know what he didn’t know and had the good judgment to bring in ABS to build a better business.
