Business Health Check/Audit

Brief:

Company engaged us to carry out a strategic review/business audit; their profit was in decline after the expansion of their product range.  Having run a successful business for 10 years focusing on baby/toddler products, they decided to expand into the toy market as they watched their growing child engage with toys.  They believed they could do better than their competitors in the new field.

Findings:

A business audit led to an in-depth understanding of the business, including their cost base, revenue by product and profit by product.

• We attributed the challenges they faced to new product lines launched in the last 12 months. 
• The six products launched were not as successful as expected. 
• They had been enticed away from the market they understood completely, into one in which they had limited experience. 

Recommendations & actions taken:

• Exit the toy market.
• License the toy range to an existing toy brand, utilising moulds invested in.
• Refresh current range in baby/toddler market.

Results:

• Licence revenue added c35% to turnover and 25% to gross profit.
• Payroll savings contributed 8% to net profit.
• Refreshed range earned four new major account listings and 18 smaller retail listings.
• Streamlining cost base contributed a further 13% to net profit

Brief:

Company engaged us to review the financial information available to them as they found the information difficult to interpret, inadequate for making decisions and, therefore, not meaningful. The financial information presented a very different picture to that painted by cash in bank.

Findings:

Having gained an understanding of the business operation, we inspected all financial information available, both systems-generated and that provided by their accountant. We found the financial information to be:

• fully historic; it presented a picture of the business at a past date/time frame;
• untimely – often provided to management on average 3.5 months past the period to which they related; information mainly driven by VAT reporting;
• not detailed enough for the management of the business; only top line Profit & Loss and Balance Sheet for the business, although a Sales by Product report was available.

Recommendations & actions taken:

• recommended a change of accounting system as well as defining rigid processes and controls around the business;
• prepared 12 months' forecast;
• designed a management reporting pack to provide meaningful numbers to the owners on a monthly basis, with narratives to explain variances to earlier periods;
• designed reports to be included in the management reporting pack where the information is not easily accessed from within the new system;
• KPIs implemented to manage performance of the business;
• derived a rolling 12-month cash flow;
• credit control analysis and processes to recover ageing debt.

Results:

• specific tasks and responsibilities for each employee;
• real time information enables owners to make timely decisions for the business;
• bad debt reduced following overhaul of credit control;
• rolling cash flow enabled owners to assess affordability of future decisions;
• unprofitable & profitable products were highlighted for owners to determine future actions for each product;
• focused financials resulted in c31% cost savings in the six months following our engagement.

Brief:

Company generates c60% of its sales from mainland Europe and was concerned about the impact of Brexit on the business. We were engaged to identify the likely implications and implement actions to mitigate the risk to the business.

Findings:

Having gained an understanding of the business operation and on speaking with key partners, we identified a potential risk to the business losing c75% of its European business when Brexit is concluded.

Recommendations & actions taken:

• Set up a legal commercial entity in Europe, Germany was identified as the best fit for the company.
• Relevant members of the senior leadership team would operate from the new EU registered company.
• Some key staff to remain in the UK to support the Senior Leadership Team on the continent.
• Renegotiated the basis for pricing projects.
• Sought to secure assurance of business continuity post-Brexit.

Results:

• 100% lock-in for all mainland European customers under the new structure for a period of 2 years.
• Identified cross-functional collaboration opportunities with mainland European customers, further increasing turnover.

Brief: 

Company is a brand with three products managed by a distributor under a traditional distribution model. After five years, the company developed new products to enhance their range within the market and wanted to take back control of their brand.  The owners engaged us to take them out of distribution and create a framework for them to manage their brand themselves.

Findings: 

The time was ripe for the business to come out of Distribution.  The company needed the profit from the three products to contribute to funding the change in operations. The brand had the potential to develop a cohesive range to establish themselves as a dominant brand in the marketplace.

Actions taken:

• prepared an 18-month cash flow to assess the initial cash needs of the business in the first six months of direct management;
• secured funding for the operational cash flow needs;
• set up office with IT infrastructure and essential staff;
• assessed inventory needs over Y1 and implemented an inventory ordering and replenishment plan;
• liaised with Distributor to minimise disruption to business during change of management;
• secured NEW accounts with major retailers – none lost during this transition;
• secured listings for NEW products with all major retailers;
• expanded the territory presence for the brand within Europe;
• renegotiated terms with inventory supplier;
• negotiated 3PL warehouse and logistics service;
• implemented processes and controls to enable order fulfilment within the stringent terms commanded by majors;
• designed and implemented trading terms & conditions;
• brokered product liability insurance;
• set up an online e-commerce platform for the business, one that did not compete with its core B2B operation.

Results:

• The business was able to trade independently within 1 month of taking the brand in-house.
• NEW product listings secured across existing retail partnerships as well as two significant major retailers added to their customer base.
• The business was able to process orders from majors without incurring penalties.
• A cohesive and relevant basket of product, including the redesign/repackaging of some products, should see this business grow sales by 60% in Year 1 and 100% in Year 2.