Positive Churn

Channel 4 News - Made In Britain Feature

2011-11-15T09:33:00.001Z

I was recently interviewed by Sarah Smith of Channel 4 News for their Made In Britain feature which aired last night. Severn Delta came to her attention when she was living in Washington as C4's US correspondent and friends would send her packs of our Sarah Smith products.

The film is above. The section on Severn Delta is about 4 minutes in.

I have long been a vocal supporter of British manufacturing. When Severn Delta launched the Sarah Smith brand in 2005 many people were amazed that we were making it ourselves here in Somerset. "Surely that is all made in China these days?" people in stiff collars and pin striped suits would say to us at tedious corporate networking events. Don't be stupid would be my reply.

We could have easily subcontracted production of Sarah Smith off shore but then our liability would have been in a stock filled supply pipeline that stretched around the planet. Instead we make here in the UK and our liability is arguably in the obligation that we have to our employees under UK law. As I say in the film, I see nothing wrong with that and personally I have a problem with the concept of firms moving work off shore to places and factories where workers don't necessarily have the kind of rights that we here in the west take for granted and that generations of our forefathers fought for.

I support British manufacturing because buying British supports British jobs and contributes to the greater British economy.

Because we manufacture here in Somerset we buy goods and services from other local companies contributing to the local economy. For instance we needed some drainage repaired in the factory yard recently so we hired a local company to make the repair, we hire local electricians, local engineering contractors, we use British transport companies to make our deliveries, and we employ 45 people who live, shop and spend their money here in Britain.

The tickle out effect of buying a British made product instead of one made over seas is enormous. Keep that in mind this Christmas and look at the back of the pack to see where things are made and try to buy more British made goods.

We Have An ERP Suite and We Are Not Afraid To Use It!

2011-08-18T10:07:00.003Z

My partner in Severn Delta, Martyn Shiner, has written a further back-story post on our ERP project on the MAX Usergroup blog here.

Essentially we wrote our own ERP suite using open source tools because we could not find a right size right cost solution elsewhere for our c. £7m turnover consumer goods manufacturing business which supplies the likes of Tesco, Sainsbury's, Morrison's, Boots & Waitrose (to name a few) with a mixture of private label and our Sarah Smith and PitRok branded goods.

Severn Delta has been fully operating on the system which we have branded uzERP since Jan 1 2009. We have posted two years full accounts from it and and 8 months into our third fiscal year. All without hitch.

At the end of 2010 we spun uzERP out into an LLP with the two guys who with Martyn had done all the heavy creative and code work taking a stake.

We have three other clients using uzERP the largest of which is a c £5m Turnover specialist motorcycle parts manufacturer. These were all brought in via our close local network. So far we have kept pretty low on the radar and have not made any effort to "go live" or start selling.

But we are coming to the crossroad and we need to decide what next. Both Martyn and I are conscious that we will need to dedicate more time to uzERP and having put a solid team in place at Severn Delta who essentially run the company on a day to day basis we are certainly in a position to do that, splitting our time between the two companies.

It is more the how and when that is on my mind. Should we look for some funding to pump it up and go loud and start to build awareness of the uzERP proposition with SME manufacturing businesses? or should we stick with the softly softly slowing building clients model?

Some may say but if it is not "in the cloud" it will never fly. That to me is nonsense. As a manufacturer I am not concerned whether it is on site, in the cloud or on Mars. Which one is right size, right solution, right cost? That is the one for me. The beauty of uzERP is that we can pretty much deliver it any way you prefer and you can control the cost. We will charge you for the time we spend putting it in for you but once you are live if you never need us again well good for you, just tell all your friends what a killer deal we gave you!

Maybe that is a crazy plan but we have confidence that we can build a decent business here. The mission is not to have stratospheric sexy trendy braggable buzzy product that a million people have played with and no one uses. We aim to build a solid, profitable specialist business that delivers the lowest cost ERP system to SME manufacturing.

Lots of questions still to answer, lots of questions still to ask. We will let you know how we get on.

The Hidden Cost Of Flying

2011-07-26T09:34:00.004Z

Like many people in business I frequently use the so-called "low-cost" airlines for business travel. I am often only away for one night and therefore can travel light and control the cost by not checking in luggage.

At the weekend however when booking a flight with one of the most well known of these "low-cost" airlines I had an odd experience which I thought worth sharing.

I wanted to book flights for 3 people and so worked my way through the usual steps on the web site to pull up the date and time options etc. selected flights from the various options (having noted that only a limited number of seats were allegedly left available at the lowest prices)and got to the "summary before you buy" point. The total cost of the flights at this point was just under £200. So far so good.

At this point I jumped off to hunt for the hotel rooms. Searched around my usual preferences and found that all my top three hotels for that location were booked out for my dates. Then the phone rang and I was diverted dealing with that and by the time I had finished the call and booked the hotel rooms about an hour had passed.

Back to the flights which had timed out of course so I re enter all the info. and arrive back where I had left off at the "summary before you buy" point. Only the price is now just under the £400 mark. Just about double where it had been an hour before.

Being a paranoid animal I smelt a rat.

Noting that I was using Firefox I minimised the browser and opened Chrome. Started again. Same company, same web site, same information entered. Took about 5 minutes to get back to the "summary before you buy" page and discover that... the price was miraculously back at the just under £200 level. Out came the credit card. Job done. Money saved.

I guess the lesson is clear cache and cookies before you buy if you want the best price. Big brother is watching and will charge you for taking your time!

10 New Year Resolutions for SMEs

2010-12-23T11:02:00.004Z

I have a post up on the Business Heroes blog: 10 Resolutions for SMEs for 2011. Read it here>

Enjoy!

Part Of Learning How To Make Money Is Learning Not To Spend It!

2010-10-01T16:06:00.003Z

Seems obvious right? Wrong. Most people setting out in business will spend more time in the early phases spending money rather than making it.

I will admit that in the first year of Severn Delta we spent a whole bunch of money we didn't have to. That just made the first year loss even bigger than it would have been if we had exercised a little more restraint. Like most CEO's at the helm for the first time I had to learn this lesson the hard way but learn it I most certainly did!

I visited a company in the Valleys about a year ago. Or rather an ex company as it had gone under. It was beautiful. The cleanest factory I have ever seen. A gleaming state of the art laboratory. A £350k production line with a packing unit on the end that had three times the packing capacity that the line it was bolted to needed, and which cost more that the line feeding it! They had newly decorated offices with the latest Dell's in front of all the staff they had hired. They had spent and spent and spent setting up their company and had burnt all the money they had borrowed to set the company up plus the same amount again in grants from the Welsh Development Agency (or rather from you, me and the rest of the Tax paying millions!). They had been so busy spending money they had forgotten to make any. The factory was completely uncontaminated by production and they had no customers. No customers means no sales. No sales means no income so when the cash pot ran out the game was up.

Repeat after me: You are in business to make money not spend it.

Another thing I did a year ago was hire a Sales Director for the first time in our history. This enabled me to focus on other things. The man in question was astonished at the fanatical cost control and cost attrition that is an everyday staple at Severn Delta. He had worked for bigger companies and for similar sized companies and he quoted examples of whole departments in some places who were little more that spending machines contributing little to the overall drive of the business but lobbying for bigger and bigger budgets every year.

We don't have departments like that. We don't really have departments. We have two open plan offices full of people with different specialties working together towards a common goal and all constantly looking for ways to not spend money or to cut costs wherever possible. It is in the DNA of the company now, but I keep a paranoid close eye on it anyway.

I know we can spend less if we try. We just haven't worked out exactly how yet, but we are working on it.

Know What You Are

2009-12-22T10:16:00.003Z

It is a common mistake in business. Having a quite different idea of what your business is, to that held by the most important people you deal with: your customers.

Borders failed because they neglected the core reason people walked through their doors: books.

Railtrack lost its way because it thought it was a property company and outsourced what should have been its core competence: managing the rail network to ensure safety and efficiency.

Eurostar has fallen on its face in public because it sees its core purpose as running trains back and forth. Its unhappy customers see it as a way of safely and quickly getting from A to B in comfort.

Over the past few days they would have settled for being put on a coach and then a ferry and conveyed not so quickly from A to B smothered with apologies and information but at least in moderate comfort.

Wouldn't have been so hard to organise were the top brass no so single mindedly obsessed with the damn tricky technical science stuff which is apparently more important that customer service and reputation!

If In Doubt, Act Like A Receiver

2009-12-15T09:24:00.004Z

The recent demise of Borders UK brought back memories of February 2003 when our once parent Plc. went under and on the morning of Feb 6th a car rolled up the drive and out stepped "The Receiver".

Within a few hours many colleagues were heading in the opposite direction for the last time. The Receiver doesn't mess about.

He gets on with his job. No sentiment. No procrastination. No "well Janis has been with us a long time..." or "we need to get this low margin delivery out on time they are a long standing customer". It is black and white to The Receiver. He deals in quantum and maths.

The clue is in the name. He does not come to give but to receive.

In a time of crisis, turnaround and survival it is worth remembering his role and doing his work before he has to come and do it for you.

Every piece of resource that is not focused 100% on turning inventory and debtors into cash is resource you don't need in a crisis. Harsh but true.

OK. He has the advantage that all contracts are broken so he has more freedom of movement than you but my point is the principle. Stop giving. Stop spending. Focus on generating and receiving cash.

Everything on your premises is inventory. Anything not in current use can be sold. Even things that are in use can be sold. We sold two production lines within 9 months of acquiring what is now Severn Delta. Both had residual levels of business on them. Both unprofitable. Both we exited in a jiffy because the cash win from selling the asset was greater than the cash generation from crewing and running the lines.

Slash all discretionary spending. Stop cash flowing out. And of course get on the phone and hound every pound until it is paid on time or early.

We had one year where we pulled in several hundred thousand pounds early at our year end. Only took one person focusing on it.

This is not just a lesson for hard times. We have had a pretty good 2009 but a focus on cash is to the fore because we are investing in new manufacturing capacity and we want to be sure this does not exert unnecessary pressure on cash flow.

But if times are tough and your business is struggling my message is act like the receiver before once is appointed to do it for you.

When A Turnaround Fails: What Went Wrong At Borders

2009-11-26T19:48:00.005Z

Troubled bookseller Borders UK made true many a prediction today by entering administration. There is little doubt now that the Borders name will follow The Pier, Woolworth's and Adams (to name but three) on to the list of household names that will have disappeared from the UK during this recession.

But as with The Pier and Woolworth's (I admit I know little of Adams) Borders was a business in trouble long before the bitter winds of recession blew hard.

Sold by former US parent in 2007 and sold on again this year Borders has long been in turnaround territory although to the eyes of this turnaround veteran there have been few signs of a turnaround strategy in execution.

Having long been a patron of Borders Bristol it has been clear to me for some time that rather than focusing in on their core trade the team at the helm of Borders were making the cardinal turnaround error of being distracted.

Many a turnaround has failed by trying to grow turnover by diversification when the order of the day should have been a tight focus, slimming down, cost cutting, cash flow management, and diligent inventory control.

My reading of the situation at Borders is that crucial turnaround errors have been made. The stores are cluttered with non core peripheral products (things that are not books) that will have been tying up precious cash, churning margins down and either tying up key personnel who should have been concentrating on the books market or even worse driving overhead growth.

Many reports will blame loss of trade to internet retailers and supermarkets. Don't believe the hype. Like The Pier and Woollies before them Borders was killed from the inside not from without.

As I have said before, you can't grow your way out of a hole. The rule is shrink to survive and manage for cash, cash, cash and cash.

The Windows Free Business Experiment

2009-11-04T11:48:00.001Z

At the start of this year my businesses partner @martynshiner & I started an experiment to see if we could run Severn Delta using free open source software.

In place of Microsoft outlook we have been using Roundcube Webmail. Instead of Word, Excel and Powerpoint we have used Open Office. Our servers are likewise Microsoft Free-zones.

To be really bonkers we have both been using 9 inch Eee pcs running Eeebuntu! As you can see above.

We of course run the day to day business of the company with our own ERP software built with open source tools and our in house IT crew of 2. This runs in a browser. FireFox usually although I am using Chrome.

After eleven months the only glitch is my forecast model which still resides in a spreadsheet (I know I know - we are working on it!). This has a tendency to crash Open Office, but this is the weedy processor in the Eeepc falling down so a hardware issue. Otherwise it's no looking back. We are overdue an overhaul of our desktop hardware and so will be rolling Microsoft Free desktops across the company replacing our remaining XP running hardware.

The conclusion on the Eee pc is that it is great for traveling as ludicrously light but just a little too light on processing power. Martyn is already playing with an old Toshiba laptop with Karmic Koala...

I sent this blog post from my Android running HTC Hero. Maybe not as achingly trendy as an iPhone but it is Open so we can write apps to hook up with our ERP if we want.

And as for Windows7...

If You Work For Me You Can Twitter All You Like

2009-10-30T13:49:00.003Z

Great response from TechCrunch Europe here to the "We don't understand what the kids are up to so we'd better try and put a stop to it!" story in the Telegraph this week.

If you work here at Severn Delta you can tweet all you like. I don't care. As long as your performance is good I am not going to micro manage you and fret that you have just had another cup of coffee! We believe in managing performance not behaviour. Simple as that.

I am confident that the cost to Severn Delta of our employees using Twitter or Facebook is ZERO English Pounds Sterling.

I am in any case very confident that when it come to all this new fangled social media time wasting blogtastic webby stuff that round here I am very much the time waster in chief!

So who am I to criticise?

Its Official Sarah Smith "Ultra Absorbent" Cleaning Cloths Are Britain's Favorite!

2009-10-23T18:48:00.005Z

According to those clever chaps at Nielsen our Sarah Smith "Ultra Absorbent" Cleaning Cloths are Britain's number one selling branded cleaning cloth!

