Business turns around after seven years without a profit
The only way your small business will survive is if you consistently generate a cash profit. But what if you hadn’t made a cash profit for seven years – and weren’t even aware?
For a small Central Coast bus company that was their reality.
When a small business isn’t making money it’s essential to identify why – and quickly. The faster you can discover where the losses are coming from, the faster you can reduce or stop the leak.
When Graeme began working with the business two years ago the owner admitted he needed help. He had lots of bills and didn’t “know his numbers”.
Initially he was very resistant to change, and within three months almost all the general staff members had left – only the drivers remained.
Addressing the culture problem
“My view was that the culture of the organisation was toxic,” Graeme said.
“Destructive behaviour was affecting the safe operation of the business. Checks weren’t being done, they weren’t following up on calls as leads for new business. Generally, there was resistance to everything.”
Following some serious discussions and inward looking – the business owner spent time asking himself “what do I want? What am I trying to create?”
Three key roles were established, and the process started to recruit for:
– A sales coordinator, who would also act as the customer service coordinator,
– A fleet coordinator, and
– A compliance coordinator to liaise with a core major customer.
Know your numbers
When you run a business, there is no room for unorganised, inaccurate accounting. Employing a decent bookkeeper was prioritised as the business’ numbers didn’t make sense and couldn’t be trusted as accurate.
For six months attention was strongly focused on stabilising the business, managing cash flow and having a very tight control on spending.
To assist cash flow, a number of the business’ specialty vehicles, needed to be sold.
Time was spent developing an understanding of what was happening in their sales and market process.
The results start to appear
Sales growth hit 30 per cent approximately 12 months after the start of the turnaround and the business made its first cash profit in seven years. Paying down debts that grew during the previous six years has been a priority and is expected to be complete within two years of the turnaround. With ongoing profitable operations, they are now in a position to consider replacing some of the vehicles.
Monthly reviews to check the scorecard
The owner now undertakes monthly reviews to ensure he remains fully aware of the financial performance of the business.
“It’s like reading a score card to check in on how they are doing. There are plans to develop some contingency plans, so they are prepared for potential changes in the business structure, as it is such a niche industry.”
Take the next step to true success in business, and life with a FREE 60 min manufacturing growth session. Contact Graeme today on 0407 093 662.