Wednesday, 9 October 2013

The Cliff Edge Perils Of Puddlecote

This was going to be a short parish notice explaining why content may dry up for a while, but it's more serious than the usual run-of-the-mill 'pressure of work' so some may be interested in more detail.

2013 is turning into quite an extraordinary year for Puddlecote Inc which has led to my slipping back to working days of 12 hours plus, something I thought I'd left behind in the late 90s/very early noughties.

It's mostly as a result of winning a far greater amount of work than I'd planned when placing bids for long contracts. The general success rate I budget for is around 20%, so when awards come in at around twice that, there is a hell of a lot to do. Any businessman will tell you that rejecting work will inevitably harm your quality score with the client, making future awards far less likely, so is to be a last resort. Yet already, for cold practical reasons we've had no alternative but (with much tearing of hair, gnashing of teeth, and almost tears from yours truly) to hand back two smallish offers and are desperately struggling now to cover the rest with a competent service until the cavalry arrives.

The juggling this entails with begging overtime from current employees; desperately pursuing swift recruitment; and - most annoyingly - striving to comply with state red tape which seems designed specifically to hinder growth or put us out of business altogether* is a proper headache. But this also comes at a time just after we have opened a new south coast branch which requires special nursing (hence my journey there recently), and also while we are preparing documents and liaising with a client to defend our two stand out biggest contracts when they come up for re-tender, after five years in our care, in March.

Sounds good, doesn't it? Well, yeah, mostly. But financial concerns then come into play. Finance for new vehicles is front-loaded, and everyday costs for running trucks, paying staff etc have to be incurred well before the 30 or 60 day credit receipts start rolling in. The only way round this is by talking to banks about creative finance arrangements and banks - as you will have read widely in recent years - are extremely careful these days when it comes to lending cash. On any given day in the past month, we've been a couple of days away from running out of liquidity. Big suppliers of parts, tail-lift engineers, and maintenance contractors are being wonderful in accepting subsistence payments, while a fuel card bill which is constantly close to its credit limit has to be serviced almost hourly with part payments to keep the engines running. All while the VAT and HMRC bills sit there with their rigid deadlines saying "fuck you, pay me" like some character out of Goodfellas. No point in trying to negotiate with them, you just end up with an inspection.

So I'm producing cash flow forecasts up to three times a day, and compiling monthly debtor predictions right up to February next year to make the case for extending credit facilities beyond where our bank feels in its comfort zone. It has required forming a new debenture on directors' assets, the creation of an invoice financing draw-down scheme, and an overdraft extension of 60% for the coming 30 days, all of which needs to be approved by the credit management personnel at the bank ... none of whom we will ever meet, and who don't seem to understand the concept of urgency because boy are they leaving their decisions late!

If that great big jigsaw puzzle fits together, we're gonna have a relaxing and happy Christmas and around 10 more people are in employment; if one piece doesn't fit, the whole thing goes bang and Lord knows where that takes us and 107 brilliant current staff.

So ... if you don't see anything on these pages for a day; two days; even more, that is most probably the reason. Actually, scratch that, it is the reason. And if I owe you money, please don't ask till November, at least (cos I can't even bloody pay myself at the moment!).

* Up to 13 weeks (a quarter of a year!) for VOSA to change a single ASC11 character of our O licence, for example. Plus a pointless state regulation which cost us £20,000 to overcome in the past year, £20k we could really do with right now.


Lysistrata said...

Oh god, sorry. Good luck with all that. Those of us who are also running our own businesses know what you're going through. Trouble is, you can't see overtrading before it hits you however careful you are. I feel you'll probably pull through ok.

nisakiman said...

Ha! Sounds like you have your plate full, DP! Still, all positive stuff. You have to chase it. If you don't, you'll never forgive yourself!

I can empathise, having been in a similar situation, albeit on a much smaller scale. Expanding rapidly and not having the cash flow to cope. Hassling clients for payment (the big boys are the worst; 90 days was normal) and the bank for a larger o/d facility. Bloody nightmare.

