Sunshine Shade Sails was started by Jackie in 1992 and had grown to a turnover of $1.5m per year. They produced shade sails for domestic and commercial use and Jackie worked the business with her two sons. Jackie was referred to ThextonDODD Consulting by her accountant who was observing a steady drop in earnings over the last few years and was concerned with a sudden drop in the last financial year to the point that the business was approaching insolvency. Jackie was really in a state of depression and confided in the consultant that she had really hit rock bottom emotionally.
On the surface things seemed okay but once the consultant did a business diagnostic many negative issues surfaced:
- Family members had given themselves a substantial pay increase without any financial forecasting being done to ascertain whether this could be afforded.
- Products being manufactured were being quoted based on a competitor’s price list from 2002.
- There was no systematic way to actually produce a quote and the wastage being cut off whole rolls of fabric was not charged to the job.
- There were no financial controls at all and no monthly reports being produced.
- Jackie had a limited understanding of the financial requirements of running a business.
- There was no marketing plan to develop more business and they just waited for it to come in the door.
- The financial crisis caused a drop of 30% in sales.
The consultant commenced the Business Success Programme and established what Jackie actually wanted out of her business. This is called a ‘Business Vision’ and it is usually a set of five year goals. The diagnostic uncovered a number of important areas that needed prompt attention:
- Establish the exact financial position of the business.
- Reduce the income of the family members to what it was previously.
- Introduce a comprehensive product costing and quoting process to ensure every job made a profit.
- Gross profit was increased by 24%
- Introduce an accurate monthly financial and KPI reporting system.
- Develop a total marketing plan to gain more customers.
- Re-brand the business and products as the brand looked tired and out of date.
- Developed budgets and cash flow forecasts for presentation to the bank.
- Get all suppliers to requote resulting in a saving of 9%
It took 12 months for the business to turn around and then salaries were restored. The owners now understood the value of accurate timely financial reporting and learnt how to make products cheaper and sell them for more than they had previously. The stress and pressure was off Jackie and she actually enjoyed coming to work every day. The next twelve months they planned to acquire a loss-making competitor with a turnover of $800k for almost no investment as the owner would accept a job with them as payment. Turnover is expected to reach $2.7m with profits increasing 400% since the time of crisis.