Available in a range of kooky British designs they outsell:

Every one of 23 Spontex branded cloths (owned by Total - T/O 143bn Euros)
Every one of 26 Vileda branded cloths (owned by Freudenberg - T/O 4.8bn Euros)
The total sales of all 8 Scotch Brite cloths (owned by 3M - T/O $23bn)
The total sales of all 26 Minky branded cloths (owned by Vale Mill - T/O £30m)
And outselling E cloth's 8 products by a more than 50%

Not bad considering we have a fraction of the distribution of this lot, indeed for most of the last 12 months we have had only 2 shelf facings (one in Sainsbury's, one in Waitrose) and a "clip strip" merchandised unit in less than 50% of Tesco stores. Not to mention of course that we are a small, privately owned company employing about 40 people in the depths of rural Somerset, UK!

A good example of where focus and Ignoring Everybody and the big company marketing industry straight jacket of conventional thinking will get you. The world has changed so you have to think different and be different or you will die.

Data source: Nielsen UK Grocery Multiples Value Sales 52wks ending 22Aug2009

Why A Weak Currency Is Bad For Manufacturers

2009-10-20T16:17:00.004Z

I get frustrated when I see articles like this one in The Observer trotting out the cod wisdom that weak sterling will help the UK ride the recessionary storm.

The view from the small to medium sized manufacturing enterprise is different for two reasons:

1. The collapse of sterling has caused a vertical lift off in raw material costs. The modest manufacturing base here in the UK is wholly dependent on imported raw materials. If from the Eurozone or the Dollar-zone the increase in prices resulting directly from weakness of sterling. The weakening in Sterling has cost my company an amount equivalent to 75% of our 2008 pre tax profits. Just the currency shift alone. It is the equivalent to the salaries of 8 shop floor jobs. Am I sitting here comfortably reaping the export boom and not worrying? No. Actually our export business is down. Well down. Here is why:

2. Demand in the UK's biggest export markets is on its knees. Italy, Germany, Spain, a little better in France but where is the demand for my cheap sterling exports made with my now 25% more expensive raw materials? Hello? Hello? Anybody there?

My outlook for demand recovery on the continent is sceptical. I am not holding out for an export demand surge because by the time it arrives (if ever) the preceding wave of cost increase may well have finished me off and so rather than be the saviour of UK manufacturing a weak currency is simply exacerbating the problems.

Doh! If You Don't Send An Invoice You Won't Get Paid!

2009-07-05T12:39:00.003Z

Seems obvious, but it is an all too common failing in all too many businesses. A devil may care attitude to actually billing customer for the work, goods and services that have been supplied. In these credit starved times a punctual, nay, obsessive approach to invoicing is called for.

Here at Severn Delta we issue invoices daily for all goods shipped that day, like most FMCG companies. But our suppliers are not so sharp. Our financial year is Jan to Dec so we have just passed the half year mark in 2009, and we have a substantial chunk of accruals outstanding for goods and services which we received BEFORE the end of December 2008, but for which we have to receive an invoice.

Now I don't know how long it typically takes you to issue an invoice to your customers but I put it to you that six months is a little extreme.

We will be happy to pay the suppliers in question. No problem. We ordered the goods and services and we received the goods and services. BUT if you don't send us an invoice you just ain't gonna get paid!

To give you an idea of the scale of this slackers approach to the fundamental act of invoicing, the value involved totals £30,000.

And that is just Severn Delta, a £6million turnover company. Scale it up across the UK economy and how large is the big black hole of un-invoiced value?

So if you are reading this and are wondering if there is anything you haven't billed your customers for, go and check now. Get the invoice/s out today.

The sooner you do, the sooner you will get paid.

And that is what you are in business for... isn't it?

Assets, Competencies & Positive Churn

2009-06-09T14:56:00.000Z

We have a million pound asset in our factory, at least that is what it would cost to replicate.

My Technical Director is a chemist and all round R&D dynamo.

We have a supplier base whose abilities we like to stretch.

We have a Brand which continues to grow rapidly. IP is an asset.

The first is a fully automated wet wipes production line. The second conjured a new cleaning formulation with Lemon Tea Tree & Thyme to Put on a bespoke fabric from the third to create a product to be sold as part of our Sarah Smith brand.

It goes on shelf in Waitrose this month replacing one of our slower selling lines.

Assets, competencies & Positive Churn.

Here endeth the lesson.

Where Ignoring Everybody gets you....

2009-05-15T16:26:00.002Z

The Great Inventory Correction (Again)

2009-05-05T09:27:00.002Z

Back at the very end of 2008 I pondered what seemed to be a huge Inventory Correction. Four months on it is clear I was right and economic activity across many industries has been hit hard by inventory slashing of pandemic proportions as discussed in two Financial Times articles today which can be read here and here.

We have not been immune from this trend and have seen sales hit in particular parts of the business. Oddly the very ones that the economists will tell me should be prospering in a downturn. You know, the kind of things that people trade down to rather than the other way.

I think there are three reasons why this has happened.

The first is the great inventory correction effect. When inventory is being managed at sub replenishment levels (i.e. being driven down) your sales fall even if your customer's sales are steady.

The second is the reaction of others whose sales are being hit for the reason stated above. For example if I supply a value for money equivalent of a leading brand (as say, a supermarket own brand for example) and the leading brand in question moves £10million from TV into price slashing promotions to buy some volume there is very little I can do about it. The effects may be short term but they hit my sales all the same.

The third is miscellaneous other factors outside of my control. These effect demand for the kind of products that the contract manufacturing part of my business make and supply. For example: if my customer pushed their prices up to insure their cash margins against falling demand this may drive my sales down further whilst delivering an acceptable amount of cash to my customer. By attempting to insure against falling volume they guarantee a fall in volume but compensate themselves for this regardless of the impact on us.

We have encountered examples of all three so far in 2009 but are nonetheless holding our own. We have widened our distribution base steadily over the past 2 years and this is serving us well. Growth of our flagship Sarah Smith brand remains strong with annualised growth of 26% despite a set back or two along the way!

But if the tide turns in the inventory correction it will be welcome all the same!

Here Comes The Sun: Boo / Hiss / Hooray!

2009-05-01T14:43:00.004Z

The Met Office Summer Forecast 2009 predicts an antidote to the the washed out summers of 2007 and 2008. Damn and Blast!

Back in 2007 in my post No Alarms and No Surprises I mentioned my obsessive reading of such things and have posted on more than one occasion that we have a Happy When it Rains approach because a decent % of our revenue comes from a product with a rainy sales trigger.

So a long hot summer though perhaps a welcome boost for UK business (e.g. Sterling has tanked so holiday in Blighty, enjoying the sun and spending what money you spend here at British tills rather than Jonny Foreigner's) is not, generally greeted with a cheer round here!

But, consider the post below about our recent acquisition of PitRok. You won't be surprised to hear that the seasonality is counter to my business as it stood before the acquisition.

Another reason why the acquisition made sense.

So,

Though I will admit to commenting as the rain falls down, "nice weather for us!", I shall have to get used to saying "Here comes the Sun... Hooray!?"

Making An Acquisition In A Recession

2009-04-27T15:35:00.005Z

Last Wednesday 22nd April my company Severn Delta acquired the business of PitRok Ltd. and in particular ownership of the PitRok brand of natural deodorants. Given that at a glance this has looked like something of leap for Severn Delta, not to mention that we have made the acquisition in the teeth of a recession, I thought a few words on the subject were in order.

1. How does this make sense for Severn Delta?

The logic is three fold:

a) The distribution fit is good. Both Severn Delta and PitRok sell fast moving consumer goods into UK multiple retail. The overlap is strong with three exceptions - one where we are stronger by a long way and two where PitRok is stronger. The net effect is the opportunity to broaden the distribution base in both directions.

b). We have acquired the PitRok brand and this will increase the % concentration of branded business vs contract manufacturing.

c) Price and ease of absorption are attractive. We have bought at a reasonable price a small business with strong cash flow and a low level of complexity that makes it straight forward for us to take over and absorb administratively into Severn Delta.

That caveat is of course that any acquisition features some of Mr Rumsfeld's "unknown unknowns" or as Sig put it me that in any acquisition you are:

" walking out into the dark night and there is no flashlight strong enough".

So we will see how we get on!

2. Don't you know there is a recession on?

Yes. But this is a factor in favour of the acquisition rather than against. Firstly because this makes the price perhaps more favorable than at other times (although we have paid a fair valuation of the business) and secondly because even though the bank margin may be higher than in previous years it is some of the cheapest money we have ever borrowed and our total borrowings are still low compared with our early history!

A third point is that it strengthens the business as a whole. It gives us greater market breadth, additional cash flow, distribution reach and a new brand in the stable with range extension possibilities that lie within our competency reach.

3. But aren't you a textile company?

Yes and no. We manufacture textile consumer goods but many of these are in the form of moistened wipes with personal care formulations, so we already have a number of skin care products in the portfolio that are not so far from a deodorant.

We work under the regulation of the European Cosmetics Directive already, and our preference for natural and organic components rather than petrochemical alternatives is again a good fit. Our new "ABSOLUTION" by Sarah Smith is an example.

More importantly we have grown our Sarah Smith brand from zero to a level where it is twice the size of the PitRok brand, doubling sales twice since launch in late 2005. We will aim to apply the same methodology to PitRok to ensure its longevity as a strong, if niche brand and hopefully delivery some growth into the bargain.

Ambushed!

2009-04-17T08:52:00.002Z

Yesterday afternoon I was ambushed by three members of my staff. To be precise three of the four most senior members of my staff!

Before departing for the USA almost a month ago I had refused to sign off a purchase order that required my authorsiation. It doesn't matter what it was for but at the time I felt we were jumping the gun. We didn't need the goods or in this case service in question at the time.

A month on the deadline from the customer has come forward and we now need to press the go button. Hence the ambush.

The lesson: by stalling to the last possible moment the cash in question will have had an extra 30 days reclining in my bank account before being paid to the supplier in question.

Don't spend it unless you have to.

Don't spend it until you have to.

And,

Pay when you have to and not before.

7 Thursday Thoughts By Way Of A Catch All Catch Up Post

2009-04-09T11:31:00.005Z

1. The recent trip to Chicago to exhibit at the International Home & Housewares Show 2009 was a good, worthwhile. We came away with a greater quantity of leads than three European shows provided collectively. A big thank you is due to everyone we met. We had a great trip.

2. While in Chicago we had dinner with a friendly competitor (we compete next to each other rather than head to head - same market different niches if you like although there are areas of cross over). It was a good evening. Worthwhile kicking around the same issues and seeing how two similar (although they are 5 times our size!) businesses tackle the same issues. E.g. They installed SAP last year, we "rolled our own" ERP software with open source tools!

3. Oddly I have a sense, despite all the warnings to the contrary from "export-experts" that it may well be more straightforward for us to build business in the USA than it is in some of our closer to home European neighbours. Our open, straight, keep-it-simple approach seemed quite at home.

4. Sarah Smith Kitchen Classics, a new product we launched this Spring is already selling as well as the Original Sarah Smith "Ultra Cloth". GOAL!

5. The parts of my business that are suffering from recessionary demand decline are the exact opposite to the ones that the economists tell me should be suffering. For the sake of clarity: the sexy pricey stuff is doing very well thank you, the low price value end is looking a little soft. Make of that what you will.

6. Innocent have sold a stake to Coca-Cola because Pepsico tore a chunk off their business last year with Tropicana Smoothies. Up until then their flim-flam heavy cuddly marketing2.0 with added antioxidant aren't we lovely healthyisms (but just don't ask us to substantiate our claims) has served them very well indeed BUT once the big guns come to town a big chum with big guns is worth having around. My opinion. Nothing added. Nothing taken away. :-)

7. Ian Tomlinson was a friend of my brother.

International Home & Housewares Show 2009, Chicago

2009-03-19T10:38:00.005Z

A little over a month ago I wrote this post: Go Where The People Meet And Get Among Them detailing the schedule of ten shows both trade and consumer focused that we were attending in the first half of 2009.

Tomorrow I head to Chicago for number 5, The International Home & Housewares Show 2009. This mission to test how our Sarah Smith brand may go down across the Atlantic.

25% of our web & blog traffic comes from the USA already and yet there is not one location in the whole nation that you can buy a single Sarah Smith product. I have a small number of leads clutched in my palm. We shall see where we get.

Following that in the first half of April we are launching a new product at Natural and Organic Products Europe in London. I will write separately on that subject closer to the time.

Tax Rebates Are A BAD Idea ? or Economic Musings on a Saturday Morning

2009-02-21T10:36:00.002Z

I'll relay a conversation I had over breakfast with two of my team in Frankfurt about ten days ago.

"Gordy has said he thinks Tax rebates to stimulate the economy are a bad idea." I said (reading the FT)

"Why?" no. 1 asks

"I guess he doesn't trust us to spend it wisely."

"What would you do with a tax rebate?" No 2. asks.

"I'd pay off some debts." No. 1 replies

"I'd replace our 15 year old boiler or have the house painted." I add.

"I think we'd save it." No 2. said "for a rainy day."

My simple brain cannot see where this is bad. Two out of the three sends cash in the direction of banks. The third adds demand in a local economy...

Seven Thoughts On A Wednesday Morning

2009-02-18T09:53:00.004Z

1. Go Mandy! Well said Sir.
2. Me thinks the lady rocks.
3. I have no problem with banks paying gerzillion pound bonuses. Bonuses get spent. On cars. In restaurants. On flights. On chauffeurs. On dudes who paint houses, fix gutters, mow lawns. On Stuff I make. On stuff you sell. Lets have more of them. BUT...
4. The govt. cocked it up.
5. Should have let the banks go bust one by one. Buy em for a quid. All contracts broken. Bonus what bonus? Much cheaper. Just needed to go live on all comms channels saying loudly: Don't panic all your cash is protected. Instead they had a bonfire. [sigh]
6. Mr Wolf.
7. Ho ho.

