Saturday, 26 May 2007
Friday, 25 May 2007
Easy to say. Harder to execute.
This was one of the cornerstones of our business mantra: Cash belongs in the bank not in the warehouse. Stock is the enemy. You can't grow your way out of a hole. Shrink to survive. Don't let overheads grow faster than your business. If you build it they will come. Positive churn positive churn positive churn. Pick your fights. Only get in the ring if you know you can win.
And we stuck to this one for three years. For three years it was easy.
In year one and two we didn't grow our way out of the hole, we shrank. So we kept turnover tight and churned our margin up.
In year three we planned to relocate in September so kept a lid on growth. We didn't want to be executing a formidable relocation project in the middle of a growth surge so we kept business steady.
I can honestly say that in those three years we did not openly sell. We acquired no new customers. We concentrated on trading up and churning the portfolio. Doing a better job for our customers today than yesterday and better tomorrow than today.
So we could control people costs very tightly. We could control expenditure and investment on our terms.
Once we had moved, it all changed.
We needed to grow. We needed new revenue. We knew that we had a couple of pieces of business in very mature markets that would be vulnerable to price erosion if not collapse within 2 years. We had to move on.
As the R&D cupboard was fit to burst by this point we had plenty of ammo. So tentatively wandered out into the world and picked a fight or two.
Sales took off. Rocketed. This put a huge pressure on an organisation that had been perfectly scaled to the first three years.
It quickly began to creak.
We realised that we had crossed a line. Below that line the organisation as configured for years 1-3 could cope. Beyond it it could not.
But what if the cost of an organisation that could cope with the growth curve meant overheads growing faster than turnover? And would it be affordable if we entered a storm or if the new revenue slowed and erosion in the mature portfolio accelerated?
As it turned out it took us six months to recruit the new talent that we needed. There had been some leavers along the way so we applied the positive churn principle. I expressed this at the time as our needing to churn the mean intellect of the business upwards. That is not to demean the people who moved on. We lost some real stalwarts. People who were a real part of the family but who were moving on for reasons of their own unrelated to our journey as a business.
The way the people churn phased meant that the year came in at the same ratio to turnover as the previous year. Big tick perhaps but ephemeral. This meant a big increase in spend that was back ended that would show itself as a big upward lurch in people costs if top line growth slowed in 2007.
Which is exactly what happened in the first quarter. The erosion that we had foreseen back in 05 was now washing through and eliminating the effect of the soaring new business growth.
If I compare my first quarter nos for 06 and 07 people costs growth is running ahead of turnover. Twice as fast in fact.
But, my latest forecast says this will even out by the end of the year and will be more or less in line with last year. So I am holding my nerve.
Overall if I compare the baseline yr1-3 with 07 to date turnover has increased marginally faster than overheads, but the consensus is that with the new team in place, we are now operating a the lower level of potential.
By which I mean that the team is more or less fixed until the next ceiling which is probably at about 40% growth on current turnover.
We just have to make that happen.
Posted by Clive Birnie at 12:03
Thursday, 24 May 2007
Wednesday, 23 May 2007
A few times over the last week, I've spoken at conferences where laptops were open and people were online. They were liveblogging, taking notes in real time and posting them online for all to see. At first, this sounds like a fantastic idea. Now, thousands of people can listen on what's happening in a smaller group.
On closer inspection, it doesn't work particularly well.
I am a regular reader of a particular form of live blogging and have been since the summer of 2002.
I think it works very well when:
a) the event is suited to it and has a "I must know now" element about it
b) the blogger can provide real time information to an audience that would otherwise be in the dark
The event that turned me on to this was the World Cup which that summer took place in Japan and South Korea and so had games scheduled at some odd times.
So to ensure I could keep up to date with every game I kept the running blog commentary from the football section of GuardianUnlimted open when at my desk. It meant I could continue to work and indulge my insatiable appetite for the king of sporting tournaments.
I have continued to use this when other media forms let me down or to keep tabs on one game whilst watching another. I have a TV card in my desktop pc at home so can have one game playing, one live blogged, and have an IM conversation with my brother about both games at the same time.
Toinght I will be sticking to TV only as Liverpool take on AC Milan in the Champions League or European Cup Final.
I may be livebeering in real time as I watch but apart from that...
Monday, 21 May 2007
Its an accident of history but all my main competitors are huge.
I can think of three in one area who have global turover 30 or 40 times our own.
One of the smallest in another area is a mere 7 times.
The largest is owned by a global mega corp oil company. Another has turnover counted in billions.
