Often a business owner’s view of their own company can be clouded by their personal involvement. Some business owners remain hugely optimistic even when the evidence presented clearly shows a business to be beyond help. Conversely others are sometimes depressingly pessimistic even as they are being told there may well be hope. Making objective decisions about your carefully nurtured ‘child’ can be difficult.
Such was the case with the Home Counties printer that had apparently reached the point of no return when Mercantile was invited to assess the future viability of the business. The husband and wife run business had been trading for 15 years with mixed results, but with a history of good ideas never quite bringing the success they deserved. Their reputation was for innovative and intelligent design, allied to quality work.
Our appraisal showed that the company was badly under-capitalised, over-borrowed and struggling to make ends meet. High quality, sometimes blue chip, customers often only used them for ultra difficult work that was rarely profitable, or short run, “we need it tomorrow” jobs that barely contributed to a shrinking turnover.
Gary really wanted to run a successful business, but remained pessimistic – and the balance sheet, the pressure of debt and the ongoing overheads suggested he was right. Things looked bad, but results for the last quarter were a little better and it seemed that there might be a business worth saving.
There was light at the end of the tunnel but first, surgery was needed. Sales had to be increased by at least 50% if the company was to have a chance of survival. The printing staff were skilled but clearly needed greater leadership. There were ‘issues’ about efficiency, timekeeping and loyalty with some of the office staff. Debt was high and Gary and Gill had already given significant guarantees to the bank, but they had considerable equity in their home and a relatively small mortgage. A chink of light? Well yes, but only for the committed and brave.
Using the equity in your home, whether to support a guarantee or to secure personal borrowing, is common for SME owners, but should not be undertaken lightly. Ideally it is better to separate business and personal finances, but that is often not practicable. In this case Gill and Gary really wanted to keep their business and had exhausted every other alternative.
Three months later the new funding was in place, Gill had taken responsibility for production, new administrative people were in place and Gary was frantically making phone calls to an impressive database of customers and immediately raising the company’s profile and turnover.
There was a lot of ‘corporate’ work to be done in the background, so to aid their recovery Gary and Gill retained Mercantile indefinitely to continue to guide them through trying times – and they were trying!! Two book-keepers came and went before a real star emerged and a similar horror story unfolded on the sales front, but through it all Gary and Gill remained steadfast – with the support of an experienced mentor. Credit control was tightened and production efficiencies improved. A change of image was actively promoted and supported by a genuinely innovative brochure. There were ups and downs and not all success is immediate, but determination and the right advice are a potent combination to help drive a business forward.