A European installer and provider of service solutions for electrical engineering projects, plumbing, and HVAC had experienced three consecutive years of flat earnings growth. Operational and pricing improvements put the company back on a profitable path with a 25% EBITDA gain.
The company had 200 branch offices, 5,000 employees, and roughly €1 billion in annual revenues. Yet despite a healthy market position, growth just wasn’t happening. The company worked with BCG to identify why EBITDA wasn’t expanding.
The team found two chief contributors to the company’s stagnant performance: low, erratic average price realization within the same regions and inefficiency on the installation side of the business. With those issues identified, the team drafted a three-phase solution.
A detailed, multidimensional value creation program had a goal of boosting EBITDA by 25%. Half of that gain came in the short term from pricing improvement in the service business. The other half came later through greater efficiency of the installation side of the business.
Prepare for Implementation
In the next phase, the team developed implementation packages and training concepts. Before being rolled out companywide, these materials were tested in pilot programs to demonstrate their benefits and generate buy-in from key employees.
To boost the efficiency of the company’s installation business, the team identified and evaluated project managers and lead installers. These employees honed their project management skills and participated in a regular series of check-in meetings to monitor progress. The company also needed to improve its business acumen, so it began to emphasize formal payment plans and selective project engagement.
Push Price Improvements
At the same time, the company worked to improve pricing in its service business. It developed a new hourly pricing model, improved list pricing management, rationalized materials pricing, and made better use of surcharges. The company also provided branch managers with pricing tools for simple fixed-price work, and it monitored and measured pricing performance. Planning tools were introduced to increase the efficiency of service technicians.
As a result of this comprehensive effort, the company was able to meet its goal of 25% growth in EBITDA.