Growth of Sarah Smith 2005-2008

2009-02-16T12:34:00.003Z

A Few Pics From Ambiente 09 in Frankfurt

2009-02-14T14:37:00.004Z

Go Where The People Meet And Get Among Them

2009-02-11T15:16:00.002Z

This idea was often voiced by the Marketing Director at a global consumer goods co I worked for many eons ago. OK he used it for the most part as an excuse to visit exotic festivals in little trodden corners of the globe but I think the idea is a good one and have therefore absorbed it into my cannon of business lore.

This year we are putting the idea into action by exhibiting at a raft of trade and consumer shows here in the UK, in Germany, in France and in the USA. The full run down is:

1. Bisou - Nice, France - January

2. Top Drawer Spring 09 - London, UK - January

3. Spring fair 09 - Birmingham, UK - February

4. Ambiente - Frankfurt, Germany - February

5. International Home & Housewares - Chicago, USA - March

6. Natural & Organic Products Europe - London, UK - April

7. Vivre Cote Ouest - La Rochelle, France - April

8. Exclusively Housewares - London, UK - June

9. BBC Summer Good Food Show - Birmingham, UK - June

10. Vivre Cote Sud - Aix En Provence - June

This is a mix of trade and consumer events with a 80:20 bias to trade. The mission remains to take our kooky brand of British design to the world.

Turnaround Tasks No. 2 - Letting People Go

2009-02-10T09:34:00.006Z

Back in December I wrote this post Turnaround Tasks No.1 - Get The Cash In. My reasoning in putting this first was that experience tells me that small businesses have a tendency to manage cash rather poorly. It is of course an absence of ready cash that will kill any business.

Just fixing poorly managed cash flow will not in itself save your business however if demand is dramatically down, prices are collapsing or your market is in the process of going through a structural shift away from you. It will buy you some time and give the ability to structure the business for survival. Without cash being crisis managed and the whole enterprise run for cash you will have no time and no future, but attaining any future will require the next painful steps.

Once of the first Positive Churn posts I wrote was You Can't Grow Your Way Out Of A Hole. This sums up the approach I commend to you. If demand is down, dramatically, structurally, permanently (as far as you can see) you have to take the fixed costs of the business down to a level that leaves you cash positive and profitable on current demand. Accept it. Live with it. Get on with it. Shrink to survive.

Yes you will need to look at your portfolio, pricing policies, customer base, purchasing, cost engineering... and more and yes you WILL do all these things in due course but first and foremost you have to look at your people costs, and they will have to come down. Its not great. Its not pretty. But if you are a small business and the burden of the unemployment figures is not your problem. If you don't have the work you don't need the people.

The reason you need to look at this early in the Turnaround process is that (as I have written before) there is (here in the UK at least) a raft of statutory obligations that you must adhere to. Otherwise all your efforts will be in vain and you will go out of business for losing a wrongful dismissal case to a smart non win no fee outfit in an tribunal. Not clever and easily avoided.

This takes time.

I am not going to go into the statutory details here. There are good sources of information in these locations:

Business Link
ACAS
BERR

I suggest reading all of them and if you are in any doubt about your obligations take legal advice. If you are a member of the FSB or other organisation that can offer help then it is worth seeking their advice.

The problem you have is understanding how deep to cut. I am deliberately writing about Turnaround situations. Businesses in a "do something very soon or die very soon" situation. My advice is structure for survival first in the short term (1-2 years) and a stable, workable structure that is affordable and gets the cutting done in one session. Companies that cut, cut, cut and cut again as they flounder about trying to get it right frequently suffer from an intellectual exodus. It frightens away the talent you need to keep. Think about this.

But also think about this:

The rule on these things is Cut Early and Cut Deep.

One CEO I know well said to me "It if doesn't hurt it isn't deep enough!"

And think about the big beasts around you. Do you need all those Directors? Do you need all those managers? Don't automatically cull the little guys and leave the expensive bodies standing. In a turnaround you need to shift the balance towards do-ers. Think like a Receiver. They look at a workforce on day one with a view to shedding every bone of resource that is not simply engaged in getting the goods out the door or the cash in. Be hard on yourself.

You should also look at your contract of employment and terms and conditions. Companies typically hire more people than they need when times are good and let the contracts fatten. You may well have scope to trim back the contract and the benefits, if only in the short term as a temporary measure. Decide this at the same time as formulating the restructuring and have one big bad dialogue with your people and get it all over with in one go.

Be straight, be open be honest. If it is do this and survive vs don't do it and die you will find that pragmatic realism kicks in.

Not nice. Not easy. But necessary.

Turnarounds are tough. That's why so many don't make it.

I Might Be Wrong But...

2009-01-21T09:50:00.004Z

Now up front I feel compelled to remind you that I am but a Managing Director of a small British company. OK a bit of an odd one that actually makes stuff despite all the advice I have received telling me that we are totally nuts and should have outsourced to Mars or somewhere long ago, but all the same just a simple businessman. I am not an economist. I have never read a weighty economic text or sat so much as a GCSE in the subject.

But...

If I don't have the work because I don't have the orders I don't need to hire anyone. So all the £1000 in cash incentives under the sun from Her Majesty's Government won't get me hiring. Since I haven't hired that guy I don't need to train him so the £1500 that I may be able to get for training is equally ephemeral.

If I don't have the work because I don't have the orders I don't raise the invoices so I cannot discount them with the Bank of England Invoice Discounting service, I don't collect the cash so cannot repay a loan that HMG has underwritten. All the banks in the land can offer me Government backed loans but if my demand is tanking it is not going to save me.

If lower VAT is just a different calculation in the way I collect tax for HMRC. It doesn't help me.

If prices are rising because of the currency devaluation the lower VAT rate has not lowered prices in the markets I trade in and so this has not stimulated demand so I don't have the work because I don't have the orders...

For the moment at least we here at Severn Delta are weathering the storm. Costs are through the roof but thus far demand has held, our bank are supportive, as I outlined in my previous post.

But...

I worry about the long term impact of the short term decisions our government have made.

I worry that the solutions we are presented with are balm for the symptoms that disguise the fact that the underlying infection is spreading.

I worry that pouring money into a black hole because someone has erected a cardboard facade with the word "Bank" written on it in crayon (so it must be OK, right?) and hoping the hole will fill up is hopelessly optimistic.

Maybe I just worry too much about this complex economic rocket sciencey stuff that maybe I'd understand just a bit if I'd maybe stayed in school just a few years longer.

Maybe I'm wrong...

Information Will Be Key In Lending Decisions

2009-01-15T09:35:00.003Z

Back in the frothy days of September I wrote this post, and mentioned:

...the growing importance of good management systems and information in how banks and investors judge businesses. The better the systems, the better the IT, the better the information: the higher the confidence levels.

I said at the time: "Ignore this at your peril."

Four months on this is pertinent as "Business" gives a "guarded" welcome to the latest Government wheeze to save us all.

The financial world is now full of charcoal-fingered cautious fellows who may have been happy to roll over credit facilities year after year in the past but now consider your business only as strong as the latest set on monthly management accounts.

If you cannot provide up to date information on a regular basis expect bad news from your next bank meeting.

Loan guarantee or no loan guarantee - if your data is not of good quality, reliable and up to date you are going to struggle.

Small business are regrettably poor in this area. In my experience too many small businesses still neglect good cash management.

We encounter examples all the time in our own supply base. Our financial year runs with the calendar year so we are currently tidying up our year end numbers. Yet we have small suppliers who supplied goods or services as far back as early November who have yet to furnish us with an invoice for the goods/service they provided. Of course without an invoice we won't pay, so they wait for their cash. No doubt some have expensive overdraft facilities that are being reigned in.

In the easy good times lenders were relaxed, as long as the annual accounts looked OK then it was hey have another ginger snap and cup of Earl Grey. No more.

Confidence is the absent quality right now so good data with coherent explanations of your current trading patterns and outlook for the next quarter will stand you in good stead.

There is business to be done with our friends the banks. Don't believe all the propaganda. There is money to be lent - money to be borrowed.

For example we successfully secured funding on sensible terms for an acquisition we were looking quite seriously at towards the end of last year. We opened the discussion at the height of the bank rescue storm. We were taken seriously and received the backing we needed to proceed in making an offer.

In the end we didn't succeed with our bid, but that was more to do with the price that we were prepared to pay not the amount the bank was prepared to lend. The latter being greater than the former.

But I am under no illusions, without the detailed up to date management information we provided to support our proposal it would have been rejected.

The Great Inventory Correction of 2008/9?

2008-12-28T15:25:00.005Z

Its just a hunch, just a theory, but are we seeing the Great Inventory Correction of 2008/9 play out on the High Streets and shopping malls of Great Britain.

It had been oh so easy for oh so long.

Fill the shelves and ring the tills. Sell the real estate and lease it back. Spread the supply chain to a land far far away, on the other side of the planet. Keep it well stocked. Stock on the shelves, stock in the store room, stock on the road, stock in the warehouse in the RDC in the NDC. Stock at the docks waiting to clear, stock on a ship waiting to dock. Stock on the water stock on the oceans. Stock at the docks waiting to depart... stock in production ready to go.

You get the picture.

But, for too many the cash commitment on all this stock stock stock stock stock is up front. Paid for by Irrevocable Letter of Credit, provided by our chums the banks.

You can get one today if you need one. Just hand over the cash first.

And that is the corner of the problem.

While the sales were flowing and the river of demand ran on forever where was the problem. But when what was three months stock becomes six becomes twelve. The time it takes to clear the log jam that stretches to four corners of the Earth is just as long.

Hence the bankruptcies. Hence the 90% discounts. The whiff of panic in the air.

As cash stops flowing freely in at the tills having a mountain of cash tied up in a circumnavigational stock blocked pipeline is a life threatening disease.

And the game is not over yet. There are months still to run. It is too early yet to say whether the step down in consumer spending is simply indigestion after years of easy credit and imported deflation or a permanent change in mindset.

In the short term maybe people are focusing on debt reduction, maybe later they will focus on re-building neglected savings, maybe they just own as many cheap DVD players and self assembly bookshelves as they need for the time being. We will have to wait and see.

But if my hunch is right and the Great Inventory Correction is afoot, what hope for the VAT fiddling charge of the Keynesian Light Brigade?

Buy hey, what do I know? A simple captain of a simple small company trying to navigate its way through some choppy waters.

Fingers crossed?

Screen Cloth Test Results So Far

2008-12-23T17:14:00.003Z

A while back we decided to road test a product concept by calling for triallists via Twitter, this blog and the Sarah Smith Blog.

All in all we sent out cloths out to about 40 people with a very short list of questions.

So far we have had 12 responses.

Most used the cloth to clean Laptops, LCD screens and mobile phones.

10 rated the performance Very Good. 1 Good. 1 OK

4 thought the size a little large. 6 thought just right. the other 2 simply large.

12 said they would purchase at our stated price.

Minimalist I know.

@btudor wondered how the research would affect the product. The simple answer is not at all. I hope to get a few more responses to beef up the numbers but realistically this is small business land. We work intuitively. If we think its a good idea with make a few, test them ourselves, if we think its a flyer we may, and I when I say may it depends on the cost and accessibility of a suitable test panel, run a quick litmus road test and then usually decide in a nanosecond whether to go or not.

Sometimes we do it like that. Sometimes we go "hey fuck it lets just launch the damn thing and see if it sells!" Examples here, here and here

Thing is, it often costs no more to just launch and see if it falls on its face than to fag about looking for justification. So sometimes we get a turkey. Such is life.

BUT the flyers out weigh the dogs about 7-1 so far. Even some of our lesser success slow burners have actually trickled away for long enough to have delivered a net return. Some of these will get culled next year because - remember what you are reading - we positive churn the portfolio. Low margin, low value, low volume get churned out as better margin, better value, better volume is won.

So all I plan to change is the print design. A new year is around the corner and we have some new designs and colours just about ready to roll.

Turnaround Tasks No.1 - GET THE CASH IN!

2008-12-02T09:38:00.003Z

If a business is nosediving it has one overriding problem that will kill it in due course: cash.

If you cannot meet your obligations, you will go under. So if your business is struggling you should be focused on one thing: how to cover your cash requirement this month.

Forget your three year plan. Forget the mission statement. Forget the strategy. Quite frankly you can forget the P&L for the time being. You can take for granted that it will be bad - you can fix that in time - but fix the cash issue first or time is something you just won't have.

The first thing to do is cancel all discretionary cash advance purchases. Now. Just stop. How many things can you do without? Write a list. Communicate it. Get saving. Get used to it. It is going to become a permanent feature for the foreseeable future. Do you have any temporary workers? Say goodbye. Cut back. So you are going to let some customers down this week, deliver late. So what. If it takes less cash to deliver late this month then deliver late & then ask for forgiveness.

Right now your foreseeable future is counted in weeks not months. Adopting this mind set will get you and your team focused.

Second COLLECT THE CASH YOU ARE OWED. I am constantly amazed at how little attention businesses pay to credit control even when times are tough. Get on the phones, get everyone you employ on the phones if necessary and get paid.

If the bill is overdue. Be firm and ask for immediate payment. At the outside agree a payment plan with them. 50% this month is better than zero. 75% better than 50%.

For invoices that will be due during the rest of the month - get in early. When will you be paid? Are there any queries that can be resolved early? Solve them now and there is no excuse for late payment. Keep on top of every invoice until it is paid.

If necessary offer discounts for early payment. If your customer has cash they may want to use this to reduce costs. You don't have the luxury of this yourself right now.

Although in the very near future you are going to be relentlessly focused on getting your costs down, you should expect them to rise in the short term as you re-focus on running your business for cash, cash and cash. Live with it.

Third. Negotiate with your creditors. Get some time, agree a payment plan for current debt. Of course you will very quickly have to get back to paying to terms but surviving comes first. Buy some time.

Once you have the immediate next few weeks covered you can think about month 2 and month 3 of the crisis cycle.

