- Steve Fergus purchased BCP Building Products in December 2021 after a lengthy 14-month process during which he had to navigate the stages of business acquisition as a new buyer, juggling them with his existing sales role.
- But Steve knew he had made the right choice. This acquisition offered the life he wanted for himself and his family.
- Now, Steve is focussing on growing his business’ profitability with a view to stepping out of daily operations in 10 years time.
Steve Fergus completed the acquisition process for his first business in December 2021, a year after he came across an advertisement for BCP on Google. The deal was a drawn-out, challenging process and Steve knew there was significant risk in jumping from a stable job to business ownership, but he was convinced this was the right opportunity for him and his family.
He knew of the business already, having dealt with it as a customer for almost 20 years prior to buying it. “I’d always had a lot of respect for the business. I’d seen what it achieved over the years and knew its product offering well,” he says.
BCP is a manufacturer of building products including concrete blocks, retaining wall systems, decorative pavers, and garden accessories. BCP has two sites in New South Wales, a manufacturing site in Bathurst, and a retail shop in Dubbo.. The business sources raw materials locally from the hills surrounding its Bathurst factory and it almost exclusively employs locals.
Steve didn’t realise how protracted the process of acquiring BCP would be. It took him and his wife, one of his two business partners, more than 14 months. This was partly down to complexities in the diligence stage where the process was convoluted by the need to normalise BCP’s financials due to the Vendor having several other businesses that shared some costs with BCP.
Steve and his wife also had concerns about the age of some of BCP’s production equipment. ”Specifically the production capacity of some of the equipment, replacement costs, and servicing requirements, with OEMs to understand what the capacity of the equipment was, replacement costs, all those sorts of things,” says Steve. “We tried to identify some of those risks upfront.” Steve developed a good understanding of BCP’s existing operations and offering, and what opportunities exist to grow its market share. “That all takes time,” he says. “It’s not a ‘pluck a number out of the air’, you’ve really got to be confident in the numbers you’re pulling together, and then really stress test those numbers as well.”
Financing the deal was also difficult. Most banks simply weren’t prepared to fund the purchase of a manufacturing business. “There was a lot of appetite out there for lending into services-based businesses,” says Steve, “For obvious reasons – there’s low overheads… you can run some fairly hefty gross profit numbers in services-based businesses and [you] don’t have the added complexity… of trying to place values on plant equipment.” Plant equipment in manufacturing businesses can be specialised, he explained, and different people can present different opinions on what the equipment may be worth.
Another key priority for Steve and his wife was staffing. There were a few key staff members who possessed a huge amount of knowledge about the business and were they to leave, BCP would suffer. After buying the business Steve put in retention bonuses early on for these staff members and trained up other team members so that they weren’t the only staff with so much knowledge.
Then there was the question of when to quit his previous role. Steve was initially still working for a competitor of BCP, so he was careful to keep his work on the acquisition outside office hours. This job was financially lucrative and was something Steve enjoyed. “I could have been in that role for the rest of my life and made a very good living,” he says.
But Steve eventually had to choose between this job and the acquisition, and while he knew there was significant risk in jumping from a stable job to business ownership, he wanted the opportunity to set his own hours and live a richer life. “I’m a big believer in experiencing things in life, I don’t want to be bound to a desk, I don’t want to be bound to a job forevermore,” he says.
Steve had no idea how things would turn out, or if the deal would even go through, but he decided to take the plunge.
After a few months of rough cashflow, his decision paid off. Because Steve closed the purchase of BCP in December 2020 and the construction industry doesn’t typically see much activity throughout January, there were very few sales to get them into the new year. “Things don’t tend to ramp back up again until February,” he says. “… by the end of January, I was nervous and worrying about when we’d start to see sales returning.”
But sales eventually picked up and now, just over two years later, business is booming, with BCP set to make an annual net profit of $6 million by the end of this financial year. Steve and his wife are confident that the business will be able to consistently generate good solid revenues and returns. The advantage of being in the construction industry, Steve says, is that it is typically characterised by relatively stable revenues. During economic downturns you often see an increase in government investment in infrastructure. When the economy recovers, you see an increase in residential and commercial construction.
Looking back at the process of purchasing his business, Steve thanks the mentors he had in his life at the time. Through connecting with other, more experienced figures in his life, he was able to set realistic expectations for the business’ future. “I certainly think if we tried to do it all by ourselves without engaging some of that help, to be honest, I don’t think we would have got to the point where we bought the business,” he says. His accountant was one of these key figures, who “stripped half a million dollars in sales” of Steve’s P&L forecast. “I was overly ambitious,” says Steve, “and that’s why it’s good to have those people around you to challenge you on things.”
Steve and his wife are now focusing on growing BCP. “Our goal when we bought the business was to be netting operating profit in the 10%-18% margin range,” says Steve, a target which is just the beginning for BCP.
They don’t currently have any plans to sell but Steve doesn’t see himself working in the business every day for the rest of his life. “We probably are talking about a 10-year horizon,” he says. Running the business has definitely been more challenging from a time commitment perspective than he thought it would be. “But it’s a hell of a lot easier to do those hours when it’s your business than it is when someone else is paying you to do those hours.”
Steve aims to train his staff to take over so that he can step back and be less involved in daily operations. For now, he is enjoying his role as MD and business owner.
“I am able to travel the world without worrying about annual leave balance or manager approvals,” he says, “and spend time with my kids and my wife whenever I like.”