We were on the brink of financial disaster
In a nutshell...
Who we buy from: Charity shops, community fundraising groups and the general public through the Cash for Clothes initiative
Who we sell to: Traders across the world, including in East and West Africa, Pakistan and Eastern Europe
CV: When you look back 18 months, what mostly stands out for you?
HP: I had suffered a loss of confidence in my ability to run my business. I didn’t feel I had the skill set to deal with all the challenges that come with our business model. So I brought in two Directors to run the day to day operations.
However, over a period of time I realised the arrangement wasn’t working. We were experiencing some real challenges regarding cashflow. Our stock is bought by foreign buyers and so this was effected (as it still is) by fluctuating currency exchange rates, but also falling profits which had left next to no reserves in the business to rely on.
The business was making loss after loss each month and there was no plan to get us out of the mess. The Directors didn’t have the in-depth understanding necessary to turn the ship around.
Plus relationships between my Directors and the team members were not good.
CV: It must have been a very stressful full time. What drove you to do something to change things?
HP: One particular day sticks out in my memory. I was sat in my office looking at our latest bank statement. My team had been complaining bitterly about life in the business. Various issues with suppliers and customers had cropped up.
I felt things come to a head.
It was like I had been sleepwalking and I just woke up.
A wave of frustration came over me, most of all with myself because I was still Managing Director and ultimately had responsibility for ‘managing the ship’. I realised I couldn’t afford to let my own fear get in the way any longer, I simply had to step back in to keep the team and protect the business.
CV: How do you assess the financial costs of the lack of strategic management of the business?
HP: HUGE, HUGE, HUGE. It got really, really worrying financially. We were continually in overdraft, in a big way. Something needed to change in order for the business to survive. We were on the brink of financial disaster.
CV: How did you set about making changes?
HP: I just considered which adviser had always been there for me and phoned Rob at Clear Vision. We discussed things and organised a meeting at his office with the Directors.
We negotiated the exit of the Directors, agreed what they were owed from the business and that was it. The business was back in my hands.
CV: How do you describe the effect on the team of this change?
HP: There was a sense of relief. And it really energised the team. Everyone felt ready to get on with their roles and pull together. It was like the team wanted to prove we could turn the business around between us.
CV: What did you do to start to reverse the financial performance?
HP: We had great support in setting up tools which really helped us gain financial clarity.
Adam helped Stacey my Accounts Manager set up a weekly cashflow forecast. It’s very detailed and she updates it every week to reflect the money we have actually received and what we owe to suppliers. So we can see what we have to pay, what bills are going to come in, and what we can afford to pay and when.
Slowly but surely having this visibility helped us get control of our cash again and catch up with payments. It’s something we continue to use and monitor closely. It’s really key for us.
CV: What other solutions helped drive profit for your business?
HP: We didn’t know which of our charity customers were making profit for us and which weren’t. So Adam created a costing spreadsheet for us. It literally works out what each charity’s stock contributes to our profits.
And once we can see our overheads are covered, we know we can afford to pay the charities a little more for some better quality stock. A better ‘grade’ of stock is highly sought after by certain international buyers so we can get more for it.
So being able to make these calculations helps us perform better in what is a really competitive, fluctuating market.
CV: How else have you managed to withstand the challenges your business model creates?
HP: We have an annual financial forecast but the markets we supply are highly susceptible to political change which occurs all the time.
So we needed the ability to assess the impact of these changes on our profit margins quickly and react accordingly.
We could see how being able to forecast our income and profits on an ongoing basis would help transform the business’s fortunes.
Adam gave Stacey some great training on producing a financial forecast, something which she is now doing all the time alongside producing our monthly management accounts. He and Carol are really great trainers and it means we not only have up to date knowledge of our performance throughout the year, we can also predict what effect the continual changes we experience have.
So all these financial tools and monitoring processes have brought us great financial clarity to help us to get the business back on an even keel. They even meant we could cope with the bank reining in our overdraft at one point.
Now the bank can see how we are continuing to monitor our finances and how well we are doing in managing our financial recovery. Being able to show them we are maintaining financial clarity, plus they see how well Rob and Carol in particular understand our business and how it works, gives the bank confidence in us.
CV: Tell us about how your team have come together to play their part in the business recovery?
HP: The team have been amazing. Really pulling together to work on further efficiencies to increase profits. The team are really running the business now and discussing how things can be improved.
For instance, we have put in place a ‘spot check’ system on the rag we receive from traders. Sometimes we find that traders strip out the quality stock and try and sell us the lower grade stuff they are left with. Now, when a trader arrives with a ton of stock, we can’t possibly go through it all, but we can quality check enough of it to be able to gauge whether or not to purchase it. It saves us paying for stock that we will find hard to sell on and for little or no profit.
This is just one example in a series of systems we have discussed in our board meetings with Rob, to tighten up what we are doing. Individually they are not earth shattering but the cumulative effect is considerable.
CV: What do you think would have happened if you hadn’t made the changes you made?
HP: In all honesty I don’t think we’d still be here. I‘m just so glad and grateful that my team are still with me because they went through a really tough time.
On a personal basis, I think I would have ended up paying out a lot of money in debts if we hadn’t have turned things around, and possibly having to sell off my home to do it. My life would have unravelled.
CV: How do you assess the financial recovery you have seen?
HP: I’m not letting things run away with me as we are still facing challenging times but I’m so grateful for the profits we are now seeing, we now have something to build on which is fantastic.
I find the daily turmoil of running my business stressful given the complexity of it all and having support with the introduction of new reports is wonderful.
As a leader, Rob encourages me it not let negative thinking get in the way. To be aware when I am thinking in a destructive way and let go of those thoughts.
When we have an issue, I can ask for Rob’s help. He and his team will then come up with a strategy to manage the situation. They really help bring direction for my team which they so want and need. With their level of financial and strategic expertise, I know that they will continue to help us protect and strengthen the business.
CV: What is the biggest difference to you personally now compared with 18 months ago?
HP: I just trust in my team and I know I can, within reason, leave them to get on with it.
I have learnt to have more faith in myself over the last couple of years but it’s knowing that the really important people are the people around me now.
This includes our ‘wider’ team, who help us both financially and strategically through the quarterly board meetings we have with Rob.
It’s about personalities and my team respect Rob and his team a great deal.
I am very aware that Clear Vision also care about me on a personal level, it’s not just about the business and money, they care about my wellbeing and look after my interests.
CV: How does it feel to have so much faith in the people around you?
HP: Positive for my retirement (laughs).