It is not a turnaround until you turn the corner.

Until then it is a struggle for survival. You have maybe one or two cash cycles to stop the downward momentum and I would hazard maybe one more to show signs of stabilisation. If you are very lucky, and if you have your creditors and your bank on side.

To keep the bank onside in 2008-2009 you are going to need to demonstrate that you are in control, taking tough measures and dishing out the nasty medicine when necessary. Otherwise it won't be your decision whether your business continues or not.

Back At The BBC Good Food Show

2008-11-29T11:36:00.001Z

Once or twice a year we take our Sarah Smith Brand on the road at a big public event like this one.

With around 150,000 visitos over 5 days it provides a great way to showcase the products but more importantly to hear what people REALLY think of the Brand.

I have learnt that THEY define your brand.

You don't.

You think you do but you don't.

Once you send your Brand out into the world it acquires a momentum you cannot entirely control. So we have learnt to listen and reflect back what we hear.

We have trebled sales of Sarah Smith since 2006. Trust me. It works.

41 Things We Did During The Turnaround

2008-11-26T14:16:00.012Z

I had been mulling over a concise, pithy, and to the point post along the lines of "10 Turnaround Tips For Troubled Times" but then Paul Fabretti ( @paulfabretti ) said this:

@gapingvoid agree. Sick of reading trite "10 reasons why" posts...

So instead I will share with you the full list of things Martyn and I wrote down in a bar in Amsterdam two years into the project when reviewing how far we had come by that point.

I have two objectives in doing this:

1. To illustrate that executing a turnaround is not necessarily straightforward. Yes there are some basics that you need to get right to sort your cash flow and stop the bleeding but turnarounds have two phases: crisis management and comeback. I can give you some crisis tips that should help you stabilise but comebacks are tougher.

2. To emphasise that any successful turnaround is a mixture of good practice, fire fighting, opportunism, and has many factors distinctly specific to the individual business and its individual problems.

Here is the list :

1. Painted the office. Put up pictures. To give staff a positive indication of change.
2. Installed computer system from scratch. Over a weekend. Ourselves. £30k in licences!
3. Merged warehouse & shop floor "line service" teams. 1 headcount reduction (natural).
4. Recruited 2 new admin staff.
5. Moved shop floor onto new 7 day/2 shift pattern.
6. Moved shop floor back off new 7 day / 2 shift pattern after 1 month as a total disaster.
7. Narrowly avoided strike with action 6.
8. Negotiated lower cost overtime pay structure in agreeing to 6.
9. Issued new contracts to all employees together with employee handbook bringing Terms & Conditions in line with current legislation.
10. Customised very old semi scrap metal machine to manufacture a very odd new product for a French customer.
11. Bought a small carton erector / sealing unit to go with 10.
12. Exited 3rd party warehousing and brought all finished goods in house. Huge saving. Meant fundamental reorganisation on shop floor and disposal of museum of old (s)crap kit that came with the acquisition.
13. Exited the "Industrial Distributors" market for our kind of products. Cut c. 100 small customers.
14. Moved to new sub contractor for a critical sub assembly. Halved cost.
15. Moved a key customer(4% of yr 1 T/O) to new more profitable product specification. They got a lower price. We got a wider margin. Win:Win.
16. Renegotiated a key partnership (we license a brand to them & make the product) onto more favourable terms. (5% of yr 1 T/O)
17. Launched what is now our single biggest product with what is now our biggest customer.
18. Ceased production of old "canister" format wet wipes. Resigned £100 k of business on very short notice. Sold production line to a Iranian gentleman. (Cash arriving days before we would have run out!)
19. Negotiated shorter payment terms from 5 of our largest customers.
20. Moved our single largest raw material supply to a new supplier having agreed an earn as you go increasing scale of credit, and lower prices.
22. Moved a further critical mass raw material component to a lower cost and easier assembling format. Saving RM cost and reducing labour time per assembly.
23. Installed ERP system upgrade.
24. Retained and relaunched key export contract on improved terms.
25. Bought a new production line from a Swedish drag racing champion. He had built it himself as a project. Reduced time from first action to finished product on a key margin item from 7 days to 1 day. Also a critical forward chess move in allowing us to move the business. The line it replaced was immovable.
26. Reduced the amount of space we leased from our former parent company as a result of 25 and by knocking a hole in the wall that separated our production areas from our warehouse to allow direct internal access. This also improved productivity by reducing "raw material miles".
27. Resigned a swathe of low margin business (2003 150 skus, 2004 116 skus, 2005 86 skus)
28. Negotiated further price reduction for 20.
29. Renegotiated a contract worth 9% of Yr 1 T/O onto a lower cost specification.
30. Moved a third key raw material item to new supply with longer payment terms although prices slightly higher! Sometimes the term is more important that the price.
31. Started purchasing in regular smaller quantities even though this sometimes meant higher prices.
32. Reduced order backlog from 6% of annual turnover (yes I mean that at any one point in time I had a backlog worth 6% of that year's sales!) to zero. Took nearly 2 years of attrition and steady planning improvements and my almost constant involvement.
33. Customised a small, mothballed machine to make a new format product (for us) and gain a good margin chunk of new business.
34. Bought a new packing machine to go with 33.
35. Began an improvement programme on our largest volume production line. Engineering investment, training, changes to RM inputs to stabilise woeful productivity.
36. Virtually eliminated the need for overtime.
37. Reduced engineering team by 1 by natural wastage.
38. Achieved ISO9001/2000 and BRC Global Standard for Non Food accreditation within 9 months of acquisition.
39. Completely renegotiated contract of employment and terms and conditions with staff and union. Major confrontation. Played VERY HARD and got 98% of what we went in for. A FUNDAMENTAL CHANGE. The single toughest thing we did.
40. Imposed a dramatic price increase on our biggest customer (14% yr 1 T/O) when they refused to give us a firm 12 month commitment. Took them 8 months to resource. They always took so long to pay that this repositioned our cash cycle once they were gone. A big decision, but they had to go.
41. Took a net head count reduction in mid year 2 that totalled 12 jobs ( out of 55) through natural churn (influenced by 39. possible as a result of 40.) and only 1 forced redundancy.

What I don't have on the list is that we re-paid a huge amount of debt, slashed discretionary spend, R&D spend and Marketing spend to the bone. We didn't start actively selling until mid year 3. Up until then it was contract and re-focus. The first profitable month was month 10. We were net in the black and technically solvent for the first time by month 21. To be honest this is not the full list of things we did. There is more. But this is what we wrote down at that one pointas we paused for breath and a cold beer and as this was written live in the moment this is what I share with you here.

But lets be clear. If was complex. It was HARD. And £1 profit for 21 months hard hard graft is not much to write home about, but we got there and look back now only to learn.

This Week We Will Mostly Be...

2008-11-25T17:47:00.004Z

1. At The BBC Good Food Show at the NEC as is our way promoting Sarah Smith - more details here from Dale at Delta Two Zero

2. On TV:

Deflation? What Deflation?

2008-11-17T09:23:00.003Z

I guess it takes a wiser mind than mine to figure this out. But I just don't see prices falling, not around here.

I was talking on Friday with a guy that @martynshiner met at meet 'n' greet in Bristol a while back. The man in question built a very successful niche sports goods company which he recently sold. The only reason I mention it is for one comment he made:

Anyone whose business model is built on low cost dollar priced imports has just taken a 25% cut in margin

His point was about the impact of weak Sterling. Many UK retailers and their suppliers are now dependent on imports from China and SE Asia. A year ago to provide their suppliers with $2000 they only needed to put their hands on £1000. As I write the exchange rate is $1.49:£1 so that $2000 now costs £1342.

You don't need me to tell you the % shift.

You don't need me to tell you this is going to hurt many many businesses.

Think of fashion retail for instance. Think of electrical goods. Think of toys. Think of Sports goods. It won't hit straight away because of the high inventory involved in distance sourcing but the wave is coming and when it hits there will be casualties if weak sales mean aggressive price cutting just as higher input costs soar.

The same is true of the Eurozone. We buy around 2.5 million Euros worth of raw materials p.a. at the moment. for the vast majority of these there is no domestic supplier or alternative. A year ago the exchange rate was typically 1.37-1.42 euros: £1. For most of this year the average has been in the range of 1.23-1.27 euros : £1. Today it is 1.17 euros : £1. So lets call 2007 1.37, 2008 1.23 and 2009 1.17. The cost therefore goes from £1.825 million to £2.032 million to 2.136 million. That puts 2009 17% up on 07.

In reality we deal with this in more ways than simply increasing our prices. We don't deal in commodities. So a combination of product innovation (so that lower cost new generation products replace higher cost old), cost engineering, progressive NPD deployment and Positive Churn portfolio management (so that we drop off lowest margin business as we new higher margin business grows) all figure, although inevitably some prices have to rise.

My underlying point remains that from where I am sitting prices are still rising and will continue to do so into 2009. The Sterling price of Oil is a figure that gets lost but when you read the headline about Oil being under $60 a barrel remember that when it went through that figure on the way up it meant £30 and when it came through it going down it meant £40.

Maybe in the long run weak sterling will boost exports but long before it is sending the cost of imports up and don't forget, here in the UK we import just about everything.

Open Source ERP Project Update

2008-11-13T15:39:00.005Z

As some readers will know we have been quietly (well reasonably quietly) creating a new ERP solution in house around an Open Source core (EGS from those fine chaps at Senokian - best know for Tactile CRM).

In a few minutes long Twitter frenzy this afternoon I fired out a few bite sized statistics about Severn Delta to aid your understanding when you read the beautifully understated project update that my partner in crime @martynshiner has posted on the company blog Delta Two Zero.

A link to Martyn's piece is at the end of the post. My tweets are shown here in reverse order:

we employ 50 people and will T/O around £6million in 2008.
1250 parts / sub assemblies and around 350 separate items of inventory. And we invoice around 4500 invoice lines p.a. or about 2200 invoices
That's around 7000 stock movements pcm, c. 2000 works orders being issued to the shop floor p.a. 480 bills of materials. 300 end products.
We pack them into around 1.4 million cases which we ship on around 9,300 pallets. Having received around 50% of that no as goods in...
Today is statistics Thursday: The following is for your information: Severn Delta produces around 12 million packs / units of product p.a.

Martyn's update is here

A Turnaround Tale - The Brief History Of Severn Delta -

2008-11-10T10:12:00.005Z

A 10 point mini history for your information:

1. Severn Delta was created in Aug. 2001 as a buy out vehicle but sat dormant as we waded through the various abortive MBO attempts until March 2003, when trading began.

2. We bought the "Consumer Goods" division of BFF Nonwovens, an industrial textiles manufacturer in Bridgwater UK. This was an internal division prior to the buyout. When I say internal I mean fully integrated within the main business. It had never traded independently and was not structured to trade independently using many shared resources e.g. planning, buying, customer services, accounting. In 2002 the turnover of the part we acquired was 1/3 of the whole.

3. The business we acquired mainly supplied UK Supermarkets with contract manufactured wet wipes, cleaning cloths and tumble dryer sheets. It still does although a significant and rapidly growing % of revenue now comes from our Sarah Smith brand.

4. At the time we acquired it the parent company of BFF, Lamont Holdings PLC was in Administrative Receivership, and so therefore was BFF. Something we in our final pre-receivership buy out attempt inadvertently precipitated. It was the main bank's refusal to sanction the sale of 1% of the total assets of Lamont to us that brought the house down.

5. We finally completed the deal on 27th March 2003. The next day we started again. We had 50 people in three locations within the BFF building(e.g. to get from our production zone to our warehouse you had to go outside walk around the building and go back in!) . These now needed to become a new unit, a new company, a new team. We had no computer connection. No email. No fax. The only telephone was an extension on BFF's switchboard. That weekend Martyn installed new servers himself so that we could get back on with the basics of life. In order to give our team a plain simple visible signal of change we painted the walls (with the help of our wives, daughters and my retired in laws.). We hung paintings and stuck company name signs (made on a desktop laminator) on all our zones. So by the following Monday at 6am the factory came back to life with a usable ERP system returned - the same one used at BFF of course with the data history carried across and the first semblance of a new identity and purpose.

6. By this time the business was in trouble. Suppliers withheld credit. We were funded purely by debt (but with less than we needed). Some customers walked away. Productivity was on its knees. In the first 6 months we had 2 floods, 10 days without power and the main union on site had gained national executive approval for a strike ballot. By the end of 2003 we had hit the ceiling of our debt facility and racked up a substantial loss (6 figures, and the first digit was not 1!). But we had started to turn the corner.

7. We started 2004 with sweeping changes. We had already exited two markets and sold a production line. We had started life with a long long tail of small low margin, commodity product customers. We amputated it. Every change we could make to overhead costs without negotiation we imposed. We gave statutory notice on a new contract of employment first and negotiated second. We played tough with our biggest volume customer whilst lining up replacement business on better (i.e. shorter) terms and succeeded in steering the former to the exit while the latter were collectively settling in. Effectively as I have described elsewhere we shrank to survive. The combined effect of the market exits, customer rationalisation and payroll strategies meant that turnover came down but cash flow was transformed. We took a net reduction in head count without making a single role redundant by freezing recruitment as people churned out in protest at the new contract (I'll admit we had not entirely anticipated this!). Tough medicine. But it worked. By Dec 04 we were in net profit after 21 months of trading. This is very much the simple version. Martyn and I sat down in a bar in Amsterdam during a visit to a trade fair in May 2005 and listed more than 50 separate substantive actions we had taken within the first 21 months.

8. So we landed in 2005 in the black and arguably with the worst behind us. This therefore seemed the logical time to move the business into new premises, and this we duly did in Sept 2005. At which point we returned to Turnover growth, and even though we took most of the relocation project costs straight through the books in 05, we still made a modest profit before tax.

