Many who take time to read my content will know that previous to business coaching I built a food manufacturing company from scratch to a £10m business before successfully exiting to take on a new career in business coaching in 2013.
This demonstrated to me that the grounding I experienced in a demanding manufacturing environment supplying national and international retailers, provided me with a unique insight into the meticulous logic and extensive planning that has to be applied to run a successful business. 25 years of intense business education in a highly competitive environment with fastidious control over the details, including the management of short-shelf life products and the ever-present threat of mass food poisoning. Without having the highly detailed understanding, knowledge and systems we had in the business, it couldn’t of survived and flourished.
Coaching isn’t teaching the owner how to become a better manufacturing or service business, it’s about practical implementation and demonstrating to business owners how to increase profits and scale businesses over the long term. There isn’t a blue print to become a natural success in any business, and we all have to work extremely hard learning from our successes and failures. I am constantly learning how to be a better business person and coach through practical experience and my own targeted personal development plan.
How I learnt in one of the toughest markets
Like any company the food manufacturing business had good times, bad times and very bad times and wasn’t a twenty-five year success. None worse than losing one of our major retail clients, Tesco’s, in a fifteen minute commercial meeting three days before my wedding in 2000. This equated to a revenue loss of £2.3m at the time and meant we had to undertake a CVA (Company Voluntary Arrangement) to avoid administration over the following four months; and my first job when I returned from a short honeymoon was to make fourteen employees redundant. An extremely difficult period for the business, and for myself because I lost everything I had invested over the previous twelve years into the company. With hindsight, it just made myself and the business stronger, and enabled me to learn from my mistakes and invoke radical changes so that we were never exposed to the same level of risk again. It made me fight that much harder for the success I knew we deserved and could achieve.
That difficult period certainly did make me very emotionally strong, and indeed the business, and from thereon history will show how the business became a much larger operation. In addition, on a personal level, I feel you have had to experience those massive emotional strains yourself in your business life to provide the empathy to coach others to their own success.
Recipe for success
To be successful in manufacturing you had to have a strong grip on your operational costs, or an iron grip as I like to call it, at all times. The manufacturing plant produced premium ranges for Waitrose, Sainsbury’s, ALDI, Caffe Nero, Costa Coffee and many others, and most of you will have purchased our products at some time, and indeed I suspect still do.
Each product required a unique manufacturing process consisting of numerous ingredients, temperatures and times. Manufacturing food meant we had very perishable ingredients, and the shelf life of both work-in-progress and the finished product was very short and microbiologically critical. Cream was typical of a short shelf life ingredient, and we had tonnes of daily deliveries coming into the plant, with less than two days to process it into finished product. Each tonne of cream cost £1,800, so any production downtime would see the potential loss of cream and other associated perishable ingredients in the recipe that were work in progress.
The business also utilised very capital-intensive equipment such as a liquid nitrogen-freezing tunnel that required continuous preventative maintenance, we couldn’t afford to be reactive. Business continuity was of the utmost importance to maintain our production schedules and our contingency plans were very fastidious and aligned to our BRC Grade ‘A’ accreditation standards. Apart from the very expensive liquid nitrogen-freezing tunnel, £400,000 per unit, the rest of the equipment was duplicated multiple times to provide back-up in case of breakdowns within the production line.
Managing risk with extensive planning
As with any manufacturing business the loss of production was one of our biggest risks along with losing a major contract, and without extensive planning it was the difference between being profitable or not. We targeted and achieved a consistent industry envied 10-12% net profit margin, (many competitors, even if they were profitable, struggled to achieve 2% net profit supplying into retailers). Without extensive long term operational planning and constant monitoring of daily KPI’s the opportunity for profits to evaporate was very real. Usage of highly perishable ingredients, multiple production sites that operated twenty four hours per day, ‘just in time’ ingredient and packaging deliveries, daily temperature controlled finished goods collections and onerous technical standards drove the business. Our financial KPI’s were highly structured and refined, factoring in labour requirements, equipment production rates and capacities, logistics and warehousing costs, maintenance programmes, marketing budgets, sales and of course administrative expenses. Losing any form of production at any time would have a significant impact on the profit margins, and of course it had a potential knock on effect in losing major contracts if you couldn’t fulfil the customers daily order requirements.
It was an incredibly intensive grounding to become a business coach
It is probably difficult for anyone reading this article to fully understand the pressure of food manufacturing unless that is your current business, but imagine how long the business would have lasted without extensive planning and maintaining that iron grip on operational costs.
However, this taught me an extremely valuable lesson that is my main and continuous focus when coaching a business owner to become more profitable within their business. The no.1 priority is to have a true grasp of the financial aspects of the business, and be able to read and understand them and how your decisions can affect them. If your accountant cannot provide or demonstrate this, I will!
This grasp is not about looking at methods to purely reduce costs unless there are obvious ways in which you can do so. This is certainly something we explore, but our main focus is about scalability, and creating a full understanding of how to grow a business logically and efficiently, but dramatically reducing the element of risk. Take away the fear of growth, which is normally borne out of the anxiety of not being in control.
Helping the business owner to truly grasp control of finances is always the first port of call when I coach a new business and helps the owner to see the potential within the business over the longer term, and where they should be investing to strategically grow a business. The Orbit Map I covered in the last article is the first part of the process, and this really does start to unlock the hidden potential.
Completing an orbit map is truly inspirational and empowering and I have witnessed some quite astounding responses from business owners when carrying out this important task.
Scalability of a business
This is the ‘golden egg’ for any business and its owners, and whether you are a manufacturer or at the opposite end of the scale in the service sector I have noticed through coaching business owners there is a tendency to look at cost reduction as a method of increasing margins and expanding profits. However, before exploring purely cost savings, strategic internal re-organisations, investment and growth opportunities should be identified. For most businesses labour costs are a big, and potentially the largest overhead, and yes you may have opportunities to save on labour, but in reality any other significant cost cutting is very rare, 10% is probably the maximum. Although some may argue cost reduction should be a regular entry onto the agenda and yes it should, the important part of increasing the success of a business comes first from focusing on expanding margins, and adopting methods of how you can increase profits.
When scaling a business, the percentage of overheads naturally reduces, and profits become easier to create if the business is in control and improved efficiencies can be identified and monitored. Scaling the business helps to target areas where you can build a wider and more sustainable customer base and target the profit centres within the business. Employees naturally become more focused in larger teams, aligned with the correct training and personal development, and by creating efficient management structures it enables the business owner to focus on the strategic development of the business, losing those day-to-day responsibilities. A business owner is not simply doing a job, they are, and should be considered a business professional, and that is where their main focus should be.
Starting with a cost reduction process instead of identifying methods for scaling a business is a purely negative course. Scaling a business will naturally reduce costs when controlled.
Scaling a business is about absolute control and building a knowledge base of information related to that business. It is learning how to maximise production, getting the best from results from your staff, investing in the correct capex and infrastructure, improving product or service offerings, and recognising the true value of your proposition when selling to the end user.