Business Advice With Ruth Badger - Part 3

Ruth talks to a medium sized business about the areas that will encourage turnover and healthy growth. Watch the whole business surgery here.

 

Transcript: Business Advice For Commercial Lighting Projects Business

James Pomfret: I'm James, James Pomfret from 299 Lighting and I run a small project lighting business, we specialise in lighting for commercial projects and interesting sort of environments. Energy efficiency is obviously a primary aim of ours, for our customers.

I used to work for another lighting company for ten years, taken the business from quite a small level, to just six or seven people now employed by us and grown the turnover by twice as much.

Well the reason why I wanted to come have a conversation with you was to find out some ways we could you know, change the business because you know we've got to a stage where we've grown it. You know we've probably grown a turnover quite well in terms of percentage terms over the last three of four years, but you know were at a stage now where we're finding it more and more difficult to get to the next level because of you know financial issues and premises issues and things like this.

Ruth Badger: Okay.

JP: So you know, we're kind of stuck somewhere, but you know we need a bit of advice I guess.

RB: Okay, it's interesting when you talk about growth; I've got this belief that actually you've got to make the most out of what you've got, right? And growth is an interesting term, because growth can mean a number of things. People think I'm odd because when I talk about growth, I'm interested in one thing and one thing only and that's profit.

Right, so I could actually grow my businesses without moving offices, without increasing staff numbers because staff are bloody expensive, without changing my model by account management and for you, I'm a drawer so I'll have to draw some things out for you, but growth is a very, very big word. It's a black hole of a word really.

What you've got to be careful of, and this is a really important point, everybody wants growth, but be careful what you wish for because once you've got it you might actually grow but not actually be any better off. And unless your exit plan is to sell, at 5, 6, 7 years, then all that had work and pain and everything else, you go home every night, every weekend going on the same holidays, driving the same car, do you get what I mean?

JP: Yeah, yeah that's it, I understand what you're saying.

RB: There's different elements of growth, I told you I'd draw and I'm just going to show you it.

You've got different elements of growth; the first one you've got is in relation to turnover. Ok, now for that for me, there's different things you can do, you can go out to actively market, you can put money onto the website, but, I'm not somebody who basically just throws money at situations because I'm too analytical, because for every pound I spend I want to know what my return is.

So if I say to you: 'Okay then, well your biggest source at the moment is word of mouth,' right? I'm going to talk B2B, and I'm going to talk B2C. So we've got business to business, and business to consumer. Right this one will cost you a lot, lot more, because consumers, especially your high net worth individuals will do one or two things. Firstly, they'll engage with an interior designer or a designer, which is what I did, and I'll take you through the route that I got to, because I guarantee you that somebody like you got involved in my house, and I would have preferred to deal with you than to deal with them, because they get all airy fairy and I'm like: 'Well how much is it going to cost?'

And what I see is margin upon margin upon margin. What you're not selling is your light that somebody just shoves up. Do you know what I mean? You know, and there is different angles. So, in relation to this customer here, your marketing can be, needs to be more, and I'm not just talking about your bog standard shove loads of money on pay per click and stuff like that and tweet about it because I don't think that would work.

There's a company down in South Wales, who deal in high net worth individuals and  networking of their properties. And I was talking to one of the directors, I said something to him back in 2006, and he laughed, and I said to him: 'If you don't believe me I'm going to pay for it, and once it's washed its face you give me the money back'. And I said: 'There's different routes in order to get your high net worth individuals', one is through your designers, because people always think: 'That's a nice shop' or 'Oh, I've had an interior designer', and I'm talking about your ones with the proper disposable money. But the other way to go directly to them, you've got to have a good website because people will always verify. I said to him go into all the life magazines, like Cheshire Life, Liverpool Life, Lancashire, because what you've got is very high-end people and a two grand advert, washes its face in two seconds when you're selling 40, 50 grand lights. And you look at your Alderley Edges and your Cheshires and you're mapping it out.

JP: Yeah it's in the right place, absolutely.

RB: What it does is, it diversifies your revenue stream, because when we look at turnover, if you actually go: 'Okay, we've got business to business, okay and that comes from my builders, my this, my this, my this', if you know there's a pot of gold there, go and dig for more, and that's basic sales, isn't it?

