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CEO's Diary: Honesty is the best policy

29th Jun 2007
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The CEO comes clean

June 29 - I did the deed. I decided I had no choice but call our new customer and tell them we wouldn't be in the bidding for their southern contract before the weekend arrived. I don't want another one pondering on this. We've got a family bash this weekend and I'm on strict orders to be present in body and mind. The influence of family instruction on corporate decision making is, I suspect, a seriously understudied subject at the UK's business schools.

So I made the call. My position was straightforward. We'd been 100% on the line about the North. We can do it. And I'm 100% on the line about the South. We could do it, but only if we didn't do the North, and that's the one we've already agreed.

I could tell they were a bit taken aback by this. Sometimes I may be too honest for my own good (is that possible?). They didn't see my logic at first, but I argued my case. I said we were committed to not failing. We could not take on all their work and guarantee that. We could (within agreed supply terms) on one contract.

I think (or is that hope?) my candour worked.

I'm not going to worry about it. Much.

* * *

June 28 - Had to meet our solicitors this morning about the tribunal claim being made against us for discrimination (yet again). She backs my judgement on this one. The claimant's got a weak case. But she is pragmatic. I can spend a lot in defending our case, or offer a modest settlement. What would I rather?

I'm the sort of guy who thinks there are rights and wrongs in life. Spurious claims are a wrong in my book. They really annoy me. So I really don't want to concede. Why the heck should I? And if I do will I set an unfortunate precedent?

Equally I can see all the reasons for putting this behind us.

So I agreed to sleep on it. I should be able to decide. And I will decide. But whatever I do I'll do with a heavy heart. There's got to be a better way of dealing with disputes than this.

* * *

June 27 - Some breathing space was needed and discussion of the kit from Belgium provided it. Our guys have been using it and think that this company is really back on the ball. So much so that they're keen to make it the standard product for the new contract. That gives it a logical installation base, a consistency in our operation and enough of a presence to ensure familiarity and to guarantee good and regular supplier relationships.

I of course raised all sorts of objections to this, like why are we trying new kit on a new contract, but I had no leg to stand on. They rightly pointed out that two years ago we were wholly reliant on these people and it wasn't so much kit quality as financial reliability that moved us away from them. They can now deliver both it seems, so there's no reason not to use them. They've already proven kit compatibility with our other supplier (and be realistic - can you tell the difference between and Intel or AMD computer, which is the comparison my guys used?) so why not?

I'm willing to share their confidence and have invested time in specking supply conditions and terms on price, stock supply times, acceptable quality standards and so on which we think we can reasonably demand. If they can match these they're back in the game.

I still find it hard to imagine that it's only a year or so I've been in this job. I don't do much accounting now, as this shows. I'm confident #3 can do that for me. But what does surprise me though, is just how important that experience is in this new job. People say accountants overly dominate top roles in business in the UK. I'm not arguing either way. All I know is that people who come through other routes may be better wheeler dealers, might be better technicians, but when it comes to tying things down, being an accountant helps. And I may be right or wrong, but I think risk is always in the small stuff and leaving loose ends. Good accountants don't do that.

Bad accountants are another story.

* * *

June 26 - Curious muted reactions to yesterday's decision today.

I feel a sense of disappointment we're pulling out of an opportunity, mixed with relief. I think others do likewise.

We've decided to give ourselves a day or two to muse on it before we say anything. There's no harm in that.

The best we came up with today was from Newc (almost inevitably) who suggested we should go for it and then subcontract it. In other words we should become a facilities management company in our own right. But this doesn't hold water. It's management we're short of, and this won't help in that respect.

So I'm going to refocus, but encouraged by the obvious fire in the bely of this team. That's good.

* * *

June 25 - I spent much of the day with the Chairman and East discussing the new contract, and the possibility of extending it.

I spent far too much of the weekend working - but there are occasions when this is necessary. This was one of them. Basically I was looking at how work loads and cash flows would alter under a wide range of assumptions on the volume of work this new customer could bring, especially if we did bid to bring the work south. This is when building really good budget models pays off. Mine work from the physical realities upwards on a variable costing basis. Admittedly I then have to use judgement on overheads, but that's OK, I think.

