Engineering Staffing Firm

Price: $5,400,000

Location: Michigan

Industry: Staffing & Recruiting

Listing ID: FM201115GT

Status: Prospect

Listing Description

The company currently has a corporate staff of 14 persons. Of the 14, there are no full-ime sales people. The company has three account managers (3 FTE’s), five recruiters (5 FTE’s), one full-time receptionist, 1 full-time receivables and payroll manager, one full-time accounting assistant, a full-time CFO and a full-time director of Human Resources and the CEO.

On any given day there are some 200 jobs that need attention to be filled and earn profits. In addition, there are an average of 140 – 160 active contract employees out in the field working at client locations. They have contract employees outside of the state of Michigan and in Canada.

The company has been asked on numerous occasions to employ staff in Mexico, but has declined to do so due to a lack of knowledge necessary to do business in Mexico; however, there continues to be a great deal of interest by clients to find a resource to help them do business with contract employees in Mexico.

Currently, the company has five new company (customers) that have signed agreements to fill positions as needed.  Unfortunately, because the company hasn’t anyone calling on these new accounts/clients, very few opportunities have been harvested and the agreements sit in a file cabinet.

Although there is a real opportunity to grow and add to a talented team of dedicated professionals, the CEO believes their time is better spent on attempting to fill the current opportunities in their inventory; meanwhile, additional opportunities get no attention. In addition, there is no concerted effort to find new business by harvesting new clients; instead, more than 95% of the resources are spent on current clients.

We cannot discuss the overview of the opportunity for the new clients already contracted without reminding the reader not every placement or contract placement company and/or market is the same. There is a significant demand and a major shortage of talented people with very specific engineering skills. Manufacturing of today is nothing like the past. In fact, it is changing so rapidly and the shortage of talent so acute, the right leadership can be well positioned to make significant progress in growing profits. Furthermore, should the political trade winds blow in favor of changing international trade agreements to protect U.S. manufacturing, the company stands to experience even greater demand for services.

By comparison to its peers, this company is a low cost provider of services. As manufacturers continue to reduce operating costs by a variety of means, this company is well positioned to help its clients continue to hire contract employees. In brief, this company helps client companies reduce costs by assuming full responsibility for employees and the pension benefits that go along with that expense.

The company with its team, resume database, reputation in the industry, well-developed systems and more than 25-year-old industry brand has the potential to grow their earnings significantly over the next five years.

Listing Details

Total Sales: $12,515,828

EBITDA: $795,601

Accounts Receivable: $2,500,000

Reason For Sale:

Owner retired 10 years ago.

Operation

Year Established: 1988

Location

Type of Location: Office Building

Relocatable?: Yes

Summary

Competition:

The company has witnessed a shakeout in the industry that began around 2001 and seemed to continue through 2009. Since that time, they have had a stable and robust client base and more important, they have continued to preserve and further cement their position as a preferred provider. There are numerous serious barriers to entry in this business. Attempting to break in and win a big account as supplier is near impossible. On the other hand, they have continued to win new activity from existing clients while being recognized by domestic and international customers as an award winning partner/supplier.

Following 2007-8 and the major decline in economies around the world and the U.S., many supplier firms were cut as the march to reduce costs by auto manufacturers included paring down sourcing partners became the business theme. Contracting companies like our client were not excluded from this review and process, yet their customers chose to keep them on board as a valued supplier as they have always been a favorite. They have survived all of those cuts and have enhanced their reputation as a “Go-To” supplier to locate and/or supply highly skilled human capital.

The barriers to entry into their customer base and manufacturing industry, in general, are greater than they have been in modern manufacturing and engineering business history. They have a very sought after and valuable place in the manufacturing and engineering marketplace. By putting the right leadership in place, the company’s profit levels will significantly increase driving greater financial returns.

Last year the automotive industry sold a record breaking number of cars. All of the experts agree this trend is likely to continue with the development of auto markets around the world that are currently in their infancy, not to mention the aging fleets in more developed countries like Canada and the U.S. An even greater contributor to the future growth is the application and evolving use of technology in transportation, including aeronautical industries. There is little question, despite the ups and downs of the world’s economy in general, Southeastern Michigan still boasts a high level engineering legacy, knowledge and talent needed to meet industry demands in automotive, aeronautical and military related industries.

Potential Growth:

Under new ownership and management the company can increase net profits by taking the following actions:

  1. Hire one or possibly two outside sales persons to cultivate new business and take advantage of current contracts that are sitting in one of their file cabinets.
  2. Outsource basic HR functions for contract employees that would deliver immediate savings.
  3. Replace the CFO with a capable Controller
  4. Broaden company’s ability to solicit business from the aeronautic Industry.
  5. Reduce the office space by 1,500 square feet as the office has excess office space
  6. Move all computers to cloud computing to reduce Cap X expense
  7. Reduce IT support as the move to the cloud takes place requiring less of this specific expertise
  8. Remove the CEO and replace with a Director of Sales and Business Development

All of these steps are very basic and uncomplicated. The final suggestion would be to change the compensation system to be more reflective of pay for performance. We would be glad to discuss this further with serious buyers who would like to move forward and take the next necessary steps to do so.

This company has tremendous potential, by simply driving more business, reducing costs as outlined in the above and leveraging current customer relationships to expand the business. Currently, the company’s shortcoming is the absence of active ownership as the owner has not worked in the business for more than twelve years, moreover, the company lacks the leadership interest necessary to grow the business. Currently, there is little interest authored by the CEO in growing the business. The company, from a leadership perspective, has been skating on its past accomplishments and not pursuing new opportunity. Despite this, from a very reasonable perspective, the company has performed very well and rewarded its owner and CEO handsomely for little or no effort or sacrifice.

New leadership and direction can leverage the assets and its key customer relationships, developed over 25 years, to grow the company significantly in a relatively short period of time. This company is a business opportunity waiting for new leadership and the drive necessary to build upon its past successes. The subject company is widely accepted in the manufacturing marketplace as a very highly rated resource for human capital in the manufacturing industry. A new owner simply needs to take a few small steps to grow revenue significantly.