CASE STUDY – FURNITURE BUSINESS-DOUBLED SALES & PROFITS & CASHFLOW EASED IN 6 MONTHS
Posted on 9th Feb 2022
Increased Cashflow Doubled Sales and Profits in 6 months
A common problem for many businesses, but for Mike it had become a daily struggle. Just to try and make ends meet Mike was constantly working late nights and long weekends too. Sometimes even that wasn’t enough.
Mike didn’t know it yet, but his business was about to be transformed and his cashflow problems would be gone.
Mike owns a bespoke furniture manufacturing business. A few years ago, it was struggling with cashflow. Really struggling in fact.
Cashflow was so tight that it was touch and go if there was enough cash to pay the bills at the end of the month. Usually, he scraped by. Just. But, when he couldn’t a new business loan was taken out to plug the gap.
Cashflow wasn’t his only problem.
He didn’t have a steady flow of customers placing furniture orders. Many a time Mike found that the only order he had was the one that was being manufactured in the factory.
That made a bad situation worse.
A LOT WORSE in fact.
It wasn’t the life he dreamt of when he set up.
With no light at the end of the tunnel, he was on the verge of closing the doors.
The Turning Point
He turned to his new accountants at Krystal Clear and asked if they could possibly help….
Having listened to Mike’s tale David at Krystal Clear’s first words were….
‘Fundamentally the problem is that you’re not charging enough….and the reason for that is you’re doing the wrong stuff for the wrong people.’
To fix the 3 problems of cashflow, profitability and lack of regular customer orders Mike worked through the following programme of five clearly defined steps.
Clarify the ideal customer – who was the right who
Until now Mike had been willing to quote for almost any joinery job to almost any customer. This was a big mistake.
Not all customers are the same.
And that’s because….
Some prospective customers don’t have enough budget for Mike’s furniture.
Some prospective customers are far too demanding, meaning you end up spending lots more time and energy on them than what you are being paid for.
Some prospective customers are unwilling to pay a fair price.
Doing the wrong stuff for the wrong people led to jobs being done at a low and unprofitable price.
Life becomes easier and more profitable when you deal with the good customers paying the right price.
To focus on the good ones – profiles were created of the ideal customers.
Select the right the Product Line
Mike had to focus on a small number of products. Products he was an ‘expert’ in. The result was his product range was severely cut – to just 3. Everything else he now said ‘No’ to.
Having a smaller product range had two huge advantages when it came to making more money.
Firstly, he could start to position himself as an expert which justified a higher price and lead to higher profit margins. Secondly, the factory could become more efficient meaning the manufacturing costs would fall and his profit margins rise.
Recognising what he stood for !
By trying to cater for everyone meant that he, firstly, produced a quality and bespoke product AND, secondly, gave a great service AND, thirdly, he charged a relatively low price.
However, to make money he couldn’t do all three at the same time. A change in strategy was needed. It wasn’t feasible to reduce the quality of the product nor the quality of the service. That left the price – it had to go up.
Clarify the proposition to the customer!
To give Mike the confidence to increase his prices he needed clarity on why a prospective customer bought from him. What was that compelling reason?
To do this Mike went through everything that he did – from the design of the furniture through to the installation. In doing so he was looking for all the benefits, both tangible and intangible, to the customer.
It turned out to be a long list.
It was clear that Mike was giving huge value to his customers.
It was only fair that he be paid for it.
The price of every product went up – and not by a little bit.
Communicate the price!
Up to now Mike sent his prospective customers a quote as a pdf attachment via email. It was a single piece of paper which listed the furniture that would be supplied with a single price at the bottom. More often than not he wouldn’t get a reply.
The problem was this approach didn’t convey any value.
Nor did it make Mike’s business, nor his furniture stand out from the crowd.
Nor did it justify a higher price.
In short there was no compelling reason for a customer to buy.
The content of the quote had to be overhauled as did the process for sending them out.
To maximise impact as well as save time new proposal templates for each type of furniture were created and each one….
- included testimonials from happy customers who had bought that piece of furniture
- highlighted the benefits to the customer of the key aspects of Mike’s design, manufacture, and installation process
- had the furniture lists replaced by pictures so the prospective client could clearly see what they were getting.
- listed multiple payment options to make sure the purchase was affordable
- gave guarantees to give the prospective customer complete peace of mind
To maximise impact Mike made sure every glossy new proposal went out in the post. No more email.
This whole new approach was soon getting noticeably better results as more and more of his proposals were accepted.
Over the six months Mike increased his prices again…and again.
To Mike’s surprise each increase was met with almost no resistance. Prospective customers continued to accept his proposals.
Very soon the factory had a pipeline of furniture orders waiting to be fulfilled and the business had a lot more money coming in.
Simply by following this five-step programme and consistently taking action the business was soon turned around.
The results were simply amazing.
- Sales UP 100%
- Profit UP 100%
- Prices UP 40%
- Customer conversion UP
- Fully booked with work for next six months
- Bank balance NO longer overdrawn
- No late night or weekend working
This all happened in just six months.
Six months for the business and its finances to be completely transformed.
Mike’s life has been transformed too. He now feels better about himself, his business, and the future. He has more time to spend at home with his family. He takes holidays.
A far cry from where he was….