Read about how our client did so well in their first year of the turnaround that they exited their CVA early.
The managing director who is a self confessed sales man and not really a great financial controller had built up sales to £4.5m pa in 2009 with clients like Morrisons, Sainsbury's etc.
The company provided mainly eastern European workers to warehouses in the Midlands on fixed rates. Working with Gangmasters licence and high quality standards was of course vital to work with blue chip customers.
His accountants advised that he needed to grow the management team and set up a platform for a £10m sales business. This he duly did but had very poor luck with the management recruits. At the same time as recruiting and growing the management team they opened a new branch in East Midlands.
The expansion was funded out of working capital and an invoice discounting facility from IGF Invoice Finance who were and remain very supportive. After 6 months the MD realised that the 6 extra managers, 6 PC’s, 6 expense accounts and 6 extra cars had not been covered by increased sales and margins. Indeed the margins were under top down pressure and losses began to mount. Managers and their staff costs were mounting up and the new branch had also failed to cover its costs.
After losing £350k in the 2009 financial year the business started building up PAYE and VAT liabilities to cover cashflow problems. A time to pay deal was arranged and the company began paying £20k per month to catch up.
The MD decided that enough was enough and fired 5 out of the 6 managers. The cars which were on short term hire were returned and the laptops sold.
But still losses mounted.
Read our recruitment case study to find out how this company was turned around and exited a CVA 4 years early!