Guiding a wholesale business within the construction sector back to profitability
With a revenue of £3.6m and EBITDA of £7,000, the return on sales within this family-owned business was very low and they were only just breaking even. Lacking strategic direction and focus, alongside the fact that they were regularly losing money month on month, they recognised the need for external support to help guide them back to profitability and growth.
The Challenge
The main obstacle for this wholesale business was the need to formulate an effective strategy to turn the business performance around. They were looking to return the company back to profit and generate some cash – performance like this tends to eat into cash liquidity which needed rectifying quickly.
Alongside this, other challenges included:
Poorly controlled inventory – allowing stock to go out damaged, resulting in a high volume of returns and right offs.
A third of stock was slow moving or dead, tying up much needed capital.
A disjointed sales strategy so they were only just managing to cover the wage bill.
The Solution
Enlisting the help of Jon Corns, an experienced business practitioner, the team of directors were able to gain some clear direction and an understanding of who was accountable for what – something that had previously be missing. A strategic business plan was introduced to focus on key areas for improvement and change. These included:
A new sales approach focusing on sales activity – this had an immediate impact, achieving in excess of £400,000 per month in revenue.
Inventory control management to get rid of dead stock to turn it back into cash.
Supply chain management involving buying in containers directly from suppliers rather than UK agents. This improved payment terms and gross margin.
Implementation of process improvements within the warehouse allowing them to save money.
Tactical, focused and effective marketing for product campaigns and promotions.
Collation of real data to enabled them to make informed decisions.
The Outcome
By working in close partnership with Jon to implement these changes, the company is now experiencing significant improvements and they are on a strong trajectory of growth. They have grown by £1m in revenue, sales are attracting a return of 5% (which is now a 6 figure EBITDA), new customer acquisition and inventory levels have gone up and the team has been restructured so all the directors are aligned and have specific areas of accountability. A win-win all-round!
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