Employee-Owned. No Forecast of the Repurchase Obligation.
An ESOP-owned design firm faced a repurchase obligation and a loan maturity with neither modeled. How project-hour visibility and ownership modeling surfaced $420,000 in annualized value.
Architecture & Engineering — ESOP-Owned, Multi-Office
Employee-Owned. No Forecast of the Repurchase Obligation.
A multi-office architecture and engineering firm was employee-owned and profitable, with a leadership transition already underway. What it did not have was a model of what that ownership structure would demand in cash, or a way to see which projects were making money. A Financial Discovery Assessment identified $420,000 in annualized value.
An employee-owned firm carries an obligation that behaves like debt and is rarely modeled like it.
In a labor-based professional services firm, the only real inventory is people's time. When a firm is also employee-owned, that time has to fund both the payroll and the eventual buyback of the shares.
This firm had done the hard part. It had transferred ownership to its employees, kept its client base intact through the change, and grown across several offices. The founding partners were stepping back on a defined timeline and the next generation of leaders was already running the work.
What the firm did not have was numbers against any of it. The repurchase obligation, the cash the firm would owe departing owners as they retired and redeemed shares, had never been forecast. Neither had the alternative. If the firm ever chose to sell instead, no one had modeled what that path would look like or what it would be worth. The incoming leaders were being handed an ownership structure without a map of its cash consequences.
Sitting alongside that was a loan approaching maturity inside the same window, with no modeled path to repayment. The firm produced financial statements that were accurate and a forecast that was, in practice, last year plus a percentage.
Underneath the ownership question was a simpler one the firm also could not answer. In a business where labor is the product, project hours were the one signal that never got captured. Time was recorded for billing purposes and never rolled up as hours against a project. Which meant project profitability was an estimate, every time. That's when they called us.
The Assessment
What we found in a firm that ran well and measured little.
None of these were failures of effort. They were the predictable gaps of a firm that had grown past the systems it started with.
An ownership transition is not a sale, and neither path had numbers against it
The incoming leadership group had inherited an ownership structure without a financial model of how it behaves. The repurchase obligation, which accrues quietly as employees vest and comes due as they retire, had never been forecast against projected headcount, valuation growth, or retirement timing. The alternative path, a sale to an outside buyer, had never been modeled either. Building both models gave the board a defensible basis for the decision it was going to have to make. Identified value from improved capital planning and avoided financing cost: $118,000.
Projected Annualized Value: $118,000
A loan maturing inside the transition window with no path to repay it
A significant term loan was approaching maturity within the same period as the leadership transition. The firm's forecast was a prior-year roll-forward that did not model debt service against the repurchase obligation, so the two largest cash commitments the firm faced had never been looked at together. Building an integrated forecast that carried both, and opening the refinancing conversation early rather than at maturity, identified $61,000 in annualized value in improved terms and avoided distress pricing.
Projected Annualized Value: $61,000
Accounts payable and consultant payments matched by hand
The firm subcontracted a meaningful share of its work to outside consultants. Their invoices were matched to project budgets and client billings manually, in a process that lived in one person's routine and did not survive their absence. Implementing three-way matching against project budgets, with consultant costs flowing to the projects that incurred them, identified $58,000 in annualized value and removed a single point of failure from the payables cycle.
Projected Annualized Value: $58,000
In a labor-based firm, project hours were the one signal that never got captured
Time was entered for the purpose of generating invoices, not for measuring effort against a project. Hours were never rolled up by project, by phase, or by staff level, so the firm could not compare what a project was estimated to take against what it actually took. Every fee proposal was therefore built on judgment rather than history. Implementing project-hour capture with phase-level reporting identified $84,500 in annualized value through better fee setting and earlier detection of projects running over.
Projected Annualized Value: $84,500
Paying for a project ERP and running it as a billing ledger
The firm licensed a full project-based ERP and used a fraction of it. Project accounting, resource scheduling, and earned-value reporting were all available and unconfigured; the system was being used to produce invoices. Configuring the modules the firm was already paying for, and retiring the spreadsheets that had grown up around them, identified $47,000 in annualized value without new software spend.
Projected Annualized Value: $47,000
Senior directors absorbing project management work
Regional leaders who were accountable for growth and client relationships were spending a substantial share of their week doing project coordination that sat well below their level. The cause was not workload but role definition. No one had drawn the line between leading an office and managing a project. Separating the roles and staffing project coordination appropriately identified $51,500 in annualized value and returned senior capacity to business development.
Projected Annualized Value: $51,500
Employee ownership transfers the balance sheet to the people doing the work. It does not, on its own, give them the numbers to run it.
Is This Your Firm?
If the repurchase obligation has never been forecast, the firm is carrying a commitment it cannot see.
A Financial Discovery Assessment models the obligation, the debt service, and the operating cash that has to cover both.
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Professional Services Firms
Utilization, realization, and project profitability for firms whose product is their people's time.
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Financial Discovery Assessment
A structured diagnostic that puts numbers to the commitments a business is carrying but has never modeled.
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Senior financial leadership for firms navigating an ownership transition.