Business Insight 108 – Competitive Pricing and Changing Supplier (blog & vlog)


The bank still had us on a short leash and Browbroke was still causing us problems; we were still chasing cash in virtually every day and were regularly coming very close to having cheques ‘sent back’ for re-presenting. We had become very close to the bank team in Eastbourne and they were ‘helpful’, on more than one occasion, by putting a cheque received for payment in a draw for a few days (until the funds were there to pay it).

Sometimes we helped ourselves though: if a creditor became super grumpy we would send them a cheque, but where the words and figures would differ, we would try and make this marginal in interpretation, and if funds were available, still let it be paid.

On one occasion Mike from Nat West phones up (he usually phoned daily, as we were in ‘intensive care’ after all): “We are going to have to send back so-and-so’s cheque for £20 grand, you are well over the limit, sorry”. I asked him to look closer at the cheque: “Words and figures differ…yes!”. And back it went.

‘Out of date’ was another good one; unsigned also good, and unbelievably, usually not noticed. These tactics would often buy us at least another week; this in the good old days before internet banking.

We had decided to sell the office block we owned, occupied by our two very nice covenants (tenants), and rent our floor back (a ‘sale and lease back deal’). The property was marketed at the value on the books, £520,000 (£200,000 more than the purchase price), with a rental income of £43,000.

Brian Wronski, the manufacturer who had taken over our building in Gloucester, was the first to enquire and view. He had done very well in the intervening few years, had built a successful company and sold it – I tried not to let my jealousy show. “Cash is a pain in the arse, Phil; when you’ve got it you have to invest it somewhere, and commercial property seems as good as anything else I’ve looked at”.

Of course, I would love to have had his problem.

Then a delightful lady turned up and offered the full asking price – fantastic. Browbroke had been putting on the pressure. I kept on telling him the sale and leaseback deal was done, but he didn’t believe me, still wanting to send back cheques and generally be obnoxious. Then we blew him out of the water with over £500,000 hitting the bank.

This was sufficient to pay off the loan account, which had been used to buy the freeholds (this had reduced to nearer £300,000, from the starting figure of £400,000), and the balance virtually clearing the current account overdraft of £230,000 (which was still needed, however, to bring creditors back to more comfortable levels).

We still had a couple of freeholds and the accounts were looking better and better, so maintaining our current facility wasn’t going to be a problem. Browbroke was still acting like a shit, but now we were trading within the discretionary limits of Dick Holste (our local but senior manager), and things turned lighter of mood. We came out of Intensive Care!!

We get to the end of our financial year, November 30th. Chris Martin, our excellent accountant, targets the staff to get the figures out by mid-December; all things being equal, they should show the company with a ‘Net Worth’ again.

A board meeting is scheduled to review the unaudited (but sure to be accurate) accounts, a joyous occasion for all concerned who had worked tirelessly to get to this point. Not least those that travelled thousands of miles collecting cheques from all points on the compass, then getting them back to be banked across the counter in Eastbourne, and therefore preventing suppliers or other creditors’ cheques being returned. Those present (as well as myself) were: Carolyn Pettitt, Tony Davies, Martin Cheshire, Chris Martin, Chris Cole, Bob Reid, and Bill Reigler.

Chris Martin does indeed confirm that we have made a profit sufficient to make us solvent again – we were £100k to the good. Everybody had a big smile on their face and there was a round of applause. Chris Cole seemed strangely less happy, strange because he had been instrumental in getting the target volumes of work installed and was very much a big component in this success.

“I’ve got some bad news I’m afraid. Well, I think you’ll agree it’s bad news…..I’m handing my notice in; I’ve been offered a position with M&M Widows, there are almost up to the same number of (fitting) crews as D&T and they are the future. They want me to bring a bit of our supposed polish to them and help them grow even bigger. D&T is still uncompetitive and I believe they will eventually put us out of business. They’ve offered me an excellent package with more money, and if you agree, I would like to start for them in the new year – that’s January 2nd.”

Nobody had seen this coming and, unlike Paul Fitzgerald, most of us were going to be sorry to see Chris go. There was an animated debate about M&M. None of us agreed with him on that front: they offered a very basic product, badly manufactured by themselves; yes they were cheap, but we had seen off other cheap companies before. We had learned so much; we were in effect starting again from today, but without the baggage or with having to make the same mistakes. He didn’t agree, but did wish us well and had mostly enjoyed his time with the firm; and he was pleased to have contributed to today’s result .

