LIGHTING DESIGN & MANUFACTURE - 'A' LTD

An £8m turnover lighting design and manufacturing company - a profitable business on the brink of insolvency. Despite factoring, the company had run out of money by virtue of being continually advised on previous occasions to grow sales to head-off mounting cash flow pressures.

But this will not work unless you first re-design your business to generate cash.  And the notion that growing sales could fail, with a factoring or invoice discounting facility in place, is something that many people struggle to comprehend.  But 'yes' it can happen. We cover problems with factoring and invoice discounting elsewhere.

Despite their very best efforts the directors found the business sliding away from them. Unbeknown to us at the time, the financial problems were acute. The position was so dire that they were no more than a couple of weeks away from losing the business entirely.

So in these acutely pressing circumstances we showed the directors, in a 1-day bespoke training session, how certain changes to the financial design of the business could be made and start to immediately help cash flow. And in hindsight, having set this new strategy in motion, the MD conceded that even after just one week he could instinctively feel that the change in focus was right.

To support this change in strategy we carried out a detailed analysis of product line profitability over the following months. Fully reconciled this was no small job. Out of this, the primary focus fell on targeted margin improvements, rather than the conventional slashing of overheads, and the results were ongoingly reviewed on a line by line basis.  As is the norm, it certainly threw up some unexpected results and gave the directors some dilemmas their compeititors would love to have had!

From having run out of money, borrowings were subsequently halved (down some £1m) over the next 18 months.

What does this case demonstrate?

That cash flow can be quite a subtle art and the impact small changes in financial strategy can make in the hands of fundamentally talented management teams. The business has emerged to become a leading player in its sector.

Working With You - How We Charge

Free initial meeting (in confidence and without obligation).
We offer a quick initial view at sometimes reduced rates to establish if a business can be made viable or has gone too far.
We can work on a day-rate basis. Tends to be where work is one-off or short-term in nature or in situations that, at the time of our involvement, are inherenetly uncertain.
We can work based on a monthly retainer where the relationship is envisaged to be ongoing, for instance non-exec finance roles or detailed profit improvement programmes.

 

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