Whoppers all of them. They have more people, more capital, entrenched market positions, and longer standing distribution relationships.
Am I worried?
What do you think.
Sunday, 20 May 2007
I have a product that everyone insists will not work outside the UK.
I think it will.
So I gave a chap we know a car full of product and sent him to seek a cheap answer. Usual rules. No agencies. No budget. No more than five questions.
75 people took part.
75% said "yes, don't be silly of course it will work outside the UK."
The fortnightly orders from a Japanese lady in London to ship to her friends back home?
Good Brands travel.
I think this one has legs.
Friday, 18 May 2007
In town for an annual facilities renewal meeting with HSBC so headed on over to the excellent Watershed for Bristol Open Coffee III.
Simon Bunker has taken on the mantle of organiser / coordinator and did a fantastic job with the catering as you can see. Might not have been so good had we not gatecrashed the BEN event that coincidentally was taking place in the room next door!
About 50% of the attendees segued into the BEN event (too hot and too many suits) but I stuck with the splinter group in the bar.
As Mr Shiner was with me there was of course much talk of Open Source and he promised to return armed with laptop for a show and tell of our enterprise build at a future meet.
Other themes: a clear consensus hummed around the theme of SAP generally being a waste of cash for SME's; Simon's Nokia N95 looked like a pretty tempting piece of kit that connected without hassle to the free WiFi at the Watershed; and a discussion about Twitter swerved from the "never heard of it" to "I am addicted". Oh, and that Severn Delta's elevator was spot on.
It was good to meet Tom Holder and Mark Panay from SimpleWeb, Gary Wilson from Coull, and John Bradford in addition to Simon. I'll definitely be making this a regular gig, its only 20 minutes from home so it would be rude not to, particularly now that I know that it morphs into open curry...
Also I am in an inquisitive place right now and open to new ideas and opportunities. We have three projects in the incubator already, but there is room for more.
There is a reason why I take my Accountant with me to these things!
Thursday, 17 May 2007
Another simple learning from the early days of Severn Delta in 2003.
We created Severn Delta by tearing 25% off the side of another organisation. It had never been a stand alone business. It have never traded separately. It was not a division. Less than that it was not even a department! And to top it all the organisation from which we tore was in Administrative Receivership.
So we had no track record. No credibility. No Credit rating. Credit insurance on us as a debtor? Don't be silly.
But because we took it on as a going concern we had orders that needed delivering, wages and salaries that would need paying, we needed to start trading so we needed raw material supply.
We bought some stock in the deal of course but this included too much of the stuff we had no urgent need for and not enough of what we needed yesterday.
We were in no position to pay for everything we needed up front so we had to sit down with the key suppliers and cut deals.
So our word had to count. If we said we would pay on the 3rd Wednesday when the Moon was in Jupiter that was EXACTLY what we had to do.
We demonstrated that our word counted by doing what we said we would. Without question. Without delay. Without exception. We built credibility step by step until we had the level of credit that we needed on an ongoing basis.
One supplier in particular gave us an exceptional level of support backed by nothing more than a handshake and bond of a few thousand Euros. Be clear: this was a mere token. A gesture. Less than half a percent of the annual value our trade with them.
But I gave the man my word and I stood by it. He has had four years trade as a result of taking a punt on us. Risk and reward. If you build it they will come. If you are not prepared to get you feet wet: stay away from the river.
Wednesday, 16 May 2007
A sad day yesterday.
I attended the funeral of Tony Griffiths the man who hired me for my first real job back in 1989.
Since this gave me both my first break in Unilever via which I gained both a grounding in business and a wife (a friend of his daughter, we first met not 10 metres from Tony's office) I guess that meeting Tony was a pivotal moment in my life. Little though I knew it at the time.
A close friend of Tony's described how Tony's first job at Unilever had come via a formidable character by the name of Dorothy Bridgwater back in the late 1950's. Mine came via a formidable character by the name of Tony Griffiths and set me on the road that finds me now running a business in a town known as Bridgwater.
Such are the ironies of life.
Tuesday, 15 May 2007
It is six months since I called Simon Howes, although I understand Martyn spoke to him yesterday and as I write he is en route to Florida with his family for a holiday. Good for him.
Simon is my manufacturing counsellor from the South West Manufacturing Advisory Service or SWMAS.
When I need a fresh view on a manufacturing issue I call him. Or I used to.
Martyn jokes that Simon is very good at holing up a mirror to us. Once or twice his third party impartial view has helped us find clarity.
The reason I don't call him these days is because Ian Mearns who joined the team as Ops Director last Summer has negated the need.