9. 2006 was the lull before the (next) storm. We had a 6 month hangover from the move. Lots of small irritable, hard to fix, teething manufacturing issues. On the horizon a black storm. Turnover came up. Profits held but we wondered for how long. By the end of 06 a market that had delivered a 3rd of our revenue up to that point suffered a price collapse. Margin evaporated. We knew it was coming and were working on ways of filling the hole. In 06 I was launching NPD like there was no tomorrow! If enough stuck, I reasoned, if we solved our productivity issues and kept up what by then was an exceptional record in raw material cost engineering maybe we could buck the problem.

10. 2007 was tough. Oddly, given the first 2 years, it felt like the toughest year. We were having a bad time as I had expected but by the middle of the summer I realised it was for entirely different reasons than those I had anticipated. Most of the problems turned out to be self inflicted ratherthan related to the price-collapsed market. It had to be fixed with a structural adjustment. Heads rolled. I gave more responsibility to a smaller core team and kept a very very tight grip on the daily detail until I was confident the problem was fixed. To be honest we have not looked back. 2008 has of course had some choppy waters. The majority of our big volume suppliers are in the Eurozone. A year ago we got 1.4 euros for a GBP now we are lucky to get more than 1.2 (do the maths). But our relentless focus on raw material cost engineering (you can always get it lower - you just haven't worked out how yet), on NPD and on improving productivity and service has served us well so in a tough economic environment we are doing OK. Maybe the crash-crunch-tough-times don't phase me because that is mostly all we have known.

It worries me more when things appear to be going OK, makes me wonder what calamity is just around the corner.

I have learnt that it is wise to take a little paranoia withyour optimism.

Footnote: for the sake of clarity and good order Clive Birnie is Managing Director / CEO and Martyn Shiner is Financial Director / CFO of Severn Delta Ltd. They each own 50% of the company.

Thoughts On A Friday Morning

2008-11-07T10:49:00.004Z

1. Obamaramalamadingdong

2. Judge people by their results not their promises

3. 1.5% cut in interest rates means squat for my business. It has no impact on whether we succeed or fail

4. If 1.5% still doesn't do it for your business it because the cost of finance ain't the problem that needs fixing

5. If the rule is "when in hole stop digging" how come more high govt spend and borrowing + cheap money+ more regulation is the solution when this was pretty much the policy cycle that fed the asset bubble and created the problem?

6. If your business is slipping into a hole - STOP DIGGING! and contact us (see @martynshiner or @positivechurn or here for details) ...

7. This story is told to Josh by Leo in The West Wing (sorry can't recall episode or season):

A man falls into a hole. It is too deep for him to just climb out so he calls for help.

A Doctor stops and looks into the hole. The Man says "Doctor, please help me, I have fallen into a hole." So the Doctor writes a prescription, drops it into the hole and walks on.

But our guy is still stuck in the hole. He can't get out.

A priest stops and looks into the hole. "Father, please help me" our Man in the Hole says, "I have fallen into a hole". So the priest writes a prayer on a slip of paper and drops it into the hole, says "bless you my son" and walks on.

But our guy is still stuck in the hole. He can't get out.

Then his friend walks by and he calls out to him "Hey I need some help here buddy, I have fallen into a hole". His friend looks down. Thinks for a moment and then jumps down into the hole.

"What did you do that for?" Our man says "Now we are both in the hole!".

"Yeah, I know." His friend says, "But I have been here before so I know the way out..."

(thought this would make a good SOTM but I guess Mario would find the huge piece of paper contrary to rules of good composition!)

8. It is Carnival night tonight so I really must remember to run away north before the roads get closed!

A Brush With The Police and The VAT Man in Belgium

2008-11-05T16:18:00.006Z

Something of a Diary entry rather than a typically opinionated Positive Churn post but at the end of a busy seven days here is a run through what I have been up to:

Last Thursday @martynshiner (pictured) and I jumped in the 5series and drove to France with the help of the jolly nice, very efficient and quite reasonably priced people at Speed Ferries dot com. Speedy indeed. Sailing from the old Hover terminal in Dover and the little used ferry terminal in Boulogne Sur Mer its only 50 odd minutes across. The coffee on board ain't bad and on the return leg I strongly urge you to be early and factor in time for a swift meal at the Mirador Hotel, Restaurant, Bar and Hotel (The blue one across the port). Yes I know it looks a little shabby from the outside but it is one of those family run gems that you find all over France where hidden behind a nondescript facade is a restaurant providing food of a stupendous quality for a pittance.

No time to dally in France however swinging past Hem to pick up our man in those parts we were heading on to Ghent in Belgium for the Countryside 2008 consumer fair. The mission: Test drive the Sarah Smith brand of kookily British kitchen textiles from a cold standing start with the Belgian public. Not a bad result. We are always hunting for the niche appeal rather than a mass market stampede and after four days and reinforcements (Sarah and Alison from the UK team) we had chalked up value very similar to our first consumer fair forays in the UK. Given that three years on from its debut the UK sales of this brand generate a big chunk of our profits most months this is promising indeed!

In the middle of this @ms and I madly drove back to Blighty. He to pick his son up from a return flight from Hong Kong. Me to watch the Daughter play in a hockey match and to drop in on the celebratory 40th birthday bash of an old friend before charging back to Belgium to finish up. A small brush with the Belgian police (driving at the French speed limit once across the border is frowned upon!) not to mention Belgian VAT officials failing to put me off!

I said at the beginning of the year that breaking out of the UK was one of my 2008 missions. It hasn't always gone to plan but we are making progress and will push on harder next year via two big trade fairs way beyond these shores and by seeking to consolidate on the beachheads established this year in Japan, Ireland, Norway, Sweden, Denmark, France and now Belgium.

I long ago subscribed to the philosophy of If You Build It They Will Come so build we will in our small- not quite yet a global micro brand but working on it - kind of way in country after country after country because all evidence thus far confirms that we have a brand that travels.

We just need to buy it the plane tickets!

FREE STUFF - Or Care to Help Us Test This?

2008-10-24T16:38:00.002Z

As has already been detailed over here at Add A Splash Of Colour we are looking for some friendly citizens of Planet Earth to give our spanking new Sarah Smith Microfibre Screen Cloth a run round the track.

We have about one hundred test pieces of our new Microfibre Screen Cloth which we think is brilliant at keeping Laptop & desktop screens, LCD TVs, iPhones and all other manner of mobile and digital gadgetry free of smudges, fingerprints and other obscuring goo that clouds the view and frustrates our eyes!

No cleaning chemicals needed just a gentle rub with one of these beauties will keep your screen crystal clear and user friendly.

Volunteers to give one a whirl should apply with a "Yes please I'd love to test drive a Sarah Smith Microfibre Screen Cloth in a wacky pattern print" to info at sarah-smith dot co dot uk .

All we ask is that you send us a little feedback. Don't worry we will send you the questions (probably four of them we like to keep things simple!)

A huge THANK YOU in advance!

Three Thoughts On Poverty For Blog Action Day

2008-10-15T13:27:00.003Z

I have been thinking about Blog Action Day as it approached wondering what I would write and I have been reading The Road To Wigan Pier by George Orwell to remind me what life was like here in the UK in the 1930s. Three lines of thought followed:

Poverty is a relative thing, a personal thing and something that can be eroded.

Poverty is a relative thing (if we put aside UN or Government definitions). For example this which refers to the Somerset in the UK, the place where my business Severn Delta operates.

In comparison to to the experience of many in the developing world or in comparison to conditions describe by Orwell in The Road To Wigan Pier, we could argue that poverty in the UK is a condition that would be welcomed by many living elsewhere.

But Poverty is also a personal thing and existing on scant resources is a harsh existence regardless of continent or country. That the conditions described by Orwell are now all but eradicated in the UK demonstrates that economic and social progress can raise the majority of a population out of poverty. Admittedly I write 70 years after Orwell and 2015 is but a tenth of that time frame away.

I am vocal about my commitment to manufacturing in the UK. I am proud of the fact that as I write I have 46 people employed on decent terms working in decent conditions in a town in the UK that is far from its most affluent corners.

That is not to say that I am against Globalisation. I firmly believe more global trade will create the momentum that will lift millions from poverty. BUT I firmly believe that to expect workers in developing countries to work in conditions and on economic terms that our forefathers fought hard to eradicate here is shameful. It is for this reason that when we do outsource production we do so from Fair Trade sources through the Fair Trade Foundation.

I think it is imperative that in these days of increasing economic difficulty that we do not slam our doors on the world. Raising people from Poverty here in the UK means creating employment on fair terms in sustainable businesses. We still have some vacancies here and while our business continues to grow we will continue to create new jobs. If I am brutally honest I could run this business with fewer people. I choose not to. But raising people from Poverty in the developing world means buying their goods, creating flows of capital and trade. Charity and aid have their place but trade and creating access to our markets without strings attached, but crucially on fair terms would do more.

Take some time and read more contributions to the debate here on The Blog Action Day 08 website.

We Can't Grow Our Way Out Of This Hole

2008-10-07T08:58:00.004Z

18 months ago I wrote this post about one of our core theories of survival forged in the turmoil that saw the birth of Severn Delta.

Given the financial meltdown that is ripping through banking system it seems pertinent to reprise it: We, collectively, will not grow our way out of this hole.

So far out here in the real world where people get in their cars every morning, drive to work, take the kids to school, go shopping, eat dinner it feels like the early phoney war months of WWII. Not much has changed unless you have the misfortune to work for one of the increasing number of business failures .

But the bad tidings are piling up and political dithering is eroding market confidence. Consumers are pulling in their horns. Retail sales are down. The housing market is stagnant. New car registrations like new mortgages agreements are suddenly like rocking horse produce.

Behavior is slowly changing. Caution taking hold where exuberant confidence once ran free. Uncertain of our future prospects a survival instinct kicks in: we shrink to survive. We cut back and save our cash. Whether consumer or business this is the sensible course. Asset purchases can wait. We look for better value in consumables. We change vendors to offset rising prices or try to do without some things all together.

Collectively this means cumulative contraction. We will not grow our way out of this hole. We will turn round by shrinking to survive and growing again from a lower collective base.

In time those who have been fortunate enough not to lose their jobs will regain confidence and start to spend. House prices will eventually return to a level where their relationship to average earnings will make it viable for people to move. There will be pain along the way, no doubt there.

A while back I said here that I felt 2009 would hold the hardest yards. I haven't changed my view. Things for us right now at Severn Delta could not be better with a record sales and profit month under our belts in September 2008. But the underlying reason for this is the surging volumes in the value for money end of our portfolio over the past 10 weeks.

That gives a strong indication of where consumer confidence is heading. It is a trend that has only just started and has a long way to run. To be honest it may be a permanent sea change. But of that I will write more later.

A Wake Up Call For Small Business

2008-09-19T12:28:00.003Z

By a quirk of good timing (not sure that is the right expression but...) I found myself attending two events yesterday against the backdrop of the firestorm that has raged through the global banking system.

At the first John Moulton, who I have quoted (or rather deliberately misquoted!) here before, was the keynote speaker. At the second: Richard Lambert, Director General of the CBI.

Mr Moulton gave some sage advice: A downturn is happening. It WILL affect your business. You will have bad debts. Margins will be under pressure. The waters will be very choppy indeed. You need to have a grip. You need good real time financial figures for your business. You need to keep debtors where you can see them and act decisively in dealing will wayward payers.

He listed a barrage of things that businesses need to now be doing in a less easy rolling environment.

Every one of them mirrored the themes that I have repeatedly covered here: See the list of posts on the right. Start with this one or this one. I didn't learn anything I didn't already know.

Phew!

I guess the history of Severn Delta has been such that we are very familiar with how to manage our business in tough times because as a UK consumer goods manufacturer times have been tough more often than not. Hence Mr Moutlon pretty much described how we run our business as how you should run your business, not just in troubled times but all the time.

The strongest message was of course the importance of good cash management. CASH is not only KING right now it is god and emperor all mighty because it is suddenly in shorter supply. He emphasised the growing importance of good management systems and information in how banks and investors judge businesses. The better the systems, the better the IT, the better the information: the higher the confidence levels.

Ignore this at your peril.

This first event was in London. So after a brief sortie into Covent Garden en route to Paddington I returned to Bristol for the annual CBI dinner as a guest of HSBC.

Much of the discussion at our table over dinner was about the importance of good Management Information even in small businesses. An example of a c. £1m turnover business unable to provide any information less than three months out of date.

Let me be clear: If this is how you run your business you need to change and you need to change FAST. You may have got away with this during the easy rolling years of constant growth.

No more.

The world has changed this week. You need to know what is happening financially to your business in real time. You should know this anyway. Put it right. Or the moment things get tough and you need a bit of slack from the bank or your backers you will be in trouble.

And the next time you get a renewal agreement or offer letter it will have as a condition that good, regular management information will be provided. It was probably there in the past but not made too big a deal of. Expect that to change. If they say they want it you may well have your facilities withdrawn if you don't provide it.

As for Richard Lambert, having spoken to businesses across all sectors up and down the country, he was cautiously optimistic. Glass half full. He said. Keep your heads.

My advice: If you want you glass to stay half full pay attention to my words.

A Beginner's Guide To Making Mistakes

2008-08-21T15:45:00.008Z

When was the last time you got it wrong? Blew it? Ballsed it up good and proper?

Go on, be honest...

For me it was quite recently. We put a slug of money behind a piece of marketing activity and it bombed. Big style. One big waste of hard earned.

But, I had budgeted (sorry Sig- my apologies for using the B word) for it to have zero impact. So I am philosophical. We always set out a cautious plan. Something along the lines of "this is what we have so lets assume that is ALL we get". On that basis we decide how much to risk on new schemes and the ones that fly are cream and cherries. The ones that bomb... bomb.

I haven't formally sat down and tried to count up the things that went wrong over the last five years. I haven't tallied them off against the things that went right.

I know if I did that the list of decisions that ended up being reversed, the products that failed, the great ideas that turned out to be not so great would be longer than this blog post.

