Midwest energy and Communication's Case Study
Industry-Leading Utility Company Increases Efficiency, Drives Growth with Synario
9 min Read
Take-Aways from Midwest Energy and Communication's use of Synario
- Midwest Energy and Communication’s (MEC) modeling activities were largely inefficient and disjointed. MEC relied on Excel, which was incapable of performing forward-looking multidimensional analysis.
- MEC sought a solution with enough power to accommodate the complexities of their business. Including insight into their various regulated service lines and comprehensive analysis to provide a holistic picture of their financial future.
- Synario comes in – the platform allows Crandall and his team to perform forward-looking projections and report financial information on a historical basis, including extensive variance analysis.
- MEC is now able to confidently answer ad hoc ‘what-if’ questions presented by their Board of Directors on the fly.
- MEC can now visualize the holistic impacts of new projects, which is crucial considering that MEC’s core business is very capital intensive.
About Midwest Energy and Communications
Midwest Energy and Communications (MEC) provides electric distribution, fiber broadband, and propane distribution services to rural southwest and southeast Michigan, as well as portions of northern Indiana and Ohio. A member-owned cooperative, the company traces its roots to the 1930s when it was established as an electric distribution provider. MEC has grown rapidly over the years, expanding both its serving offerings and customer base, and currently reports more than $100 million in revenue and $300 million in assets. By using Synario, MEC is confident in the long-term viability of its strategic plans, ensuring success as the company accelerates its growth.
To learn more about MEC, click here: www.teammidwest.com
From Spreadsheets to Synario
Todd Crandall was a long-time user of Synario prior to his position as Chief Financial Officer at MEC. As he explains, “I’ve taken Synario with me. It’s traveled with me from Kansas to Kentucky, to Tennessee, and now to Michigan.”
When Crandall first started his tenure with the company in 2016, MEC did not use any sophisticated modeling tools and instead relied on Excel, which, according to him, was incapable of performing forward-looking multidimensional analysis. This put MEC at a serious disadvantage, largely because the company is so complex.
As Crandall explains, “A lot of the complexity in our business is not faced by other organizations because we have three lines of business – electric, broadband, and propane – that we have to keep separate and distinct, in part due to regulations.” However, from a financial perspective, MEC’s service offerings also need to be consolidated in order to evaluate the company holistically.
This type of multidimensional analysis is next to impossible to perform in Excel, as Crandall can attest to. “I've got more one-hundred-hour workweeks in my past professional career than I would care to admit for trying to use Excel for financial analysis,” he quips.
MEC’s experience with Excel mirrors Crandall’s – modeling activities were largely inefficient and disjointed. The company’s existing modeling activities focus on both historical reporting and forward-looking planning, which Excel and most other Cloud-based platforms cannot handle. Crandall explains that the company captures its financial information through the general ledger, which is divided into dimensions, each of which has meaning.
This allows MEC to then change the intersection of those dimensions, which in turn enables different views of the company, either as separate lines of business or combined. Crandall also notes that he performs activity-based cost modeling that allocates common costs across the company as a whole, largely because of the regulatory compliance MEC must adhere to.
This is where Synario comes in – the platform allows Crandall and his team to not only perform forward-looking projections but also report financial information on a historical basis including extensive variance analysis.
Evaluating Strategic Plans with Modeling Intelligence
Crandall provides two examples to demonstrate how Synario enables MEC to make financially sound decisions. In 2014, MEC made the strategic decision to construct a $60M fiber broadband network to provide high-speed internet service to 30,000 members located in its southwest region. Fast forward to 2018 during MEC’s annual strategic planning session, where the company’s Board of Directors decided to evaluate the feasibility of expanding its fiber broadband network to provide internet service to the 6,000 members in its southeast region.
By using Synario, Crandall says MEC was able to confidently answer questions such as: “Is the project financially viable? What’s it going to do to the organization as a whole? What will it do to loan covenants? How, and who, will finance it?” He further adds, “It was a fantastic opportunity to harness Synario’s power for advanced modeling.”
Crandall also explains that Synario enables him to isolate what the broadband expansion would look like if it were a standalone business, or if was combined with other operations. The company can visualize how the organization as a whole would be impacted by new projects, which is crucial considering that MEC’s core business is very capital intensive.
Since MEC is a cooperative, the company does not have access to equity markets, and consequently must borrow money to finance its expansion and capital asset construction plans. Crandall explains that the company has to be extremely careful with evaluating how this debt will be serviced, especially as MEC expands. Ultimately, because of the modeling Crandall and his team performed with Synario, the company decided to move forward with the $20M project in the company’s southeast region, and the financial results continue to look great.
MEC is also implementing an additional and particularly aggressive broadband expansion initiative, which is the company’s fastest growing business segment. As Crandall explains, the Federal Communications Commission (FCC) is currently deploying multiple initiatives in an effort to expand broadband access to more of rural America in order to eliminate the digital divide. As part of this, the FCC implemented a program called the Rural Digital Opportunity Fund (RDOF) whereby a reverse auction was held in late 2020 through which over $9 billion was awarded to the winning bidders.
