After an initially period of good profitable trading, the company entered a period of turnover decline and cash flow difficulty. The future did not look good with losses starting to mount, and the client clearly needed some assistance in getting things back on track.
Initially the business engaged in a number of restructures including rounds of redundancies and other cost cutting exercises. Given that the existing wholesale model was difficult to manage profitably, we worked with the client to investigate at a range of 'what if' scenarios based on different levels of turnover to see if the business’s position could be turned around. This required that we prepare numerous forecasts based on differing requirements. In the end we concluded the only really viable option for the company was to abandon the wholesale model and instead look to distribute its product via a larger Wholesaler in the sector.
The client was understandably nervous with this as a solution as this meant in effect working with their current competitors. They were also concerned that they would lose control of pricing.
In the end management could see the benefits to the business and ultimately considered took a leap of faith.
Since then the client has gone from loss making to profit making with a much simpler business model to boot. In the first 12 months alone of new model they produced £400,000 in profit, compared to losses of £150,000 to £200,000 in previous 2 years, and today are in a very positive cash flow position in excess of £1 Million.