The result is that, as I note some people have suggested here, we'd just expand too fast. I really don't see how we could handle the pressure of the work, or the over exposure to this customer.

I like new business. And it's hard to say no. It's even harder when at the same time you're trying to be as keen as possible on their work in the North, especially as we've been seeking to convince them that we're big enough to do this by ourselves. But even if we did this through a much larger facilities management company (heaven forbid) I'd still feel like this. In fact more so, as the margin would be smaller.

So the focus of today was making sure this logic was right and to then discuss tactics on dealing with them. Newc got dragged in for that. There's only one solution we can see for now. That's honesty. We could handle the contract in the North, no problem. What we can't is their other work as well. We all agree that it is better to say this than stringing them along a bit whilst we get the North tied down completely and then saying 'sorry we can't do the south after all'.

But it's a gamble. Still, better lose what we haven't yet got than put too much on the line. Even Newc seemed relieved. And it's not as if we're devoid of other opportunities. Why waste them? Was our closing logic.

* * *

June 22 – Everything tells me that my gut reactions were right. If we take this new contract we have to expand, a lot. As I’ve often hinted here, because of the perverse nature of our shareholder agreement, we have cash. Reasonable amounts of it, in fact. The expansion would absorb a fair part of that. OK, I could shift the load by leasing, but in effect I’m going to have to considerably reshuffle work loads for a lot of people in both the East and West divisions to fit in the suggested new work. That’s disruptive, and with the intensity of work we’d then have it would make sense to have a new satellite location to cover the East Midlands and surrounding area, where we’ve never needed such a thing before. If not we’d spend too long or too much on bit by bit stock replenishment for those on the road, and have too many of them too remote from a management team.

Then there’s the simple cost of working up to speed with new people and a new contract, which guarantees losses at first. In addition as we subsidise kit installation out of maintenance fees cash will be back-loaded anyway.

This is when I need a functioning board to discuss this with. I’ve got the Chairman to come in on Monday – but what I really need is a peer group who have been exposed to this sort of thing. I’d like to say I believed our accountants could help with this, but candidly I’m not convinced. They have neither the experience or any desire to accept the risk of saying yes or no to going ahead, and why should they?

Last weekend I said I’d rest. I can’t see much of that over the next couple of days.

* * *

June 21 – The Chair has solved my shareholder problem. He’s had meetings with them both, got the accounts and minutes signed and reassured them that he thinks all is well. I continue to count myself lucky that I got him. His people management skills are amazing.

Today mine weren’t at my best. I have a general rule that I try to be available to people for a fair part of the day, but occasionally they need to leave me in peace. Today I wanted more peace than availability. And I didn’t get it so at 4pm I made an urgent appointment with myself and left the office before I lost my cool. Now it’s time for a quiet evening of remote working.

* * *

June 20 – Newc tells me that the company who have already given us the major contract in the north are serious about wanting us to quote for another substantial slug of work.

There’s a problem though. They want a volume discount. But right now if we take it on our cost base goes up. We would have to commit to new staff, new vehicles, new support systems and managers (much of this being in the south where capacity is already looking tight). We might even need a new depot.

Newc, #3 and I sat down and chewed the cud on this for quite a while today. We don’t see a way round that quantum leap in scale if they are serious about the level of work they have on offer. But do we want to take that risk for a cut price job? Do we want to expose as much new business to one customer? Can we even get the people we need? If we do will we need to go back to the model we abandoned not long ago where some people are simply service engineers? If we do it seems Poles and some other EU immigrants can do some of the work. But it’s not their fault they can’t sell: their language skills aren’t up to it in most cases. That’s a problem, because it then risks creating inappropriate social divides in the company.

I’m pleased we put the effort into flexible budgeting. We need it right now, and this is big enough that my head will be in spreadsheets for the next day or two. But in the end it doesn’t matter what they say. It’s whether we want that risk that is the real question.

And if I do this do I want to say goodbye to the chance of an acquisition, which I’d rather set my heart on? I’m not sure we’ve got the capacity for both.

I guess there are worse problems to face.