I thanked him and asked him to leave; I also asked him to keep things quiet until we had figured out how to manage his leaving. He was popular with the fitters and we didn’t want some of them following him out the door.

Our joy was truly short lived. Martin was back in the frame as the only credible replacement. However, that was going to have to be short-term, as although he was a valued member of the team, it wasn’t because he was popular with the fitters or had showed any aptitude for managing our big installation requirement over the (still) 3 counties we operated in.

It was the Christmas party season. It was custom and practice to take out the bank manager for a jolly. Those of us who banked with Nat West and had Dick Holste as our manager thought it would be a good idea to club together to buy him a present and entertain him to a Christmas lunch. Nina was given the job of buying the present. The White House restaurant was booked and myself, Nick Leadbitter (estate agent), Mick Keeley (builder), David Lambird (car dealer), Nina (sports goods), and Dick Holste had a thoroughly excellent lunch. It was time for the Christmas present – none of us knew what Nina had bought.

Nina stands up: “Dick, we were troubled about what present to buy individually, so clubbed together to buy you something we hope you’ll find useful. We know that you are unmarried and thought that we might be able to help with that situation”.

With that a waiter appears with a huge covered platter, usually used for big joints of meat; it’s placed in front of Dick. There is a whirring noise coming from under the cover. We all shout “MERRY CHRISTMAS DICK”, with that he lifts the lid to reveal an Asian woman’s head with a battery powered mouth. Hilarity, and a very grateful Dick.

We finished up on a bit of a pub crawl around Eastbourne, many saw the most senior Nat West bank manager for miles around walking from pub to pub with a whirring woman’s head under his arm!

We had an excellent company Christmas do, even though everybody now was aware of Chris Cole’s departure; his going wasn’t going to be allowed to get in the way of us celebrating being a solvent company again, and the joy of ending the year on such a high. It had been quite a few years since we were heading into the new year in such good shape – we had everything to play for and I was determined to enjoy it.

Bollocks to Chris Cole and M&M.

Turnover: £5,501,000, profit: £138,000, net worth: £100,000 – that’s £+100,000



Back to the tried and tested 3 years ‘Interest Free Credit’ offer to kick the new year off. This was exclusively ours – nobody else seemed capable or willing to compete – and although the purchase price was high (which was expected by the customer anyway as per our reputation), they thought they were getting something for ‘free’ and the offer was particularly attractive to normally cash buying customers.

We heard through the grapevine that Chris Cole was being treated like a ‘boy’ at M&M, not even having a settled desk/office, let alone a PA in support. To say that we weren’t pleased with the rumour would be a lie, and the worries re a fitter exodus were unfounded. Our fitters were wise enough to understand where their bread was buttered: we were, after all, better payers with better products; and the community of window fitters all met in the same local pubs to swap notes (and although Chris was popular, having a pay cut by following him to M&M defied logic).

Bill Reigler wins an enormous Tunbridge Wells contract to refurbish one of their council estates. He has been approached by a former colleague from a previous job, who was now working for a large company that had set up a window manufacturing division; he asked if they could quote for the windows and doors. We had won the contract based on our regular supplier’s price and (this new) offer would significantly improve profitability. Just a couple of problems: new factories usually had a bad record re quality and delivery, as they still had to learn their craft.

The council were very hard taskmasters and there would be no room for manoeuvre; they were also a bit tardy regarding payments, which directly linked to the next problem (i.e. credit, as our normal supplier gave us 90 days on commercial work). This company wanted paying net monthly (i.e. all supplies in month one paid at the end of month two, which equates to an average of 45 days, so effectively half of what we were getting). I told Bill to forget it. He, of course, wanted the extra margin. A meeting was arranged at the new factory.

The ‘Finance Director’ had done his homework and was obviously aware of our recent history accounts-wise – even giving us 45 days uninsured was a risk. I agreed and went to leave, but was asked to stay. Was there any compromise? No. We had an excellent relationship with the current (long-term) supplier, who I knew would not cause us a problem. Their price might be very attractive but they were a complete unknown. In fact, I would want to have absolute assurance that if I agreed to give them the order, that it would be without any threats whatsoever (re payment terms at a minimum of 90 days paid weekly), and I would want that agreed at ‘main board level’ to me in writing.

INSIGHT 108:- I still didn’t want to deal with them: the extra margin would be nice, but any nonsense or being put on ‘stop’ would not be worth it, and we had no idea what the quality would be like.


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