The client is a national retailer of home furnishings. The business has grown rapidly from one branch to 42 branches in six years. The rate of organic growth has created a number of problems which the current management team have struggled with:-
- The business is overtrading with insufficient capital.
- The directors have been highly successful in growing the business, but lack the experience and knowledge to implement good management practices which would give stakeholders and potential investors the confidence to grow the business further.
- The bank has expressed a lack of confidence in the management team and requires significant personal guarantees from the directors in order to continue with the current banking arrangements.
The companies bankers along with the chairman asked us to work with the current directors to:-
- Establish the profitability of the business
- Improve the efficacy of the business management
- Re-finance the business
Key Project Activities
Working closely with the board and specifically the finance director we:-
- Reviewed the financial statements and established that the accounts had been significantly miss-stated for the last five years, resulting in a misconception over profitability. These were then re-stated.
- Prepared a detailed profit forecast for the next two years and established the viability of the business.
- Implemented strict cash management procedures as the business was cash constrained.
- Reviewed the business model and established areas for significant improvement, namely:-
- Use of loss leader products during the four key sale periods throughout the year.
- Use of overlapping media advertising.
- Product lead times
- Developed management reporting processes and established a robust Board review of progress.
- Prepaired a business plan encapsulating the proposed benefits.
- Negotiated bank finance
- Organised a part equity offer from a VC
The client benefits included:-