Since Simon helped us hire Ian (and Steve and Tim two key members of Ian's team) I guess Simon won't mind that I don't call him.
I probably owe him a beer though.
Monday, 14 May 2007
In a comment posted on SmallBizPod-small business blog I rashly offered Free Advice for would be Entrepreneurs.
Writing about a new online funding service, Angel's Den, Alex Bellinger pointed out that only about 1 in 8 proposals (at a cost of £499) would get recommended and therefore put forward to potential investors.
Interesting and tempting though many will find Angel's Den, Alex suggests that would be entrepreneurs should consider the strength of their plans before rushing in. I agree and have had a good bloggers conversation with Alex today on the subject.
My concern is that although this may be low cost in comparison to other services aimed at matching those looking for less than £500k funding with people willing to invest, you can get a long way in the hunt for funding for nothing but hard work and shoe leather.
Having offered the advice I will endeavor to expand on this in due course. But before parting with cash for a matching service I would encourage anyone to look at other routes first.
Hunt around on line for good advice. Drop in at Open Coffee meetings or similar gatherings. Most of the open minded people you meet will be happy to exchange views and offer contacts, directions, the benefits of their experience. You may even meet someone looking to invest.
I'll expand on other routes in subsequent posts, but my offer stands. My open business philosophy demands that I share my experience.
My email address is just over there so feel free to get in touch.
So Tony is on his way.
Where does this leave us? With Gordon's hand so deep in my (SME) pocket that I am finding it hard to walk I am less than enthusiastic about the much talked about coronation.
I do wonder whether this is the best way for one of the world's largest economies to elect its leader, but...
I am clear that whatever the pros and cons of Gordon his Premiership will be but a bridge to the next contest and I am personally, for the moment at least, ambivalent about Mr Cameron and Mr Brown.
Dennis Howlett reported an interesting and insightful encounter with Mr C earlier this month. It is this kind of thing that makes me wonder where the sheen stops and the substance starts.
I have to say, however, that I have one point of view that may in time turn out to be, for me, the decider:
I feel it is unhealthy for any one party to govern for too long.
But for now David and Gordon. I am on the fence lads, so convince me.
Sunday, 13 May 2007
At Severn Delta we have a love/hate relationship with the weather.
Seasonality can be a tricky sales trigger for any business, but we don't so much have seasonality as weatherality.
You see, we are a British company with predominantly domestic demand, and in the UK we don't have seasons. We just have weather. And the type of weather that sends demand climbing is the kind that sets the heart sinking.
Precipitation triggers demand for one of our key lines. So when April this year proved a rain free zone we started to fret. Were we on the cusp of a long hot summer come early?
But since we turned the corner into May it has barely stopped raining. It is raining again as I write. Not going to help me stop the wet tent hanging in my garage from rotting but good for sales.
So the next time you get caught in the rain, and you see me smiling. I am not laughing at your expense.
Its good for business so I am Happy When It Rains.
Friday, 11 May 2007
Forgive my ignorance.
I live in the sleepy South West of England. My business is located in an industrial island in a rural sea.
So until today I had not come across the term "Elevator Pitch" and so according to the rule of three that is how many times it has come up today.
Tracy my design guru provided the first two and SmallBizPod provided the third.
Tracy told me how her no.1 Bruce who works for Barclays was making an Elevator Presentation to several hundred Barclays employees today summarising the purpose of the latest ad drive.
She then told me how she only understood the term because it had cropped up in a client brief last week.
Both definitions she had been offered were different. SmallBizPod offered a third.
I went to Wikipedia looking for more info. see here.
So now I have yet another piece of useless jargon to file in the small cylindrical filing cabinet I keep on the floor under my desk!
This is where I keep the mission statement we don't have and every piece of advice that suggested I need more "consumer insights".
The wikipedia definition alludes to VC pitches. In this context it makes more sense but to any would be entrepreneurs I urge caution.
I have only ever made one VC pitch. I took my time. They asked many many questions. Mostly about the numbers.
They made us an offer.
My advice to any entrepreneur. Know the numbers inside out back to front, up and down and back again. By all means have an introduction that won't send them to sleep. But make sure you have the details to back it up.
And beware anyone who makes a thirty second decision about anything.
Thursday, 10 May 2007
Wednesday, 9 May 2007
A story from the past:
As a young marketer I had a project to relaunch a global brand in a micro market. The local incarnation had not been updated in years, so I brought the technology up to date, moved the packaging in line with the lead country, and cobbled together a TV campaign on a shoestring with a cut and paste of some ads from other countries which we edited locally for next to nothing.