What you've got to be careful of is how I increase. So I've got turnover, and I've got GP, and I've got net profit, right? In relation to net profit, I can make an impact on here because you can have growth by negotiating down your suppliers, which means you make more margin. That's one simple way to do it. That will only capitalise you about that much, and actually your suppliers might get fed up with you. So in relation to squeezing your business you might get more. In relation to your turnover, it's all about conversion. And you know this as well as me.

Firstly you've got your account management of your current customers, and if you grow, and this is really simple advice, what happens is as you grow, and you've got new members of staff, and you start to get new customers, your existing customers go backwards and backwards and backwards, and the time that you spend getting your new customers and investing your new customers, they're dropping off the back end as quick as they're coming on the front end. So, in a business where you want to grow the sales the first thing you've got to do is account manage the existing owners, what I call existing owners, right?

If a set number of customers, out of your 50 customers that contributed last year, you can pick five or ten that give you regular business, they always need to be serviced by you and nobody else, and never, ever get away from that.

I've got somebody who is very close to me in relation to a business sense because I've just taken half of his business. All he's conscious of is: 'I need staff, I need bigger premises,' he's you in a different capacity.

'I need staff, I need bigger premises, I need new customers' and I'm saying: 'Remember your nuclear customers,' because your new staff with guidance from you can go out and get new customers, but that takes time. And that time, you know as well as I do, to build relationships, to procure leads, to actually get them to buy into you, to deliver, you will have to turn your back on that if you do that.

One of the biggest problems with growth is, and growth in relation to recruiting staff, is you pay for argument's sake 25 grand, because whether you take somebody on a 20 grand, you've still got their NI, their pension, their comps, everything else. Before you even do that, you need to set out money, because ultimately, what I say to people, and I'm really strict on this, I know that on every single person I need to make 30% return, I'll pay them a million quid, I'll pay them two million quid, if they're giving me a 30% return, and I'm talking about the way that I work out somebody's commission, say if for argument's sake I'm putting somebody on 18 hundred quid, GP wise, the moment they've exceeded 18 hundred they get a percentage of it thereafter.

Growth can be growing into bigger offices, getting more sales, growing in staff. If you sanity check the offices and go: 'You know what, it really isn't right for me,' then that tells you where else you need to grow. Is that growth in relation to, okay so we're not going to grow into bigger offices, if you're not going to go bigger offices, really you can't house another member of staff, so that means that you have to go for bigger deals, which actually means you'll make more money, if I'm honest. Bigger deals in relation to the size of deals, mixing some of the consumer, and you've got growth, but you've got it in different areas.

You need diversification in your revenue stream, right? You need that for your own sanity, because if one of your builders or interior designers goes bump, it affects your business.   

The business sounds obviously you're not in a dodgy situation, you haven't got cashflow problems, I'm look at you.

JP: You could always do with a bit more cash.

RB: But you haven't got in a situation where you're going backwards, you're in a situation where you're going forwards. If you've got a business that's turning over and you're making a profit, congratulations because half the big boys in The City ain't doing it, and if you take your turnover or, forget your turnover, if you take your net profit up by 10, 15, 20 grand a year, that's more, that's huge, huge.

JP: The reason why we wanted to meet with Ruth was to actually have a bit of a conversation and try and find out a bit more about business finance, try to find out a bit more about how to grow our business to the next level, to take it to a new premises, a new warehouse, and also grow our staffing requirements, and find out some ways of doing things in a way that would be good for our business and good for our employees.

Yeah, I always enjoyed watching Ruth on the Apprentice; I was quite inspired by her actually.

RB: There's two separate types of business people: there's people who want to have a business, and there's people who have got a passion for a certain element of a business. In my experience, people who want a business could be doing anything, and it's passion that makes or breaks the business. So if you've got a clear passion for a product, a service or an industry, to set up a business around that is more likely to succeed.

You know, understanding who you want to aim to product at and actually what are the three triggers really for them taking is key, because what people do is, from the moment they sell, they think selling is about talking, and actually selling is about listening. Listening to what that business does, what that business provides, and what they do, which you can match.

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