I was at a social do of some sort while I was going through this phase, attended by mostly local businessmen, and naturally the chat was about business. I was chatting to this one guy about how turnover had increased threefold over the past year, and he said to me: "Ah, but never forget, 'Turnover's vanity; Profit is Sanity'"

That stuck in my head for some reason, and over the next couple of weeks I took a long, hard look at my business. It dawned on me that a fair amount of my contracts were generating healthy turnover, but minimal profits. I was working seven days a week, up to sixteen hours a day, and for what? So I took a hatchet to those contracts that weren't very profitable, cherry-picking the good ones, and over the next few months my turnover dropped by 50% or so. But my profits increased massively. I had less staff to worry about, less chasing invoices and a lot less stress. Best thing I ever did.

I'm not for a moment suggesting that you should do the same, DP! :) I have no idea about your situation or business (apart from that it's transport), and I am sure you are doing the right thing for it, I was just relating a little anecdote about my personal experience. Also, I had no enthusiasm for the business itself - I'd just sort of fallen into it more by accident than design, and the only aspect I really enjoyed was the wheeling and dealing side of things. The work itself was shit. Plus I'm essentially a lazy sod. So I had motivation to downsize!

Anyway, best of luck with everything, matey. I sincerely hope it all comes good for you.

Dick_Puddlecote said...

Funny you should say that, as we went through a review of our order book in May and stripped out some longstanding jobs which were uneconomical, we won a couple back on better terms.

We were also fortunately relieved of 3 members of staff who were on long-term sick which meant paying two people for the one job (not by anything we did, I hasten to add, but from their family members stepping in to encourage retirement for example). It made us nice and lean but that has perversely also meant that whereby we had bank drivers to call on before, we haven't now just as we need them.

We've had three interesting staff leads from this week though, but we have to get them trained up first. I am also hopeful that in one particular area we vitally need a driver, an ad we put in a newsagent's window might bear fruit ... at an extortionate rate of 25p per week! :)

Advertising in south coast newspapers for the new start-up cost us £1500 for the same two weeks and we had just two applicants! It's all education, though.

Sam Duncan said...

“I can't even bloody pay myself at the moment!”

Heh. I remember my dad yelling that at the telly in the late '70s and early '80s when they were interviewing Union leaders and the like. With unlimited liability, some years his personal income was zero (negative, sometimes). And then some wag comes along telling him lawyers are all rolling in the stuff. How he refrained from violence I'll never know.

Best of luck with it all, Dick. And don't worry about us. It's only a blog, mate.

Barman said...

Good luck with all that!

In a rapid phase of growth in my own business I found that non-disclosed invoice discounting solved the cash-flow problem at a time when the bank was reluctant to help...

MarkWadsworth said...

I hope and trust that you will get it all sorted out.

JonathanBagley said...

Perhaps today's post will convince the Anti Tobacco Industry that you really do own a haulage company.

Chris said...

Back in the day, but not that long ago, we had similar growing pains. Our bank manager (in the days when such people existed) was constantly asking for a 'quick position'. What he meant was a cash flow. The amusement of a 'quick position' soon past when I had to produce these so often to satisfy him that we knew what we were doing.
Now, years later, we don't need the bank's money, which is a different bank anyway because Mr Quick Position was a tosser and wanted the directors' houses on the line - never mind his penchant for excessive paperwork. Now we lend the bank money. Strangely they still mither us to borrow money and offer us ever bigger 'facilities' (another amusing phrase meaning overdraft). I've often wondered whether the current rumour that banks aren't lending to businesses is because of people like us who don't want their fucking money and prefer our own.
So I really feel for you.
On a totally different subject, I've just bought an e-cig so as to cut down on the cigar habit - but not give up. It's pretty good and it makes me feel even better to rob HMRC of duty on baccy and keep my money away from Big Pharma.

