Johnson & Sons - Heating, Plumbing, & Air
A complete, unabridged account of the 36-month value creation strategy. This site chronicles the journey from initial stabilization to being exit-ready, detailing every operational, financial, and political challenge.
Executive Summary: The 36-Month Journey
Our engagement with Johnson & Sons was a 36-month transformation designed to professionalize a successful but stagnant family business into a scalable, high-margin, and exit-ready platform. The journey was structured in four distinct phases: Stabilization (Months 1-6), focused on control and trust-building; Optimization (Months 7-24), the period of intense, often painful, operational and technological change; Acceleration (Months 25-30), dedicated to scaling new growth engines; and Preparation (Months 31-36), focused on hardening the business for a premium exit.
While we successfully increased Adjusted EBITDA by 47% and established a multi-million dollar recurring revenue stream, the path was not linear. The implementation revealed a profound cultural divide between the company's relationship-driven past and its emerging data-driven future. This case study documents not only the "what" and "how" of the financial value created but the far more complex "who" and "why" of the organizational battles that defined the transformation.
Implementation Governance & Oversight
Effective governance was the bedrock of the transformation. Click each pillar to see how we structured decision-making, communication, and resource management.
Management Structure
Communication Protocol
Resource Allocation
- Transformation Steering Committee:A committee was formed on Day 1, comprising two PE partners, the two Johnson brothers (in a transitional capacity), and me. We met bi-weekly for the first six months, then monthly. Its primary charter was to approve capital expenditures exceeding $50,000, ratify key strategic decisions (such as the hiring of the COO), and conduct formal milestone reviews.
- Workstream Leadership:We established two primary workstreams: Project Operations, initially led by the tenured General Manager, and Service Division Launch, a "skunkworks" project led by a hand-picked, ambitious young project engineer. This immediately created a "new vs. old" dynamic and a clear line of accountability for each major value lever.
- Decision Rights & Escalation Matrix:A clear matrix was established. The new COO was given full P&L authority and decision rights on operational matters up to $100,000. Issues beyond that, or those involving significant changes to the strategic direction (such as abandoning a software module), were escalated to the Steering Committee. We critically underestimated the informal escalation path to the retiring GM, which became a constant source of political friction.
- External Advisory Support:The Johnson brothers and the retiring GM were formally retained as paid advisors. Their role was explicitly defined as "client relationship management and technical consultation," but they quickly became the de facto advisors and confidants for the "Veteran" faction, providing a powerful, informal counterweight to the formal governance structure.
- Internal & External Communication Cadence:We launched a monthly "Progress & People" newsletter and held quarterly all-hands town halls. After the first few tense meetings, we supplemented these with weekly "Coffee with the COO" open-door sessions to create a less formal feedback channel. Externally, we established a quarterly business review cadence with the top 10 clients, personally led by the Johnson brothers and the COO, to reassure them of stability during the transition.
- Success Story Amplification:We celebrated the first $100,000 service contract win with a company-wide catered lunch and gave the sales lead a spot bonus. While intended to build momentum, some "Veteran" construction PMs privately derided it as a celebration of a "small" contract, an an early sign of the cultural rift. We learned to frame future wins in terms of margin and recurring value, not just top-line numbers.
- Crisis Management Protocols:A crisis protocol was developed following a major incident in Month 14, when a botched data migration from the old system to the new software resulted in missing a critical bid deadline for a long-standing client. The protocol established a "War Room" team (COO, relevant PM, and me) with a pre-approved communication template for notifying the client within two hours, accepting full responsibility, and outlining immediate corrective actions. This rapid, transparent response saved the relationship, but the incident severely damaged the new system's credibility internally.
- Transformation Budget:A dedicated transformation budget of $1.5M was approved by the board, separate from the company's operating budget. This was earmarked for technology, consulting fees, and new hires. The software implementation's 50% cost overrun necessitated an emergency capital call and a painful review session with the Steering Committee, prompting us to reevaluate our vendor management process.
- Human Capital Deployment:We used a hybrid model. The Service Division lead and the new COO were full-time dedicated transformation roles. However, we relied on existing Project Managers and field staff to contribute to the process reengineering on a part-time basis. This saved costs but created a major resource bottleneck, as these individuals were torn between their daily jobs and the demands of the transformation.
- External Resource Management:Our initial oversight of the software vendor was too lax. After the budget overrun, we placed them on a strict performance-based contract, with weekly progress reviews and payment to tied to specific, testable deliverables. This created an adversarial relationship but gave us the control needed to get the project over the finish line.
- ROI-Based Reallocation:As the Service Division began to dramatically outperform its initial business case in Year 2, its leader presented a data-driven request for an additional $250,000 in marketing spend and new service vans. This directly triggered the fierce "Resource Allocation Politics" battle with the Construction Division, forcing the Steering Committee to make a difficult decision to shift capital away from the legacy business to fuel the new, higher-margin growth engine.
Beyond the dashboard, we built a comprehensive system for financial control and value tracking. Click to explore our strategies.
Performance Monitoring
Cash Flow Management
ROI & Value Capture
- Centralized Performance Dashboard:Within 90 days, we built a rudimentary dashboard pulling data from the old systems. It provided the first-ever consolidated, real-time view of cash position, project margins, and backlog. This was a massive win for the Steering Committee but was viewed with suspicion by project managers, who felt their performance was being "micromanaged by a spreadsheet."