At 10 to midnight my boss expressed concern.
"The ad is little different to the history montages" He said.
Up until then every ad had been a montage of lifestyle shots with music and a voice over. Every execution for twenty years looked the same.
I agreed. I had deliberately moved the tempo up a little to emphasise the new technology. It was the best technology we had. The market was getting hotter. We had something to say so lets say it.
He decided that a cautious line was needed. So a re-hash of some old ads was put together and tested against my louder but in line with the brand execution.
The panel were asked which one reminded them more of the history of the brand, which was familiar.
I thought this was a waste of time and money. If you want to be cautious, be cautious don't squandered cash on justifying your decision.
Of course the answer came back that the re-hash was familiar and safe and comforting. So that's what ran.
No one noticed.
Having spent months and OK not a million bucks but a fair few thousands no one noticed.
Not one extra unit was sold.
But it was of course risk free. No one was going to get fired for not rocking the boat.
Taught me a valuable lesson about how to get ahead in a mega-corp.
Tuesday, 8 May 2007
For a SME/SMB like Severn Delta market research is a luxury. Even a dip your toe in the water small scale study through a small local agency is cost prohibitive so we take one of two approaches:
1. LAUNCH AND BE DAMNED
The rule is if it costs as much to just launch the product and see if it sells as research it, then launch and be damned.
We do this all the time.
Surprisingly enough the first person I heard advocate this was Geoffrey Probert who was at the time Marketing Director at Unilever International in the mid 90s. He said it in the context of say launching Lux Soap in Mongolia. But as a fully paid up scavenger of ideas I stored the idea away for future reference.
I figure that he meant it in the context of launching global brands in micro markets. No different from micro brands in national markets then. Global can wait for now.
2. MR BIRNIE'S DIY RESEARCH METHODOLOGY
a) Make a bunch of samples. Yourself if necessary. Using scissors, glue-sticks, Whatever you have to hand.
b) Give these to an assorted groups of employees, friends, neighbours, people you meet at the washing up stand on a camp site (as I did last Saturday morning!). Ask them to give whatever it is a try. Give them some spares to pass on to others. Give everyone a v.short feedback form (max 5 questions) which you ask them to send back to you. Or you phone / email them to get the answers).
c) Gather the data yourself. Analyse it yourself. Make a results and recommendations presentation to yourself in the mirror (mirror bit optional).
d) Make a decision based on the findings. Get on with it.
I know that any professional Market Researcher will shudder at the above. But we will sell near on half a million units this year of a particular product developed using a mixture of both approaches.
We tested the basic performance of the item by route 2 and happy with the feedback went to market. It has of course been a slow burn. But it would have been anyway: We are an off the radar SME/B manufacturing in Somerset.
The beauty of the "just get on with it" approach is that because of its is pay as you go nature the returns show themselves early.
And it costs peanuts if you need it to.
Monday, 7 May 2007
Friday, 4 May 2007
I could (and probably will) write more about the tyranny of the number three but for now let me give you the three month rule.
You will find yourself making decisions three months later than you could have and should have, but never the other way round.
We have found this time after time after time.
"Why didn't we do that three months ago!" Martyn (Shiner, the other 50% Shareholder, CFO/FD and Open Source Guru at SD) will exclaim.
"What other decisions should we make now rather than in three months time?" I'll ask in reply. But we have yet to break the rule.
I recall a quote from Jon Moulton: "Nobody has ever told me how they made a big change three months too early." See. Three months again.
I could list every instance in the 4 years of running Severn Delta, but I believe in brevity. So instead here is a Friday afternoon task (4.30 UK as I write): List now all the decisions / actions you could / should have taken / executed three months ago.
Now go bring the week to a decisive close. Make it happen.
Thursday, 3 May 2007
I went to the local pool tonight to pay for the next ten swimming lessons for my daughter.
For the avoidance of doubt, the pool is in the UK, although the system has been contracted out to the Soviet Union.
It should be simple. My daughter is already having lessons, we would like her to continue. We would happily set up a regular direct payment via Direct Debit. If we must pay in ten lesson slugs we would happily do this online.
Not an option. You have to go to the pool on a designated day during some designated hours. First you walk in the font door, past the front desk, past the office, up a long corridor, through some automatic doors, turn right and queue at the poolside for your child's swimming teacher with all the other parents.
When you reach the front of the queue the teacher will give you a form detailing the available times for the next series of classes and the cost. These forms have been printed in advance by an administrator and given in bulk to the teacher to distribute. No doubt they originated in the pool office, which is your next destination.