Dick_Puddlecote said...

Looking at cash flows for December and beyond, we are looking like being in the same position in 2014. We'll be tied down to the invoice financing facility for a year, but it will be useful as an insurance and cheaper than the overdraft which we intend to dispose of by the end of the year anyway.

It's just these next couple of weeks we need to ride out. If we squeak it, I hope we can be as unreliant on banks as you. Having said that, I wouldn't be expending effort on regular trips down to the south coast if we weren't planning further growth down there, so best they're on our side for a couple years yet. ;)

Dick_Puddlecote said...

Thanks for the kind support. We had a stroke of luck today which helps immensely, one of our clients inexplicably paid a tranche of invoices two weeks early which gives us significant breathing space. Never happened before, may never happen again, but it's extremely handy.

I say 'luck' but one of our maintenance guys claims he heard semi-retired Puddlecote Snr ringing round debtors cheekily schmoozing the credit control girls and asking them to pass "anything with our name on it" for payment. There's still life in the stubborn grumpy old dog, after all. :)

nisakiman said...

Sounds like DP Snr has the right idea. Gawd, I did plenty of that, wheedling and flirting with the ladies in credit control. Didn't always work, but occasionally it produced results!

I said in my last comment that the big companies tended to be the worst (and they were), but one company who I had a contract with, the Honda car plant in Swindon, I have to say were bloody brilliant. 30 days on the nail, without fail. Never missed. Indeed, one month they had a problem with their computers, so they called me and asked me if I'd mind coming to the plant to pick up a cheque. Heh! No problem! Rather amusingly, I thought, the cheque was signed by a Mr Suzuki...

Would that all companies were as prompt with payment. It would certainly cut out a lot of heartache. And phone calls to the bank...

SadButMadLad said...

Good luck with your business. Hope you grow - but not too fast.

The problems with such things as regulation and red tape that you have as you grow your business should be highlighted to all those in power. They should realise that pouring money into a business doesn't make much difference if the costs of running a business are so high and those costs are what those in power control - taxes, regulation, etc.

Dick_Puddlecote said...

Not just that. It's the speed with which politicians now think it OK to spend a business's money for them. For example, the two newest legislative additions we have had to apply to our employment contracts are an extension to paid parental leave and a legal requirement that holiday is accrued throughout sickness. This is without mentioning increases in minimum wage which must be a big concern for many other businesses.

Whether or not these are good things or not, they are politicians throwing other people's cash around like confetti without taking into consideration that business decisions are generally made with long term plans in mind. Puddlecote Inc bids on contracts over 5 to 7 year terms sometimes, so when a law is made which is implemented, say, two years after it was first imagined, we take a hit. We're locked into a contract and can't raise prices. Therefore, we and many other firms must routinely add in a higher profit margin simply because politicians might come out with something costly to us during the operation of the work.

The £20,000 mentioned above is one such regulation which effectively wiped out all profit on two of our contracts for a year, benefitting no-one whatsoever apart from public sector clipboard box-tickers. That has to be paid for somewhere and, sadly, the losers were around 5 people we will never know who are not now employed by us.

This is the nature of government giveaways now. They can't tax us any more since it is politically suicidal as the tax burden is close to 50% of GDP, so they instead milk businesses and give our money away instead. All well and good, but the inevitable consequence is an increase in cost of living as businesses pass the cost to the customer - there is quite simply no other option.

Miliband can cry his crocodile tears about cost of living, but it is myopic politicians like him who are causing it.

SadButMadLad said...

As well as the changing of regulations there is the cost of tendering for the contracts too. Businesses have to factor in that they will only win some of them so up the price of all contracts. And when all businesses do that who pays? The taxpayer.

And I wish that the stupid people at Occupy et al would realise that there is no such thing as a magic money tree. All the things they demand to paid for is not paid for by taxing companies, its paid for by customers as companies just pass on the cost.