- Variance Analysis Protocols:The new COO instituted a rigorous weekly project review meeting to analyze budget versus actual performance in terms of labor, materials, and timelines. This is where he first used data to publicly question a Veteran PM's timeline, causing immense political damage. While the process was technically sound, its implementation was culturally tone-deaf and fueled the resistance.
- Early Warning Systems:We configured the new PM software to trigger automated alerts. For example, an alert was sent to the COO and the relevant PM if any project's gross margin fell 5% below the as-bid margin, or if material costs on a job exceeded their budget by 10%. The Veterans initially saw this as "tattling," but it proved invaluable in preventing small problems from becoming large profit drains.
- Reporting Rhythm:We established a strict reporting cadence, comprising a daily "flash report" with cash balance and yesterday's billings, a weekly operating review deck with KPIs for both divisions, and a comprehensive monthly board package that includes full financials and a narrative on transformation progress. This relentless rhythm compelled a new level of discipline and transparency that the company had never experienced before.
- Working Capital Optimization:We assigned a junior analyst to aggressively manage Accounts Receivable. By working with clients to align payment schedules with project milestones, we reduced Days Sales Outstanding (DSO) by 10 days in the first six months. This quick win generated tangible cash flow and built credibility for the transformation team.
- CapEx Prioritization:All capital requests over $25,000 required a one-page business case with a calculated ROI and payback period. This data-driven approach was used to settle the budget battle between the Service and Construction divisions. The Service Division's request for new vans showed a 12-month payback, while the Construction Division's request for new heavy equipment had a 5-year payback. The Steering Committee funded the vans, a decision that was financially correct but politically explosive.
- Cash Conversion Cycle (CCC):The focus on DSO and later, optimizing inventory turns via the new (and controversial) centralized system, ultimately drove the CCC down from 58 to 42 days, a major value driver that reduced the company's reliance on its credit line and freed up cash to fund growth.
- Contingency Reserves:The initial $1.5M transformation budget included a 15% ($225,000) contingency reserve. The software implementation's cost overrun consumed this entire reserve, a sobering lesson that forced us to be far more rigorous in our budgeting for subsequent initiatives.
- Initiative-Level P&L:We established a separate profit and loss (P&L) statement for the new Service Division from the outset. This allowed us to track its performance independently and prove its high-margin contribution to the overall business. This separate P&L was the key piece of evidence its leader used to win the contentious CapEx debate.
- Value Capture Waterfall:In board meetings, we used a waterfall chart to visually link operational changes to financial results. For example: "Reduced material waste by 2% (SOPs) → Saved $300k (Procurement) → Increased Gross Margin by 0.5% → Added $344k to EBITDA." This made the value creation tangible for the board and helped justify the operational disruption.
- Payback Period Monitoring:We tracked the payback period on all major investments. The new service vans paid for themselves in 14 months. The Phoenix office renovation had a projected 7-year payback based on improved productivity and employee retention. The botched software implementation's payback period stretched to over 4 years, serving as a constant reminder of the cost of poor execution.
- Synergy Realization:We tracked the "handoff" synergy between divisions. By the end of Year 3, 25% of new service contracts had been originated from introductions made by the construction project management team after a new build, demonstrating that the two divisions could be more valuable together than apart.
100-Day Plan Simulator
Executive Dashboard
The 36-Month Execution Timeline
The transformation was structured as a series of focused sprints. Click each phase on the timeline below to reveal the key activities and deliverables.
Building a Modern Infrastructure
We rebuilt the company's operational engine around three core pillars. Click a pillar on the blueprint below to explore the specific initiatives and their outcomes.
Technology
Processes
Partners
Risk & Dependency Management Command Center
This command center provides a comprehensive overview of our risk management framework. Select a risk from the register to view its corresponding contingency plans.
Critical Path Analysis
| Task / Initiative | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 | 25 | 26 | 27 | 28 | 29 | 30 | 31 | 32 | 33 | 34 | 35 | 36 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Phase 1: Stabilization | ||||||||||||||||||||||||||||||||||||
| Hire External COO | ||||||||||||||||||||||||||||||||||||
| Cash Flow Forecasting | ||||||||||||||||||||||||||||||||||||
| Phase 2: Optimization | ||||||||||||||||||||||||||||||||||||
| ERP Implementation | ||||||||||||||||||||||||||||||||||||
| Service Division Launch | ||||||||||||||||||||||||||||||||||||
| Phase 3: Acceleration | ||||||||||||||||||||||||||||||||||||
| Leverage ERP Data | ||||||||||||||||||||||||||||||||||||
| Scale Service Division | ||||||||||||||||||||||||||||||||||||
| Phase 4: Preparation | ||||||||||||||||||||||||||||||||||||
| Produce Audited Financials | ||||||||||||||||||||||||||||||||||||
| Finalize Growth Narrative | ||||||||||||||||||||||||||||||||||||
| Activate Retention Plan | ||||||||||||||||||||||||||||||||||||
Implementation Risks
The Political Landscape
The transformation was defined by a deep-seated conflict between two factions. Understanding these dynamics was key to navigating the change. Click a card to reveal the political realities we faced.
Pre-Exit Preparation: The Final Checklist
The final phase was a systematic process of preparing the company for a successful sale. Check each item to see how we built a buyer-ready organization.