I received the following email from a lady who runs a double glazing company:
I’m a regular reader of your blogs etc, they keep me amused as I open my mail to endless bills and bad debts.
I’m the owner of a small double glazing company. I don’t fabricate windows anymore just sealed units.
This year has been a struggle to say the least and I’m finding it more and more difficult to survive. I kind of took the company over from a friend of mine to start with and sometimes (well most of the times) wished I was a bored housewife again, no, I jest, daytime tv is appauling. Lol
I have gone round in circles for the last year, downsized premises, staff etc and to no avail.
When would you say it’s time to throw the towel in? I figure that if I get the same answer from enough people it might help me make a decision. It’s either that or toss a coin. Lol
I often get people contacting for general advice, but obviously this one is far more important than many of the request I receive. I’d be interested to hear what readers of this website feel, but below are my thoughts:
General Economy
This is clearly the toughest time of the year for our industry, which has been made far worse with the weather we’ve experienced over the past four weeks. I would expect far more companies in our industry to be suffering poor cash flow, and directors up and down the country thinking ‘I’ve had enough!’.
In many respects, it is good for the industry if a few of these companies do pack in, as we’re in an industry with massive over capacity and falling margins. However, in this instance, I have to assume the lady is made of sterner stuff, otherwise she would not have made contact.
The positive news on the economy is that things are picking up, and the coldest weather the UK has experienced for a generation will have a positive effect on double glazing sales as a result. So, I would suggest not panicking at this stage, and try ride it out.
Pricing
I would recommend trying to get out of the price led marketing, and try selling on quality and service.
It is very unusual to see any company in our industry surviving in the long run when they compete at the bottom end of the market. This means looking at the marketing and advertising to ensure the image is right, and the overall company ethos may need to change.
Sealed Units
I don’t know too much about the company, but I would look at the viability of producing sealed units. There’s dozens of manufacturers out there with economies of scale that could supply sealed units at highly competitive rates.
I’d be looking at the overhead currently going into making sealed units, and the material costs. Then I’d be looking at how much it would cost to buy in the equivalent production, and I’m pretty confident that manufacturing low volumes of sealed units would not pay.
Overheads
Even though the lady has mentioned that she has already downsized the business, I’d still be looking at the overhead of the business in detail.
Every company should understand what the break even position is, and ideally scrutinise their monthly management accounts. I’d be recommending trying to create a more flexible sales force and installation department, so as sales increase people can be drafted in, but when things are tough they can be let go. It sounds really tough, but carrying too high an overhead figure through lean months is one of the reasons many companies fail.
I must stress that every company MUST understand their financial situation, and I don’t just mean how much money is in the bank (or otherwise). Financial forecasts should be in place, with sales targets, targets for Gross Profit, Overhead targets, cash flow forecasts and crucially net profit targets. Every job should be costed out prior to installation, and after installation, so lessons can be learned for future trading. For example, is the company selling porches consistently too cheap, and is the profit per day good enough from roofline jobs. It is vital that companies look at the profit per day / overhead recovery per fitting team.
Adminbase software from Ab Initio has an excellent job costing facility. In fact, without looking like I’m promoting another company, I would highly recommend Adminbase to anyone who wants a well run window company.
Sales
It goes without saying that the company has to bring the sales in. I don’t know what marketing / advertising is in place, but I would guess this will need looking at if the situation has got to considering closing down.
Personally, I wouldn’t waste money in traditional media where you are competing with all the price led, low margin installation companies. I’d be tempted to work hard on service levels so more recommendations are generated. Mailshot your existing customers with some special offers. Look at your website. Internet Marketing is the modern day ‘garlic bread’.
Conversion Rates
Are the sales staff converting at the right levels? It might be that they haven’t been supplied with the right tools and knowledge to compete against more proactive competitors, or it might be that they’re just not good enough. Are you getting support from your suppliers on the marketing front? Maybe you need to look at buying frames from a company who help you convert business, and even helps generate you leads?
If your sales team is not converting at more than 50% and selling products at a good margin, then there is lots of room for improvement. You might need to make some tough decisions here.
Conclusion
It might be that things have got to a point where you cannot continue any further. You might need to speak with your suppliers and discuss your situation. They would probably be far happier accepting stage payments for the debt, in the knowledge that you have a plan to turn things around, rather than you leaving them with a bad debt.
I also do not know what the alternatives you have if you were to close the business. What else would you do?
All I would say is that there have been times in the past where I have questioned whether it’s worth continuing. I have always rolled my sleeves up and got stuck in. And, I’m glad I did, because there was light at the end of the tunnel.
Should you throw the towel in?
Well, I wouldn’t, I’d put the hours in, get some good advice and try turn things around.