Armed with your form you now head back along the long corridor to the office you passed on the way in. You now queue at the office door. When you reach the front of the queue an administrator enters your child's details into the schedule in their class management software. They then initial your form to confirm your child has been processed. You now proceed to the payment desk which was the first thing you passed when you entered the building.
Again you queue to pay and it is not until you pay that your child's place in the class is confirmed.
By good fortune I was quite early in arriving tonight and the process was relatively quick if a tad pythonesque. The previous time my wife was there for over an hour.
The whole thing reminds me of a description I read of the process of obtaining food in a Soviet Restaurant c. 1989. First you queued for a permit to eat. Then you queued to pay and finally you queued to exchanged your chit for the meagre portion of the only dish available.
The Soviet Union maybe gone but its ways still pervade in the oddest places.
Jon Merry our senior Business Development guy attended a conference thrown by Waitrose last week. Here is his opening comments in the email summary he sent to me, Martyn and the rest of the Severn Delta Board:
Here are some quick notes regarding the Waitrose Conference i attended on the 25 April.
First and foremost the food was great and i had 2 bacon rolls and an Apple Danish for Breakfast followed by fish pie for Lunch and a Chocolate Pudding.
For some reason this made me laugh so much I had to post it straight away.
Wednesday, 2 May 2007
Or how to keep your people on their toes:
1. Launch a bunch of web sites for your obscure brands
2. Add new products to the portfolio that you haven't actually made yet and do not have in stock
3. People find web sites and place orders
4. Team make it happen - as first unit of each new product is made it is shipped.
So today we shipped three products we have never shipped before. A good day.
If you build it they will come.
Or to put it another way "you have got to make it before you can spend it".
Back in the dog days of 03-04 we had to deliver some heavy medicine to our employees. A necessary part of the turnaround. This required a long and difficult negotiation with the representatives of a Trades Union. But we got there. Got the agreement we needed and we all moved on together.
Less than 6 months later the man from the Union was back.
"I think its about time you gave my people a pay rise." He said.
I picked myself up from the floor.
"You are the same person who sat across the table from me just a few months ago?" I asked.
He confirmed he was.
"Then you will understand that we are in no position to discuss this". I may have been more blunt than this but, regardless, he got the point.
We then sat all the team down and gently explained that a business is just like your personal bank account. Every month the money you earn comes in and the money you spend goes out. If you consistently spend more than you have coming in you end up in the mire, up to your eyes in debt repayments and interest charges you cannot meet.
"We have got to make it before we can spend it" I explained. "And we just haven't earned it yet."
They understood. They may not have been over the moon about it but they understood. And the vast majority of them stuck with us and remain with us to this day.
When we had made a profit we paid some rewards. Not before.
Seth Godin wrote an excellent post along these lines on Monday "The marketer's guide to personal finance" although he talks mainly about personal finance rather than business the lesson and the rule is the same. As any regular reader of my musings will have gathered, I am a regular reader and quoter of Mr Godin's work. This post is a great example of why. It fits my mind set of Marketing is Business and Business is Marketing.
I have known many Marketers over the years who think the definintion of Marketing is "Spending the Marketing Budget" and little more. I see Marketing as a total business approach. I accept that you have to make it before you can spend it otherwise "You Just Haven't Earned It Yet Baby"...
Tuesday, 1 May 2007
One of my mantras of business.
Goes with Cash belongs in the bank not in the warehouse, You Can't Grow Your Way Out Of A Hole and of course: Positive Churn (how do we do what we do better today than we did yesterday and how will we do it better still tomorrow).
If you build it they will come.
Maybe not in their millions.
Maybe not right away.
Maybe not the people the that you thought would come.
But they will come.
Example: our Black Kite Fast-Dry Towel.
We thought this would appeal to Surfers (as in waves not web!) so we took it to Surf Shop Expo to have a conversation with the UK Surf crowd. The Surf Shops were rather indifferent although a nice bunch, .
At the show we met Dean. Dean is a serving member of Her Majesty's Armed Forces. He was helping a friend sell sunglasses.
Dean Loved the product.
"This is just what we need" He told us and bought one. This was on the first day of the show.
On the second day he came back.
"Can I buy some more?" He asked.
"Of course." We said, "How many?"
"Sixty." He said. So we sold him sixty. And have since sold him many many more. He sells them on to his colleagues and they have taken them on tour in the middle east and elsewhere.
If You Build It They Will Come.