* * *

June 19 – I’ve noted the number of people who say I should try to buy this place out. But having seen the Private Equity debacle that is developing, and having realised that this sector would be the only people likely to back me in this task (as I do not have anything like enough to achieve this aim by myself, or with the management team) then I do have to ask one simple question, which is “Why would I want to do that?”

Anyone got any other suggestions?

* * *

June 18 – It’s been mayhem. The new contract was with a division of a major company. Another part of the same organisation is now asking us to quote for another big slug of work. Newc’s on that case.

North has two tails, but I’m hoping they’re wagging in the same direction at the same time as he’s now inundated with work.

Mrs ex-CEO has said she can’t make a board meeting until September. So I’m negotiating having them sign the accounts by written resolution.

East is on holiday. I know he has to have them, but I’m seriously thinking of restricting them to the days between Christmas and new year only.

Office is not well, and if she says that she means it, but it’s a bit like having my right arm cut off.

I should be pleased. #3 told me to clear off and deal with other issues this morning. She assures me all is well on cash flow so leave her to manage the rest.

And the rest just seems to be coming in by the bucket load. We’ve got (another) employment issue which looks like it’s heading for tribunal on the grounds of race abuse, and this time I believe it did not happen. One of our people was working outside a client’s premises and got a stick injury from a used hypodemic syringe. So he’s having HIV testing and counselling, and I had to see him to reassure him of our support. And I’m being called by all and sundry for support.

And since I can’t moan to anyone else, I’ll do it here.

* * *

June 15 – I was quite taken aback today. The ex-CEO sent me a bottle of champagne in response to news of the order in the north. I’ve already learned that it’s rare to be thanked as CEO. From this quarter it’s rarer still.

I didn’t share it with staff – I never encourage drinking at work. But the management team had a meeting at lunchtime where the subject of work was banned for a change. Good spirits were allowed to run free. And they did. This team is gelling. Even Promo joined in the banter showing the humour he possessed when a deputy.

This weekend I’ll relax, a bit.

* * *

June 14 – There were no time for celebrations today. I was off to an old stomping ground in Belgium. A couple of years or so back I was involved in a possible takeover of a key supplier based there who got into financial trouble, and exposed us to some risk as a result. That was because w were far too exposed to hem for a significant piece of kit we use in the product we use as a key part of our service.

The issue was resolved. I helped their cash flow by significant purchasing and that kept them afloat. In the meantime we sourced a new supplier of the kit. Our dependence was substantially reduced as a result. In fact, they almost got sidelined. But having got yourself in a mess once it’s important not to do so again, and the Belgian guys have sorted themselves out, seem to have returned to viability and are now offering new product that puts them back in serious supply contention. So to Brussels I did go, two of our guys and East having already agreed that the stuff is at least worth a try.

Did I need to go? I asked myself that. I did wonder if this was really a jolly (and Eurostar is a good way to get some reading done and even to have a comfortable snooze). But I can defend this. I always think of us as a service based company, and ht’s probably an accurate description in that much of the profit we make comes from the maintenance and support contracts we supply. On the other hand, if there was no kit on site we’d have none of those contracts. So keeping on eye on what is out there, and having good relationships with our key suppliers is part of our remit. Not least that’s true because there is (as we nearly proved) as much business interruption risk in this as any other part of our activity. I think risk management is a large part of my role. In this case I also happen to have the personal relationships.

Was it worth going? I think so. Lunch was good; we’d already agreed to give the product a trial. The meeting about price and volumes. Given what’s happening in the north we have capacity to take on a serious second supplier. My brief was to secure the right rice and volume whilst ensuring substitutability in our kit with our other components. They assure me they can do that. We’ll give it a whirl. So apart from nearly getting drowned in a deluge in Brussels late in the day, it was good.

Which means I can also feel good about the week, except that I still don’t have a date for shareholders meeting.

* * *

June 13- We got it. Minor tinkering apart, we have the go-ahead on the big new deal in the north. I'm now off to see lawyers about offering employment to staff engaged by the contractor who we are displacing, but the problem has been much reduced by the fact that most seem to be have been 'self employed' sub contractors. They aren't staff at all. It's a business model I do not like, and which we won't use. But we might offer some of them jobs.

