Kent Family Company Decline In Sales

The Challenge

A family based company in Kent, grown from a one-man operation to £2.5m in sales, faced a crisis when the founder, Mr. S., hired new professional directors and a sales team to drive further growth. This plan backfired as the new hires were ineffective, leading to a decline in sales while costs rose sharply. Mr. S. tried to rectify the situation by culling the underperforming staff and reverting to a back-to-basics approach. However, he then made a critical error by promoting his daughter, son, and wife to senior positions. This act of nepotism led to a further decline in sales and a buildup of debt, with the company owing creditors over £1m and the Crown over £100,000.

The Solution

RMT KSA was brought in to build a Company Voluntary Arrangement (CVA) to manage the debt and was also appointed to the board as a non-executive director. A detailed business review revealed the core problem: the founder’s family members were not suited for their roles. It was suggested to replace the daughter and son with new, professional staff and to outsource the accounting function handled by the wife. This would have provided the necessary management structure for a company with £1.7m in annual sales.

The Results

Mr. S. was unwilling to accept RMT KSA’s recommendations, as he couldn’t bring himself to fire his family. Despite knowing the advice was correct, he rejected the necessary changes. Consequently, RMT KSA resigned from its role. Less than a year after the CVA was approved, the company failed and was liquidated. The bank called in the personal guarantees Mr. S. had provided, which were secured on his and his daughter’s homes. As a result, both the founder and his daughter lost their homes, Mr. S. was made bankrupt, and he ended up unemployed.

The case serves as a cautionary tale about how allowing nepotism to override professional judgement can lead to the complete collapse of a business and severe personal consequences.