No. of Employees
Over 50
The Challenge
Resolve system failures following a merger which had led to their bank losing confidence in them.
Actions
Supplied an accountant as an interim ‘Financial Controller’ and closed one troublesome department.
Results
Turnover and profits doubled. They are now the firm with the best reputation locally in almost every department.
This was a case of a firm in dire straits when we were introduced by their bank to help. They had undergone a merger, which had resulted in looming succession issues and failing systems, and we helped them, first and foremost, to ensure their survival and then to become a real leader in their area
The Challenge
This client was a limited company with four directors and over 50 staff operating out of two offices in the Midlands, with distinct systems and cultures in operation in the two offices of the predecessor firms. They had practices in crime, litigation, family and children, property, and a private client team, and were turning over under £2m. Partly as a consequence of the merger, the finances were largely out of control – with poor cash flow, large (and growing) debt, and (owing to system failures following the merger) unknown profits.
The firm’s bank had completely lost confidence in them, and the first priorities (among many) were to resolve the system failure, establish the true financial position of the firm, and regain control – in order to regain the support of the bank. Survival was their first and most pressing priority.
Our Approach
This was clearly a particularly challenging project, and would entail a phased approach to get the firm out of the immediate trouble in which they had found themselves and then on the road to recovery.
Initially, we reconstructed their finances, reconstituting their management information and producing full management accounts (after 11 months’ absence of management information), including a full balance sheet and departmental analysis. This highlighted that one small department was making significant profits, while some were breaking even, and others were making large losses. We also discovered an ‘endowment’ of Legal Aid Work in Progress (WIP).
During this initial phase, we helped them to run a concerted campaign to turn WIP into cash and we acted as an interface with their bank – helping the bank to retain confidence to support them through particularly challenging times. We also supplied an accountant to act as interim ‘Financial Controller’.
They closed the most troublesome department and took on some staff from a larger local competitor that had closed its doors. They then moved into a single premises that was far more appropriate to their requirements, bringing all staff under one roof, and strengthened relationships with local property agents – reducing their dependence on the key profit-making department. Through all of this we helped them to devise and implement the strategy.
This first stage ensured that they survived and even restored modest profitability, which was a significant accomplishment under the circumstances. Having achieved this initial goal, we helped them turn their attention to the longer term.
We profiled and analysed all of the local competitors, setting out a strategy to be the dominant local player. We initiated merger discussions with local competitors, evaluating the potential of the most promising option and helping the client to devise suitable terms. Having done so, we prepared papers for the bank to support the funding of the merger and recruited management to fill key gaps, including a CEO. This is a long-term strategy that has paid major dividends, and which we are still helping the firm to implement.
Our Impact
Firstly, the firm survived and emerged from an extremely precarious position. In the three years since the commencement of our involvement, they have more than doubled their turnover and profits (which were previously negligible) are close to benchmark levels. They are now the leading firm in their town, with the best reputation in the local area in almost every department. They have changed the balance of their work types and, through the recent merger, will achieve a further rebalancing. They now have truly professional management.
Lessons Learned
In this case, maintaining the confidence of the bank was absolutely crucial. Recruiting the best local talent has transformed perceptions of the firm and its reputation, and control over internal processes has been key to recovery and success. Having come out of a particularly difficult situation, opening discussions with competitors produced some pleasant surprises and the firm continues to improve in all the key areas.