I bid a contract requiring 100 units of man-hours paid at 10 units per man-hour. Bill the client 1000 and pay my folks 500, reaping 500 units of profit.
Am I too stupid to estimate the man-hours correctly?
Work for clients who don’t pay?
Beyond this, this seems like a pretty simplistic business that even a knuckle-dragging caveman could run!
You run the business like that for years with no issue and everyone is happy. I see the business model and think "I can do that". You and I competitively bid similar projects.
Instead of billing the client 1000, you end up bidding the job for 600. It takes more time than you thought and you pay your folks 650. You lose 50 on the job.
You tell your shareholders don't worry I have a really big job a 10,000 unit job. I bid on this job too, you win with a bid of 6000, it takes more time than planned costs 7000. You need to borrow money, but its OK because you have several 10,000 unit jobs on the books. You lose on these jobs and need to borrow more money. Either you start to make a profit and work your way out or you go bankrupt.
How can this business go bankrupt? Gradually, then suddenly. But make no mistake, this has been in the works for a long time. Anyone paying attention, esoecially, to the financials, saw this coming. Read the posts here, the alarms have been sounding as this comic tragedy unfolded.
Sounds like this OP could have been taken from MDR's business plan two short years ago ... really just a slide deck slapped together by a really expensive advisor.
But it's not that simple. And that's why this company is f—ed. That's why MDR should have had insiders who understand the business and project derisking. Not just advisors who want to get paid and walk away.
With a turnaround in the works, there is now inherent conflict between advisors and the company who will want back some of those poorly spent advisor fees. MDR gets it now or they get it in bankruptcy. Maybe those hefty retention bonuses too.
No money. No friends.
No retention bonuses. No employees.