When A Capital Budgeting Saved An Ambitious Entrepreneur

How many of us will dare to leave a top management position, provided with business class facilities for residence and luxurious lifestyle along with a highly progressing career for a risky business? Meet Vipin, the then general manager of the biggest construction company in the country. The structures constructed by the company were not just brick and mortar houses or shopping complexes, but heavy industries including petrochemicals, construction resources, and even nuclear power stations. And our person of discussion was the central authority for the industrial wing,

It is still not known about what made him leave a promising career when almost ready to take over as the President of construction management and try his luck in a very demanding and investment-heavy industrial construction business. Vipin had immense experience and supreme testimonials for his work in the same field, but was he tactical enough to succeed in one of the most competitive areas of business? The initial hiccups did not show the signs of any revival in his venture. The company required the heaviest construction equipment and vehicles and hundreds of employees.

Rental proved costly

Vipin’s list of resources didn’t have any machinery of its own. He had to rent them from outside and that ate away any profit he got from the cleared bills. The tenders may sometimes lead to losses when the work was not progressing due to bad weather or labor issues. Lag in work meant a lag in passing bills and subsequently, huge losses. The operational cost of every month was so huge that he had to take loan after loans to meet the daily expenses of his business and his home. He also had to borrow money from local lenders at exorbitantly high rates of interest in cases of emergency. All his properties were either mortgaged or kept under overdraft.

Vipin realized frightfully that his ambitious company was sinking fast and was too heavy to be lifted up and come at par with his competitors. This was the time when his son finished his studies and decided to join him and fight until the last moment to save their company. It was almost 10 years into the business and they were about to lose all.

The revival

By consulting capital finance experts, they decided to divert the cash flows for rental expenses and loan amounts into buying their own equipment and heavy vehicles. It was very tough initially, but many public and private sector firms providing capital investment supported them by extending overdraft amounts and funding some of the heavy machinery.

Within a short span of two years, they were able to expand their work into four sites simultaneously with their own resources. Their current operational cost includes salary payments, transportation, and maintenance expenses and has almost tripled in its net worth. Soon they will be working for a nuclear power station and scale new entrepreneurial heights.