But the select few that have really worked have made a major impact on our business. Behind these stars are a good handful of unsexy moderate successes that have covered their risk costs and made a small profit. Together these and the ongoing positive churn management of the bread and butter mean we can take some punts every year and try new things knowing that we can afford for some initiatives to fail.

I guess you could say that along the way we are seasoned pros... in getting it wrong as well as getting it right!

Sometimes of course the mistakes have spiralled away from us and taken some hard yards and piles of cash to put right . So it goes.

My advice to the beginner is threefold:

1. Be prepared to be wrong. To be fallible. To be calamitous. You will find your willingness to have a go will increase threefold.

2. Be sensible though, every gambler knows that if you bet more than you can afford to lose there will be tears, broken bones and bruises.

3. When it goes wrong: take the blame. Own it. Particularly if it is high profile. Stand between the fire and your people and take the flames.

And enjoy the ride.

It is better to have enough ideas to be able to afford for some to go wrong than to have no idea at all.

Marie Claire

2008-07-18T10:02:00.004Z

Marie Claire Buy of the day! Not bad. Organised by our customer Natural Collection.

So one for the Brandistas: When your customer uses your product as an icon of who they are, you are on the right track, right?

A SPLASH OF GLOBAL MICRO BRAND COLOUR

2008-07-11T20:57:00.004Z

Inspired by the musings of Hugh Gapingvoid Macleod and egged on by the 20% of our web traffic that comes from beyond these shores, my 2008 mission has been to turn Sarah Smith from a kooky little British brand sold in a handful of stores in the UK into a kooky little British brand sold all over the world!

So far we have signed up customers in Japan, Norway, Sweden and Ireland and started at subsidiary in France (although it was meant to be a JV - long story!).

The next phase went live this week.

After a fairly major major overhaul of the web shop we have updated, upgraded and built in an international shipping facility so will ship to anyone, anywhere in the world. Maybe not a big deal for Amazon - but a fairly huge leap for us!

Tiny everywhere works for me. We created the first Sarah Smith products in 2005 gaining the first retail toe hold late in that year.

Three and a half years on and Jan-Jun 08 sales are ahead of the sales for the whole of 2007 and on track to double by the end of the year. Sarah Smith is now near on 20% of our business. A little bit of micro growth can be transformational for a company the size of Severn Delta so you can be sure I will keep you posted on our progress.

Be Positive Baby, It'll Be Alright

2008-07-08T16:26:00.002Z

Not just my blood group. Which is actually A positive but no matter. Here in lieu of a full Positive Churn post you can read my reply to Alex's excellent SmallBizPod post on the subject of Boom, Bust, Doom and Economic outlook.

More full blown Positive Churn attitude will follow shortly.

Thanks for reading.

Small Biz Pod Interview

2008-06-12T20:39:00.001Z

A few weeks back Alex Bellinger interviewed me about our MBO Turnaround Buyout... listen here

http://tinyurl.com/49wyqc

Hippy Shopper

2008-06-05T10:10:00.003Z

Its a long time since I was accused of being a Hippy! But I take responsibility for this and am very pleased with it. No PR spin involved. They liked the product so they gave us a write up. Sometimes that's the way it goes. Usually these things are all the more satisfying for being an expression of genuine opinion.

I'm No Tree Hugger, but...

2008-06-02T14:19:00.003Z

This from my business partner and FD/CFO at Severn Delta:

I’m no tree-hugger, but I hate waste and think that an economic model based on buying cheap crap from China, shipping it half way around the world and dumping it in landfill is doomed

Part of a response to David Tebbutt's post "Make Green Pay" at Small Biz Pod.

How to Fire People (MD's Handbook III)

2008-05-23T12:17:00.004Z

A couple of years back I was watching The Simpsons with my daughter who was then 6 or so. Mr Burns was in the process of firing Homer. The daughter watched Burns do his stuff and then looked at me.

"How many people have you fired?" She asked.

"Thirteen." I said.

The number is way higher now. Just a fact of life. People get fired. My job means that I am often the final line in the process so my batting average is high. Martyn's is higher. He is the line in the sand before me.

The majority of our ex employees who have left against their preferences have gone for effectively dismissing themselves. Persistent failure to simply show up for work. That sort of thing.

We have made our fair share of serious, structural, sometime very senior executions though, and these are expensive if you get them wrong!

Here's my advice:

Do it legally.

Whatever country you are in, there are rules about this. So play it by the rules.

Why?

Because it will cost you less than breaking them. Here in the UK if an employer fails to follow the statutory dismissal procedure any subsequent unfair dismissal claim will be upheld. You won't even get before the beak. You just lose. And it is VERY expensive. I know of one local company who found out the hard way at a cost of around GBP100k for 2 cases.

And legally sometimes means slowly! And sometimes means that under performer in question may well turn the game round and save themselves.

Secondly. Do it strategically. Think about it. Plan it. Think about it again. Execute. Cool head. Calm hand.

Thirdly. Do it before it is too late. If there is someone who has to go try not to beat around the issue for six months while the situation gets worse. They might just cost you a whole load of money in the mean time. I speak from experience: Grow some stones and get on with it.

Fourth. Get your story straight. There are reasons why you want to fire someone but this won't allow a decisive hand within the law. Is there another reason? Can you restructure them out? What is the room for manoeuvre?

Make sure the reason you think you want to fire someone is a reason for which you CAN (legally!) fire someone. There may have to be a certain amount of legal smokescreen involved to reach the desired endgame. Keep point two in mind. Cool, calm, consistent.

I have shot some big beasts in our organisation when necessary. Senior managers and Directors. Once or twice people who were considered fireproof cornerstones of the company history. But there are times when you reach a fork in the road and there is a path with that person remaining and a path with that person removed. On every occasion the person involved was treated with respect and rigid application of the law.

It has never cost more than it should have or could have.

Black Kite Goes To Afghanistan

2008-05-22T14:30:00.004Z

I have mentioned Dean before. We met him at a Surf show back in 2006. He liked Black Kite and has been on a one man mission to convert his colleagues. He says our Black Kite body wash is great because it is a)dry b) light weight c) compact d) requires very little water e) uses natural ingredients that don't irritate the skin if you can't rinse them off because you are in the desert!

He likes the towel because it is a) light weight b) large enough to use a a body towel and c) it dries damn fast without going rancid.

I couldn't have put this better myself. So the lesson is listen to your customer sometimes they know your products better than you do!

There is another more entertaining picture here, Ladies, avert your eyes!

The MD's / CEO's Handbook Pt.2: Strategy

2008-05-07T12:50:00.005Z

You have got to know where you are heading or you will never arrive.

That's my simple take. How you are going to get there can change with the waves but however small your business you need a basic strategic grip on the wheel. This may mean at a very basic level having a clear idea what you will do and what you will not.

You don't need a mission statement.

DO NOT outsource this to consultants.

Work it out for yourself: Where is your business going to be in 3 Years? What will it look like? Which roads are going to get you there? Read some books. Read HBR. But keep it as simple as you can.

For us day one it was both complicated and simple. We bought out of a bust plc. and were in too many markets that we simply did not have the right assets or competencies to succeed in.

But there was a distinct difference between the tactical swerves and pure fire fighting that was needed to get us through the first nine stormy months and the strategic moves that trimmed the company down, focused it on three core markets, and more importantly made it cash positive and profitable.

We walked out of the biggest volume market for one of our technologies. Sold some assets.

We even gently eased our biggest customer towards the door! It was just the right thing to do. As I explained to Alex Bellinger a few weeks back, the complexities of our day one financing meant that every time we shipped a truck load of goods to these guys our cash position worsened. Ouch.

So getting off them and on to new business that was a) in the markets we had defined as core b) at better margins than the out going market/customer combination and c) on better payment terms allowed a wave of cash to wash in three months after the final shipment. This was a fundamental chess move in the turnaround plan.

For Severn Delta the churn factor is key. Easing under performing products and customers out the door as newer better performers come in.

We don't always get it right. We got a lot wrong last year to be sure but we always knew which way were heading and this made the corrective actions all the easier to identify and to execute. As a result T/O is up 6.5% yr on yr. YTD PBT significantly more so.

As the MD/CEO of a SME the trick is to keep half my mind on the strategic horizon which sits 18 months away and the other half on the day to day demands of the business.

I am in the process of steering us through another re-focus at the moment. I know what the 2008 results should look like if we just keep doing what we do best and I have a plan of 2009 that gives me a projection of how we will look post re-focus. There are some big plays to be executed to get this right but I have this firmly in my sights.

I know where we are going.

I have a plan for how we will get there.

Everything else is detail and execution.

120 Good Things & More

2008-04-24T12:20:00.006Z

Our Sarah Smith collection of Pattern Print textiles is roaring at the moment and word is spreading. New connections include Big Green Shop & Guardian Ecostore.

We have just shipped our first order to Ireland and then

Nanette Merrill of Utah left a comment on the Sarah Smith blog asking if we ship to the US...

Full story here at the Sarah Smith blog.

If you build it they will come!

Authentic Trappist Beer

2008-04-23T06:14:00.001Z

When in Pas de Calais or Le Nord as they call it round here, do as the Ch'tis do. This little beauty is 7% alcohol.

Keep One Eye On The Horizon

2008-04-22T10:17:00.001Z

I'm writing this on the Eurostar en route to Lille. Partly because I can and partly because travel gives me time to think and stare at the horizon.

The thing about the horizon is that it is always renewing in your line of sight and always marching relentlessly towards you.

It is the same in business. Issues that were remote and to be dealt with another day are suddenly upon you wreaking havoc and derailing your carefully crafted plans.

So whatever your business, whether big or small, Keep One Eye on The horizon and learn the art of the tactical swerve when ugly disruptions charge towards you.

Good Things

2008-04-02T12:42:00.003Z

Five good things that happened as Severn Delta passed its fifth birthday:

1. An interview this morning by Alex Bellinger for SmallBizPod

2. This fantastic piece on Sarah Smith at Print & Pattern

3. Our new Fairtrade range hitting the market, in particular with the help of Ethical Superstore, Natural Collection and Waitrose

4. First three orders shipped to customers in Japan. Including Sarah Smith to PlazaStyle

5. First order received today for a piece of NPD put together to open up a completely new retail channel.

If 2008 carries on in that vein I shall be happy.

Now We Are Five

2008-03-26T18:05:00.003Z

According to The New York Times, the 27th of March has been a busy day for many over the years.

But more significantly it was also on this day five years ago that we completed the MBO that saw our vehicle Severn Delta leap into life with 50 odd employees, a hundred customers, and a HUGE amount of instant debt.

Champagne will be available later if you happen to be in the vicinity!

New episode Of The Detective Who Had Never Solved A Case

2008-03-22T22:23:00.001Z

The 22nd since I first started posting these in July 2004.

CLOSE THE DOORS

2008-03-21T22:15:00.002Z

New Five Minute "Flash" Fiction piece posted for Good Friday.

That done its back to Wii golf and a glass of Fitou for me.

Happy Easter all!

A Small Dragon

2008-03-15T23:36:00.003Z

Tangents.

Tonight I watched a recorded South Bank Show from last year about the Liverpool Poets Adrian Henri, Roger McGough and Brian Patten and then had a hunt on line.

Found this:

The Managing Director's Handbook Part One

2008-02-24T19:21:00.007Z

It is almost five years now since I became Managing Director of Severn Delta on completion of a MBO.

The exact anniversary falls on March 27th to be precise.

As this landmark approaches I am thinking over the lessons of the last five years and how I can distill these down into useful guidance for others new to the role of MD, whether that be at the helm of their own company or not.

I found myself in odd territory. Yes we had just completed a MBO but the entity we had bought had never traded as an independent company, was not organised to function as an independent company, did not have systems independent of the now former-parent company, and there was the small matter of it having been in administrative receivership!

I stood at the helm of our new venture without a beginners guide to being a Managing Director to hand and without having first completed a crash course in turnarounds and start ups. This was my first directorship. I was 34 years old. For the record I did not make it to University and have not completed a MBA. (Although I admit that my sidekick in all this, Martyn Shiner, could tick a few of these boxes!)

Living within a failing organisation for three years prior to the deal, the fire storm birth of Severn Delta and the treacherous seas we launched our vessel upon provided all the lessons required.

Even if I had no handbook, no guide, I did have a clear idea of what a Managing Director was NOT. So that is where I started and thus where I will start now.

With a warning:

You are not cut our for this role if:

You do not have a head for strategy, and cannot spend a big percentage of your time with your head in the future with your hands holding firmly onto today.

You do not have a head for numbers, if a P&L is alien, cash flow a mystery, a Balance Sheet gobbledygook.

You do not have commercial verve and an ability to think about how every aspect of your business is affected by every decision you take.

You think marketing is bullshit.

You cannot admit making mistakes. Particularly the big ones.

You cannot learn from your mistakes. Particularly the big ones.

You cannot fire people who have worked closely with you for many years but need to go.

You cannot look the Bank in the eye having burnt a mountain of their money in the first 9 months and convince them to keep faith, that they will get their money back.

You cannot tear up a carefully crafted plan and start again in a big hurry when it doesn't pan out.

You think this job is about just keeping the day to day steady.

You think technology or software will solve the problems in your business.

You cannot lead, cannot take people by the hand and say "come on jump out the window with me it will be alright".

And most of all,

If you do not have a unfailing belief that you will succeed one way or the other, because if you doubt you will not succeed.

Even in the darkest days of our first year when the loss was huge, the debt enormous and time quite frankly running out, I did not doubt for a moment that we would succeed, and nor did the man standing beside me.

One of these is a great help. A damn good Financial Director who will tell it how it is, with a straight bat. If he is also an open source obsessive with a vision consider that a bonus!

Of course in my case the man beside me had committed cash to the venture as well so it was his money we were burning as well as mine (although most of it was HSBC's!).

He is fond of saying "Debt focuses the mind."

Damn right. More to follow.