Through the RDOF auction, MEC was awarded $37M that will be used to expand its existing fiber broadband network. The RDOF broadband expansion project will enable MEC to construct an additional 3,223 miles of mainline fiber and connect it to the company’s existing fiber backbone of 2,452 miles. When completed, the RDOF expansion project will enable MEC to provide high speed fiber broadband services to an additional 33,000 locations that are currently underserved based on the FCC’s existing definition. The total cost of the entire project will exceed $150M over a 5-year period.
As Crandall says, “We continue to use Synario extensively to make vital financial decisions in conjunction with implementing our strategic business plan.” High-stakes projects such as those mentioned by Crandall demonstrate the tremendous value Synario adds to any company or organization – it enables key stakeholders, including CFOs, to make better strategic decisions. As Crandall explains, “We use Synario to ensure that projects make sense from not only a return perspective but from a cash flow and debt covenant perspective. It lets me provide better strategic guidance to the organization so that we make good decisions and not bad ones.”
Embracing Innovation to Drive Business Decisions
This is particularly important for a rural telecom company, as there is a slim margin for error. Crandall cites multiple business lines, regulatory concerns, plans for rapid expansion, and highly leveraged, capital-intensive services as some of the primary reasons he needs an advanced modeling tool.
He says, “Mistakes get amplified when you don’t have as much revenue to spread your mistakes over.” Speaking bluntly, Crandall says, “If you aren’t using a tool such as Synario and you’re in my seat, you’re not doing the job the way that it should be done. A tool like this is essential.”
He notes that most other similar companies use an Excel model purpose-built for their forward-looking planning, and while adequate, it does not come close to the capabilities of Synario. Crandall says, “I’m shocked that my peers would use an Excel-based tool for their forward-looking forecasting.” As an industry leader, he frequently is asked by his peers if he can share his financial models, to which he replies, “We don’t use Excel. We use a tool called Synario, which is a much more comprehensive platform built specifically for advanced modeling.”
The industry’s increased competition is driving CFOs and other stakeholders to seek out tools that are more effective, especially because companies risk their financial viability without proper modeling. As Crandall says, “You’ve got people in positions of leadership that all they’ve known is Excel, and they don’t know that tools such as Synario exist.”
Increasing Efficiency and Promoting Accountability
Crandall also describes some of his favorite features of Synario, and how the platform benefits MEC as an organization. As he explains, “Where Synario drives improved visibility and efficiencies is that it can produce meaningful reports from a high level with the capability to then 'drill down' and see detailed information at a general ledger account level.” This is functionality that Synario refers to as micro and macro scenario analysis.
MEC also performs forecasting for electric sales based on kilowatt-hours, and they are able to analyze what is driving sales up or down. This is also particularly relevant when determining how gaining a large industrial customer would impact the electric distribution business.
Ultimately, however, what matters most to Crandall is reliable data. He says, “We always have consistent data, and there’s only one version of it. Our reports are also always accurate. Synario lets us do the consolidations between our separate lines of business so that we can look at our organization holistically.” This matters when Crandall and his team need to analyze total spending across the business, but also in each department so that he knows where to scale back or ramp up if necessary.
At an organizational level, Crandall has better visibility into areas that need more accountability or better business processes. He says, “Having the historical and forward-looking analysis enables me to have factual information to say, ‘Here’s an area where we’re off course. What are we going to do about it?’.” He adds, “Synario is not only a financial tool to make better strategic decisions, but it’s also a tool to drive operational excellence.”
After his experiences with other modeling tools, what he enjoys most about Synario is the flexibility – and it’s not something that requires consultants to implement. Crandall says, “I like that as our business evolves, and we look to expand our operations outside of our historical serving territories, that I can model that on the fly and do it the way that it needs to be done to meet the needs of our organization and to meet the needs of our financial partners.”
This includes the integration between the balance sheet, income statement, and statement of cash flows, which enables the company to easily adapt and adjust its core model. Crandall adds, “The other tools that I've evaluated don't have that type of flexibility, or if they do have that type of flexibility, the knowledge resides with consultants. When you are working on a major project under tight time constraints, being dependent on external consultants doesn’t always work well.”
As for the advice Crandall would offer to organizations considering Synario, he says, “Companies need to be able to think differently and get out of the confines of rows and columns. There are much more efficient and accurate ways to model.” Businesses need to be able to operate multidimensionally, which is not possible in a series of cells. Additionally, he stresses that the adage “garbage in, garbage out” very much holds true for financial models, and it is especially important during times of economic stress for businesses to predict the future with a high degree of certainty.
A Word from Todd Crandall, CFO, Midwest Energy & Communications
As the CFO of a rural utility company with multiple lines of business, I need to make sure my long-term strategic plans are financially viable, especially during times of economic stress. Synario is the perfect tool – it’s multidimensional and flexible, and always provides consistent, reliable data so that our organization can drive operational excellence. The type of analysis we need to be able to do is nearly impossible to accomplish in Excel, or other cloud-based tools for that matter, simply because they don’t actually provide forward-looking analysis the way Synario does. I’m a long-time user of the platform and it’s an essential tool for me to be able to do my job.