Turnaround and sale of an SME

By identifying flaws in the old business model, Gaynor revitalised the business, developing a new business model, re-energising the organisational culture, and creating new services that better met the needs of clients in the current economy.  This resulted in a profitable business for the future.

The Challenge

The business had over 200 clients however it was running unprofitably.  The owners recognised that they had left things a little late and that cash resources were diminishing, but asked Gaynor to work as interim MD in order to do her best to achieve a business turnaround, without additional funding, with a view to sale or growth. Gaynor had five months to achieve this.

It became quickly apparent that the business model was built on an ‘Easy Jet’ style of low price, low margin, high volume, selling a service which would appeal to SMEs.  This model can be effective where the customer feels they are getting good value for money and they become a lifelong customer, however in this case low perceived value resulted in customer dissatisfaction and poor retention.

Additionally, when investigating the financials it became evident that the business was losing money on every sale that it made and that while it covered direct costs, it hadn’t allowed sufficient money to cover operational costs, even if it sold very high volumes.

The Solution

New services were developed that met the changing needs of clients and provided results focused solutions for customers, which also embraced new technologies.  The sales and marketing strategy was adjusted to reposition the business and target and appeal to much larger organisations willing to pay for effective results rather than being driven by price.

A clearer direction was established for the business, which the team embraced and bought into.  While there was some initial resistance to the changes required, Gaynor helped them understand why the old model was not working and why the changes were necessary.  They admitted that they knew something wasn’t right but hadn’t previously grasped the importance of selling profitable services.

The fixed costs of running the business were far too high and this was addressed.  Some restructuring was required resulting in some redundancies.

The Result

Despite low economic confidence, the fragility of the Euro and poor sales over the Christmas period by the end of the five months we managed to break even, but with projections for growth and profitability.  We had also achieved our first re-sign of a client for a much higher fee and signed up one of the leading four banks. The business was sold at month five and the new owner adopted Gaynor’s recommendations.  He is now enjoying running a healthy and profitable business.

Gaynor Gravestock is a business specialist and director of Synergy and Strategy Limited.

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