New Flash Fiction: The Identity Thief

2008-02-15T17:33:00.002Z

Inspired by Gareth L.Powell and the Friday Flash Fictioneers, not to mention to excellent Guy Hogan . I have had another crack at writing Flash Fiction.

You can read the result here.

Its A FREE World Baby!

2008-02-12T11:51:00.000Z

I have noticed people joining in the Campaign For Free Hugs in Bristol and Bath in recent weeks.

I didn't take them up on the offer myself but others were happily joining in.

No strings no gimmicks no customer satisfaction surveys.

Start up costs zero.

Revenue: none but the satisfaction of human interaction.

Hard to fault.

Target Practice, Pull And All That

2008-01-31T17:29:00.000Z

Back in April last year I wrote this post having read a post by Sig Rinde. Sig had said: "Target means push is afoot. Push is yesterday, thank you very much.". (Actually you should read this from Sig as well)

"Spot on" I said. And told a story of how we have tried to reinvent a traditional product with a new performance fabric and beautiful design and how this was met for the most part with confusion and so when one of our key customers offered an opening for a more traditional incarnation of the same we took a crash course in learning to let your customers "Pull".

We didn't give up on the techology version. Sales had been slow but the fan base appeared loyal and the feedback scored high 80s on the performance satisfation scale. Given that the product had a long life cycle I felt we had a product with potential if we could get the execution right.

So we re-packaged it, re-positioned it as a broader usage concept and communicated the benefits more clearly.

9 months on: Sales of the "Technology" version now run at three times the traditional.

But I think we are still only scratching the surface. So we are tweaking it again and it hits the shelves very soon, as does a re-invention of the traditional version.

We are fortunate that we are flexible and nimble and operate at a level where constant evolution is possible and affordable. We can listen, learn, adjust and tune as we go in a way that a bigger company would find difficult. Quite honestly we can generally innovate faster than we can take new stuff to market. My R&D Cupboard has enough in it to keep us going for 2 years. I have reduced the number of initiatives in the implementation pipeline because the congestion was hampering the efficient running of the company.

You could say I am learning to prioritise in line with wherever we find the Pull signal. Yes we are still feeling around and testing the strength of emerging signals, but I am keeping the team tightly focused on a smaller number of BIG initiatives.

Doing a lot less. Achieving a lot more.

That's how I am looking at 2008.

And with January sales up just shy of 10% vs 2007: so far so good.

Inflation Inflation Inflation

2008-01-24T13:22:00.000Z

The causes vary but we are seeing significant cost increases in just about every aspect of our business.

Utilities. Packaging. Fabric (our staple raw material of course).

One market is being hit very hard indeed because of a complex combination of raw material input increases at our suppliers fuelled by oil prices and complicated by consolidation at the root, a decline in available European capacity, and the recent shift of GBP vs the Euro.

How hard?

Put it this way, I have agreed a 17% increase with one customer but will still make less this year than last assuming static volume. This increase is as high as the market will permit.

We have another contract in the same market where we are a difficult position and are "negotiating".

But in all our other markets we have managed to offset the wave of increases as a result of R&D and judicious re-sourcing. The problem market discussed above is next to zero growth. The rest of the business is expanding as a steady rate. The problem market is about 20% of the business.

You will not be surprised to hear that unless we can re-engineer the problem market there will come a time when the profitability of the business as a whole will be enhanced simply by ceasing all activity in the problem market.

That time is not yet but if the inflationary waves continue to crash on my beach harder than I can pass on then that day will arrive within the time frame of our current three year plan.

Such is business. We have exited markets before when the returns are eroded beyond recovery and we will do it again.

The trick is to make sure you are creating new markets as the old ones die away.

2007, Lean And All That... comment follow up.

2008-01-13T15:15:00.000Z

Some follow on comments are here if of interest.

Facebook Advertising

2008-01-11T17:10:00.000Z

I finished reading Paul Fabretti's musings on Facebook advertising and logged into Facebook to make a scrabble move in a marathon game with Mr Shiner.

A new banner ad appeared in the left hand margin.

Apparently I need a new cleavage to go with my Ugg boots.

I rest my case.

Death Of The Plastic Bag

2008-01-10T15:36:00.000Z

It has been widely reported that China has banned Plastic bags in an attempt to both encourage more environmentally responsible consumer behavior and to focus finite resources in areas that are less economically wasteful.

Australia has made a similar announcement.

The UK Government is of course too weak kneed for such measures but it is only a matter of time before a UK retailer takes the high ground and drops free plastic bags at its checkouts. Whoever makes such a move immediately re-positions all its competitors as less serious on Green issues and saves a huge pile of cash.

Consumer backlash? I think consumers are ahead of both government and business on this.

The news from China and Australia sits along doom laden headlines about M&S's reporting of weak trading.

Plastic is cash. Oil is $100 a barrel. Packaging reduction is cost reduction is profit enhancement.

Off you go Mr Rose... Establish a small task force and given them an eye watering amount of money you want out of packaging in very short order.

Then tell the world what you have done.

Won't fix the whole problem but in a tightening market why spend money on something your customers just throw away.

Mayhem. An Omen?

2008-01-08T11:32:00.001Z

Our biggest customer has thus far ordered more goods in Jan 08 than in {the whole of} Dec 07. All for delivery by the end of this week.

We work on a 3 day lead time.

Operational mayhem. Good for stock turn. Good for Cash.

If this is an Omen for 2008 then bring it on!

2007: So Last Year!

2008-01-07T15:31:00.000Z

To everyone who read Positive Churn in 2007: Thank you for dropping by your attention is appreciated.

Amid the many lessons from a tough twelve months:

1. Learning the very hard way that the whole Lean Manufacturing / Thinking religion is bollocks for small business, well this small business at least.

2. Question everything. Just because you are expecting a good quarter or a bad quarter make sure that when it goes the way you expect, it is for the reasons you expect. Beware a black swan lurking out of view.

3. The three month rule is still alive and kicking. Mr Moulton was right again, although I admit I deliberately misquoted last time. I believe he said "no one ever told me how they fired someone three months too early".

4. Pull is all very well but one man's pull is another man's push. So if a party with whom we trade forces a changes of terms on me are they pulling or pushing?

5. The devil IS in the detail. Don't ever forget it because he will burn your house down while you are not looking!

6. That experimenting with loosening your control freak tendency can be more problematic than you realise.

I nearly wrote more detailed posts on these themes as they bothered my mind during the last quarter of 2007 but was wary of getting bogged down in negativity. So I will leave them all here and make a real effort not to hark back.

I am optimistic about 2008. We took price attrition on the nose last year that wiped 8% off 2006 turnover (or twice 06 PBT) before we started and still ended 07 2.5% up on 06.

The bottom line rather went missing in the process but that is back under control now despite raw material increases that are ranging in the 10-15% range.

2008 will be another challenging year for Severn Delta. I am always a little guarded about how much I say here but you can be sure I will say something as the year proceeds!

We have some of our best ever NPD in the pipeline for 2008 including our Open Source ERP project which approaches implementation. We have generally been good at recreating profitability again from scratch every year. We play in tough markets with big competitors and big buying power customers so this is just a fact of life round here.

We survive by creating new value faster than old value can fade away.

We call this Positive Churn.

Led Zeppelin Reunion II

2007-12-15T16:12:00.000Z

Watching Led Zeppelin Live in Madison Sq. Gardens from 197? on TV with The Daughter (8). Half way through Black Dog I ask:

"So what do you think?"

She gave it due consideration.

"Are they boys or girls?" She asked.

"What do you think they are?" I asked.

"Girls." She said.

"But that one (John Bonham) has a mustache..."

"OK" She conceded "But the others are girls."

Led Zeppelin Reunion

2007-12-11T20:24:00.000Z

Like watching your grandad doing karaoke.

Coats Are Just Not Cool Anymore

2007-12-06T09:26:00.000Z

It was one of those Mark Earls moments.

A Herd thing.

I was driving to work along the usual route that takes me through my home town and then through the next town south en route to the M5.

This takes me along two roads, one in each town, that are usually thronged with teenage kids walking to school.

It was raining.

And in both towns only a tiny minority of kids were wearing anthing more weather prooof than a sweatshirt.

No sign of the fur fringed hooded parkas of the 70's (although I noted many parents wearing these in the playground when I picked my daughter up from primary school last week), nor the sports branded jackets of the 80s and 90s.

Coats are un-cool.

Wetter is better.

Looking for verification that this is not just a local oddity I discussed it with my 15year old niece.

She does not own a coat, despite the protestaions of her mother, although she could not really explain why or connect it with a behavoiral trend.

A google trawl threw up similar comments from across the atlantic.

In drier climates than our own where temperature is the main concern I can see that a coat is easily offset by a few thermal layers but the kids I am talking about were drenched in good old semi permanent English precipitation.

How did this start? How did it stick? I am curious.

As far as I could tell none of them were wearing Hush Puppies however.

Bootstrap Advertising

2007-12-03T17:21:00.000Z

Dennis Howlett's referred thus to my tendency to use my family as models. Examples are:

1. My Wife (left)
2. My Daughter
3. My Dog

But the point is if you haven't got the cash how to you achieve quality presentation?

As always its a mixture of who you know and technology. I have used a mixture of professional photographer who happens to be the husband of a former colleague, my family, and making the most of the odd sunny day with a Cannon EOS 400D! But mostly the latter and sparingly with the former - the image here was shot in my mother in law's kitchen in Nov 2005. We have milked that shoot for two years!

A good camera a a few inexpensive lights will take you a long way and save you a heap of cash is a good rule of thumb. But brush up on a few rules of composition and lighting first.

Amateur Advertising From Facebook

2007-11-30T11:16:00.000Z

A question:

Why, given that I have provided them with the sort of targeting information that would make yer average ad man tremble (ie that I am a Male, a certain age, Married, and live in the SW England and a list of all the things that interest me) are the ads on my Facebook page for dating services, cosmetics and "only available in N.America" guff?

Listen carefully and you can hear the gurgle of missed revenue trickling away.

OK, maybe I would look really cool in a pair of "Ugg" boots, but I have my doubts.

Black Kite Facebook Group

2007-11-30T11:07:00.000Z

Our man Dale has been experimenting with Facebook. Early stages and we have only tried a couple of things so far but getting even a single comment like the one quoted here is satifying indeed.

Hergé's Adventures of Tintin

2007-11-25T17:54:00.000Z

KB and I took The Daughter to the Millennium Centre in Cardiff to see The Young Vic Theatre Company's production of Hergé's Adventures of Tintin or to be precise: Tintin in Tibet.

The play is now moving to the Playhouse Theatre in London after a tour of the provinces.

I cannot recommend it highly enough. A wonderful piece of theatre. Hergé's "hymn to friendship" - as Nicola Blackwell (a member of the ensemble cast) referred to it in the after show Q&A session - is brought to life with the humour, drama and pageantry of the book all in place and a brilliant opening musical dream scene that tips a hat to the 60s and 70s cartoon adaptations.

I am a lifelong Tintin fan. From the school holiday TV runs of the old old five minute bursts of HUR-JAYS ADVENTUUURES OF TIIIN-TIIIIINNNNNNN! (some of which I have on an old video tape), and memories of borrowing the books from our local library back in the early 70s, through to rediscovering the stories via my daughter's love of both the books and the 90s cartoon executions that are loyal to the original artwork of Hergé.

And now its the artwork that draws me in. Hergé was a cartoon pioneer. His influence was felt by Warhol, Lichtenstein and even Walt Disney and the legions of graphic book artists that have followed.

But getting back to the play. Go and catch it in London in December. Take the kids if you must.

Ing - Ger - Land (addendum)

2007-11-25T17:34:00.000Z

... and what of the long term vision?

Tournament performance contributes to world ranking contributes to seeding...

So if you don't win the group you don't qualify and your ranking goes down so you get relgated down the seedings and run the risk of a tough qualification draw for the next tournament.

No need to keep focused. No need to ensure qualification.

Best just bumble along and hope for the best eh?

We should consider ourselves lucky not to have received a tougher draw for the 2010 World Cup. But then our Euro 2008 group was considered easy and Croatia put us in our place.

Ing - Ger - Land...

2007-11-24T10:19:00.000Z

Before Wednesday night I had a post in my mind getting ready for the inevitable.

I had no expectation that England would overcome Croatia. I remember rooting for Scotland in 78 as a 10 year old so I don't take for granted that England will qualify for tournaments.

But lets be clear, this was a financial as well as a football disaster. A business disaster. An all too familiar example of calamitous British management, and of course standing in good company this week!

One analyst put the cost at as much as £2.5 billion lost economic activity and a 1% boost to GDP during Word Cup and European Championship tournaments.

Gone is the revenue from the replica shirts that no one will buy, the 20 million TV audiences that cannot be sold to advertisers, the flags, the mugs, the beer, the plane tickets. Why did the FA risk so much by persisting with a failing strategy?

And when I say "Management" I don't simply mean Mr McClaren, woeful though his performance was. I mean the Entire executive set up at the FA.

The mission was surely to qualify for the money spinning tournament.

The strategy: win the group to guarantee qualification.

How this would be delivered: winning every game.

What resources are required: Englishmen with an aptitude for football and a coaching staff able to marshal and field them in a formation within which they are confident, comfortable and familiar in order to ensure they perform at their best.

Available personnel: c. 20 million English Males.

In business if the strategy isn't working and you persist you are a fool.

No different in football.

Leaving chance to the last throw of the dice is very high risk indeed. A way of working best left to gambling addicts in Las Vegas.

Too many foreign player that's the problem: rubbish, rot, utter nonsense.

Incompetence my friends. Mediocrity in management. An inability to adapt and swerve as the game doesn't quite go the way you expected. No fall back strategy. No plan B. No nerves of steel. No backbone. No fortitude.

Yes the boys with the white shirts on their backs looked like their hearts were not in it.

But who let that happen.