In the meantime, I made sure profuse congratulations flowed to North and Newc. The success was broadcast throughout the company. There'll now be some opportunity for overtime for those who are keen. All the new sites will need detailed surveying to make sure we know precisely how we'll fulfil our commitments. But landing this does two things. First we'll have a real northern division. Second, we have some serious growth to put in this year's accounts.

I'm pleased. I can't help saying so.

* * *

June 12 - still no news. But a bright spark of my acquaintance who read yesterday's entry and who is one of the few who knows who I am asked the obvious question, which was “how did I know we'd successfully integrated Newc's company?". Since this is key to deciding whether we have the capacity to take on another new venture I've given this some thought.

Four things tell me this worked. First, the staff say so. They (like Newc) have slipped into our teams without much problem (well, one case apart, and he's gone). They seem happy, and accepted. Then there's the fact that the customers seem to have accepted the change. Again, fall out was small, helped by a price promise for a period. Third is the fact that we bought this company to spread our activities into an area of relatively low representation. This has improved efficiency of servicing our existing clients there. Last, we've enjoyed real growth in that area as well and more than we could have expected from the base we had. This means that we're generating positive cash flows as a result. They're at least enough to justify the spend.

I guess there's a final reason why this has worked. Newc has run his own show and brings an 'edginess' to management which the rest of us don't really have as a result. I have to be honest. I'm not really an entrepreneur. I'm an accountant who seems to be an OK SME manager. Newc is different. He sees opportunity in a different way, and goes for it faster than we would as a result. OK, we still don't know the outcome of the deal I dedicated much of last week to, but North would not have gone for it as fast as he did without Newc, and it was Newc who saw the opportunity to bid at the scale we did, with less concern for the risk than the rest of us might have had. He has that entrepreneurial knack to appraise this with a high degree of confidence that the rest of us (meaning me) get from a spreadsheet. That's another win.

So what does this say I want from another deal? Three things really. Market extension. Good people. Cash flow potential. They'll keep me happy. I can dream, of course. (Sorry, spent too long watching Joseph!).

* * *

June 11 - A quick call around this morning showed that none of us had news of any developments following Friday's meeting, so I tried to follow my own maxim and move on to other things.

Like trying to agree a date for a board meeting. For those not terribly familiar with the problem of these things here, the difficulty is that the Board has now just four members. I am the sole executive member, the Chairman is a genuine non-executive, and the shareholders are the other two members. The only problem with them is that since they are divorced from each other they share a mutual hatred. The other problem is that since I effectively sacked them both from day to day involvement in the business (albeit in exchange for a reward package that most could survive on very happily, paid primarily as a dividend for those of you with concern for such things, and quite without bounty in case Arctic Systems followers muse on the subject, as I have) they hate me in common.

This makes for wholly constructive relationships at this level of management, not helped by the fact that the shareholder agreement (for which I am at least partly responsible) set absolute levels of dividend distribution and not one proportionate to profit. Since we're doing better now than we were when it was written (for which I claim some credit) this gives rise to a further diversionary dispute between the ex-CEO (he being the former husband of the ex-realtionship) and his one time spouse since he would like additional cash to fuel his lifestyle (otherwise called ever younger girlfriends) whilst she takes pleasure in vetoing payments of our cash to him for this very reason.

We are meant to meet quarterly. Sometimes we don't, meetings being accepted to have taken place on the basis of written reports. But to approve the accounts I do really think they have to eyeball each other before putting pen to paper, not least because I want them to sign these off. My name goes on the director’s report.

But, can we agree a date? Can we heck. Between golfing holidays, summer courses in garden design, meetings with the hairdresser and heaven knows what else getting shareholders in here is seemingly impossible.

I'll keep plugging at it. In the meantime, I have time to develop my other agenda item, which is an application to spend money on investigating entry to the market I've identified. It would be rash to make an approach without knowing I can spend. And with these two anything is possible, although the successful integration of Newc's company is an encouraging precedent.

* * *

June 8 - To the north, again. This time to see the key decision maker in the prospective customer. He said he wanted to meet me as CEO, and given that (as usual) we're small fry compared to the customer we're serving I had to go. This is not my choice for a Friday and will undoubtedly make me unpopular when I get back.