Failure should have consequences. And by that I don't mean the fat executive pay off!

The Importance of Elephant Hunting

2007-11-18T18:55:00.001Z

In 1993 I visited Cyprus with Dennis Bonner a long served Unilever hand. One of the most formidable characters I have had the privilege to work with and a man who taught me a heap of useful lessons. Genuinely good stuff that I continue to both use and quote at people on an almost daily basis.

The Importance of Elephant Hunting is one of them. Although he put it something like this:

"Look after the Elephants Young Clive, and the ants will look after themselves"

It was a hot day. We were sat in a cafe. His grizzled grey beard cracked in a huge smile at my incomprehension as he barked out a huge laugh and knocked back a thick strong Turkish, sorry, Cyrpiot coffee.

His point is a versatile rule for business.

Hunt the Elephants.
Herd the Elephants.
Feed the Elephants.

If you are engaged in a turnaround: List the elephant actions and take them.

Little drizzles of cost attrition won't do it. You don't have the time. Get the big gun out and give the trigger a bloody good squeeze.

If you are building a business. Know who the Elephantine prospects are. Work out which one you are most likely to bag. Focus on bagging them first.

Elephants are critical mass. Elephants are a meaningful difference. Elephants can swim.

And once you've bagged the elephantine prospects treat them with respect and keep them in the herd. Feed them and they grow into matriarchs and gather the smaller beasts around them. Ignore them and they wander away and feed in someone else's forest.

You will find that if you offer one of your big old elephants some new food they are more likely to give it a try than another creature who knows you not.

Your mother told you not to take sweets from a stranger, didn't she?

So look after the Elephants. The ants may not necessarily look after themselves, but they are more likely to take you seriously if you have an Elephant in your garden.

Gordon Backs Down - Addendum

2007-11-01T14:01:00.001Z

An amusing companion piece here to my post from Oct 7.

Thanks to Martyn who spotted it here first.

Sarah Smith Appreciation Society

2007-10-31T19:48:00.000Z

As part of our ongoing experiment with Facebook we have created The Sarah Smith Appreciation Society.

We will preview the 2008 range there before the end of this year.

SOS / Everything Communicates

2007-10-26T16:04:00.001Z

Our man Dale Shepherd writes here about how Severn Delta recently decided to help the Support Our Soldiers (SOS) charity...

Social Object - Delicious Addendum

2007-10-26T13:08:00.000Z

(the UK foodie Magazine, that is!)

Change ‘typology’

2007-10-26T11:53:00.000Z

A few weeks after the event I know but I am still catching up post restructuring.

Given that change is a way of life round here I read this post from Adriana Lukas with interest. Very much the maverick myself, but with the power of course.

Watch out for this dude though, he is really dangerous:

The Process Worshipper - the Agent Smiths of the system. Dangerous, if often well meaning. Focus on working the system and making everyone do the same. His approach to change is finding (or creating) a pipeline that could deliver it. Often relies on external third parties (agencies) for innovation and delivery. Draw strength and self-worth from following and imposing rules. Efficiency, metrics, objectives, deliverables is the mantra. Comes in several varieties e.g. the Language Abuser - uses buzzwords, phrases, charts without much meaning to create an air of importance. The Deliverer - applies himself to efficient implementation without much understanding of the big picture and what is needed. Competent and potentially helpful if the process-magic can be dispelled in his mind.

Hugh MacCleod: More Thoughts on Social Objects

2007-10-25T08:50:00.000Z

I have to admit I go a bit hot and cold about Gaping Void. When Hugh is riding the Blue Monster I switch off, but when he writes a post like yesterday's More Thoughts on Social Objects he has my full attention.

No need for me to summarise. You can read it for yourselves. But here is an anecdote to add to the mix:

I found myself in a Chinese restaurant in Clevedon a few weeks back celebrating the 40th Birthday of my friend Steve Davies along with 20 odd others only a few of whom I had met before.

There being only one other person who shared my aversion to meat I sat next to her and we shared meat free Chinese dishes and talked about dish cloths.

Yes:

Dish Cloths.

There is one in every kitchen in England after all and this humble item is a mainstay of our output here at Severn Delta.

The reason we talked about dish cloths is that Nikki(the lady in question, an old friend of Steve's wife in town for the weekend) is a fan of our Sarah Smith range.

Fan is an understatement, lets call her an Evangelist. She started the conversation, not me, although I am of course always happy to talk about my business to anyone who wants to listen / read.

I told her the story of the MBO-turnaround-start-up that is Severn Delta and answered her questions about the origins of Sarah Smith.

And then she told me that she had collected all 7 of the different designs that we had released so far, two of which were limited editions!

So when Hugh says "it's the conversations that happen around...[the social object] that's interesting". He is on the nail.

Our bright and colourful take on the humble dish cloth has to date been written about in 40 separate publications (both print and digital) and as I mentioned back in the summer, when we pitch up at events like the BBC Good Food Shows people stop by just to tell us how much they like the product. We call it Britain's most talked about kitchen cloth... but here's the thing:

We didn't know we were starting a conversation we created the product.

We didn't set out with the mission: "Hey lets create a dish cloth that people will talk about".

Mainly because it sounds like mission impossible!

But now we are talking we are of course working hard to make sure we keep the conversation going.

As a foot note: Nikki had never visited the web site. There is an offline world out there that is still talking with the need for a keyboard and monitor.

And one for me that is still too big to be ignored.

You Have Got To Go There To Come Back

2007-10-20T18:03:00.001Z

I have said this a few times here at Positive Churn and it is one of those lessons that just comes round and round and round.

Getting it wrong and putting it right teaches you more than bumbling along in neutral neither getting it seriously right nor seriously wrong.

It is front of mind right now because 2007 has turned out to be the toughest year we have faced since we bought what became Severn Delta out of receivership in 2003. For the sake of history: we bought 25% of another company, the 25% had not traded as a separate company before so it was a buy one get two free:

MBO
Turnaround
Start Up

2007 was always going to involve some hard yards. Some of our older products had reached that stage in the life-cycle when value starts to tail off and a big correction was in the wings.

We had a strategy to deal with this. A combination of New products to provide replacement value in the short term (and growth potential in the long) and a programme to drive operational improvement.

Has it worked?

Yes and no.

Yes: the new products have started to deliver new value but not as fast as I would like. The loss of my lead sales striker at a critical juncture took the wind from our sales. It took 3 months to get back to an equilibrium. 3 critical months. This has certainly cost us sales this autumn and winter.

No: the drive for operational improvement has not worked. Not at all. Maybe the slope was too steep, the cost of implementing the programme (that was then meant to pay back and contribute to profit) too high, the timescale for the improvements to pay, just too long.

It had become clear to me that as time wound forward the scale of the value that the programme would have to deliver back had got away from us. The longer we spent on the programme before it started to pay the lower potential for it to ever pay its way. The payback potential had simply tipped away from us and run out of sight.

As price pressure increased in the market it was clear to me that we had to can the programme in short order. It had become a drag on the business and was threatening to destabilise the whole show.

And so it went. One month of restructuring later we are a few people smaller and focused on simplicity and getting the basics right and getting the goods out the door. And we have a rebuilt strike force starting to find their way.

Hindsight being what it is, I would not follow the same path again. But I could not have foreseen many of the detailed circumstances that lead to the final decision to can the programme.

I had to go there to come back.

I have a clear view now about how small businesses need to be cautious about the cost of implementing change programmes. We got it wrong, will try a new approach and hopefully this time we will get it right. I will expand on this theme in due course.

Entrepreneurs Against The Abolition of Taper Relief

2007-10-14T14:54:00.000Z

In last week's PBR Chancellor Darling played emu to Gordon's Rod Hull and ran amok raiding the coffers of small business UK.

Not content at having increased Corporation Tax the last time around we are now being penalised because media-bashing of Private Equity Funds has stirred up a focus group whine, that of course Gordon and Darling cannot ignore!

But what has that got to do with SME owners like myself?

The reason we have been caught in the net is either because we are easy prey or because the wielders of policy are incompetent.

You choose.

As Andrew Rawnsley wrote today:

... bizarre new regime proposed for capital gains tax. That will still give privileged treatment to wealthy partners in private- equity funds. It will reward short-term speculators in property, antiques or fine wines. And it will punish ordinary workers in share ownership schemes and genuine entrepreneurs who have worked for years to build up successful businesses.

If you feel as aggrieved as I do then join this group, sign the petitions and badger your MP.

Unimpressed Gordon. D-

Radiohead In Rainbows

2007-10-11T12:01:00.000Z

As you may have heard, Radiohead have released a new album "In Rainbows" and it is only available from their website as a download.

So because a) I am a curious fellow b) I am partial to a little 'head and c) I fancied joining the herd I bought myself the album.

Curious, and much discussed, thing is that you are invited to pay whatever you think the down load is worth, or order a £40 box set.

So if you think "hey I have bought every album these boys have ever made, paid many pounds to watch them live and even made a T shirt purchase or two: they owe me a freebie" you can enter 0.0 and try you luck as others have reported doing.

Me?

Bought the box set.

Still hooked on the tactile thrill I have felt since purchasing my first 7" back in '79. They kindly throw in the download for good measure so that is already on the ipod and was playing in the car as I made my way through the fog on the M5 this morning.

Is it any good?

Worth joining the herd for.

Gordon Backs Down

2007-10-07T09:28:00.000Z

Amused as I am I cannot help wondering if he is following my advice:

Don't Get In The Ring Unless You Know You Can Win

Although I have to say that if I stir up a fight I generally have the good grace to get on with the punching rather than running away.

Mr Birnie's Rules of Business

2007-10-05T12:22:00.000Z

I have covered most of my fundamental rules here before. But for the sake of good order they are:

1. You Can't Grow Your Way Out Of A Hole

2. Cash Belongs In The Bank Not In The Warehouse

3. Variable Labour Cost Does Not Exist

4. Don't Let Your Overheads Grow Faster Than Your Business

5. Cash IS King

6. Everything Communicates.

I regret to say that we have done a cracking job in breaking rules 2-6 in recent months hence my frequent radio silences here at Positive Churn. Along the way I have confirmed again the truth of The Three Month rule.

Luckily rule number one remains a beacon after a dark quarter!

Lights, Cameras.....

FREE BURMA!

2007-10-04T19:46:00.000Z

A blogpost for Burma. A wonderful country ruled by an apalling regime. That the Chinese govt. endorses their actions underlines my view on China. Time to boycott the Olympics?

2007-09-26T14:17:00.000Z

When In France...

2007-09-23T10:09:00.000Z

Friday was another Severn Delta Red Letter Day. I signed the authorisation for a French Avocat to proceed with the registration of Deltalys S.A.R.L. a joint venture between Severn Delta and M. Philippe Pineau.

Deltalys will play a critical role in the development and supply of new products for Severn Delta amongst other things that I will not for the time being discuss here.

Along the way I appear to have registered myself to pay French National Insurance contributions despite not drawing or intending to draw a salary from Deltalys.

So it goes.

On The Road Again

2007-09-19T11:16:00.000Z

A brief return to the office today after 3 days at the NEC touting our wares to Garden Centres and Pet Shops at GLEE.

A highlight included an excellent curry at the Masala Club in Balsall Common with Jake Stride from Senokian who commented that my posts were a little thin on the ground lately.

I will attend to this in due course after our trip to Lille to meet our man in France Philippe Pineau.

Up coming posts will of course be on familiar Positive Churn subjects, including one explaining why "Lean Manufacturing is Bollocks for Small Businesses".

Requirements Feedback

2007-09-07T11:04:00.000Z

This from Dennis this morning:

Ask for a view and be prepared to take what comes. Do it in public. See what passionate people think because they’re the game changers.

Yes. Yes and Yes.

Example again here from our excursion at the BBC Summer Festival Of Food. (See June 17 post in particular)

Invaluable. The feedback we received from Brand enthusiasts is shaping the development of the 2008 Sarah Smith collection.

Brands On The Road

2007-09-07T10:38:00.001Z

From Sunday to Monday we were at Autumn Fair at the NEC promoting our brands Sarah Smith, Black Kite, Harry Hound, Verdanté and Kate's Kitchen.

A variation on my usual "go where the people meet and talk to them" policy in that this time, it being a trade event, we were talking to potential customers as part of our "Grow a Long Tail" diversification drive.

Regular visitors will recall we met our public back in the summer an event that lead to my business partner, FD and Uber Geek, Martyn Shiner being outed as a pink apron wearing Turncoat Accountant.

No such apron wearing antics from Mr S this time but a very worthwhile few days. It is very encouraging when people who are high on your target list of prospective customers walk up to you stand and express positive interest.

Next event is Glee at the NEC 16-18 September.

These events are as much about building awareness as hard nosed selling and we will be doing more and more of these events in the next twelve months as we embark on a drive to make Sarah Smith et al "global microbrands".

A Sale Is Not A Sale... Addendum

2007-08-31T12:02:00.000Z

Ron English posted the following comment in response to A Sale Is Not A Sale Until You Collect The Cash:

My partner and I started a business in 1992 with no money, but a credit line from the father of my partner and an advance of $50,000. Since the father put up the money he also felt free to give business advice and we felt compelled to follow it. This was a good thing. One of his best had to do with paying our bills. He said, "Pay each bill before it is due. One day your supplier will have a limited supply of product. He will most likely sell to the customer he can depend will pay him promptly." That has been an excellent policy and on at least two occasions we got product because of our pay record.

This falls under the remit of my earlier post Make Your Word Count back in May.

The only thing I'd change in the advice given to Ron is with regard to paying early.

Pay when you agreed you would.

Always pay to terms.

Cash is crucial so keep it in your bank account as long as you can whilst also building confidence with your vendors /suppliers. You don't, in my experience, have to pay early to achieve this if you pay on time and are consistent.

As I have said before if your creditor days are longer than your debtors days: good. You are collecting cash faster than you are paying it out.

If it is the other way round: fix it before it fixes you!