Was it worth it? I'd love to say yes. Normally I'm good at closing. But I simply don't know in this case. Either the guy I met is stupid, very clever or just crafty. About even that I'm not sure. He said he liked us. But then he rambled on about not being sure of our capacity to deliver and maybe we should bid through a facilities management company who would guarantee the supply. I made clear that was not an option. We weren’t sharing the margin and doing all the work. So apart from agreeing a 2% discount for strict thirty day settlement (which I suspect will be a 2% discount come what may knowing this type of company) the negotiation changed nothing.

So now I'm like a bear with a sore head, just as Newc was earlier in the week. I'd have a better weekend if this one was in the bag, I admit.

But I still think North and Newc have done a good job to get us this far. I can't complain. I just had to tell them, some you win, and some you don't. And on this one it's an each way bet, at best.

* * *

June 7 - Newc is walking round like a bear with a sore head over the state of progress on the contract in the north. So much so in fact that I had to tell him to get on with some specific tasks. Passion is one thing, but I like managers who can walk away as well. It's interesting to see that he's finding that hard. East in particular has enjoyed teasing him about it, which is indicative of growing confidence in their relationship, and that East feels very confident in his role. Quietly he's both being my deputy and bringing in great results in his own area.

Which is good, because I haven't quite got acquisition of the company that I go past when walking the dog out of my mind, or entering its market if that fails. I want time to look at market expansion.

* * *

June 6 - Yesterday seemed too good to be true. The prospective customer has reported that the current supplier has after all offered a new deal at lower prices than we're offering. Much lower prices. I told North to pull out of negotiation, immediately. The new rate is unsustainable and I already believe that our competitor is in trouble both financially and with service levels. I told him to tell the customer that if he wanted service levels he had to pay for them: we aren't working at a loss.

It's a gamble. I don't want to lose this. But there's no way I'm buying turnover either. I think the guys agree. But it might take some time to pick them up again.

In the meantime, #3 gave me our first quarter's draft results. We're looking good. Which is useful, as this set have to go to the board along with the audited accounts for approval. On those I have my usual satisfaction. Despite their best efforts the final figures are those we presented for audit. I know I shouldn't get a kick from this, but I always do.

* * *

June 5 - Written on a late train home from the north (always my preferred way of getting back from there).

I said I planned to give my managers more leeway. They seem to have anticipated that. Yesterday evening Newc and North rang me at home (try Skype for easy conference calling). They had a deal. A big deal for just the type of work I wanted them to get. They'd landed it in the last week. I didn't even have an inkling of the lead for it, let alone that they were talking. It was big enough and unusual enough to require my input. I agreed to go north to see them. I find it very difficult to do these things from a distance. I had to measure their feelings about this as much as any data.

They're right about the deal. It's excellent for us, bar one thing they had overlooked. I think we'll have to TUPE in some people from the previous supplier of services. One we need them, two we'll have no choice. They'd forgotten this legal risk. But that apart their thinking, pricing, calculations and suggested service approach (using our default reporting model so that 'no news is good news' is the normal reporting requirement which saves all the hassle of reporting normal performance) is all built in.

I could have kissed them. But there are some things I just don't do. I never kiss any staff, ever. It's a good rule to follow. So too it seems is letting people follow their initiative.

What seemed good as well was that they really wanted to share this. They get the credit. But they appreciated the reassurance of sharing the analysis to make sure they hadn't missed (much). Candidly, such is the deal that whatever the TUPE outcome we'll do it. It's too good to miss.

I'm cream crackered, but happy.

* * *

June 4 – What a week off. The wettest holiday I think I’ve ever had. And then it’s been great at the weekend. Aaaaaahhhhhhh. Oh well. That’s life.

Now back to reality. I mused hard when I was away, as I said I would. And the biggest conclusion I came to is that the best thing I can do as CEO here is give people their own chance to excel. East’s #2 showed the potential of that the day I went away. He closed a deal off his own bat. I did not need to be involved.

Sure, guidelines are needed. But the reality was that he’d liaised with me on that one, and we’d agreed parameters. He then delivered. I’d like to see more of that.

I’ve already abandoned some aspects of formal budgeting and no one seems to be going off the rails as a result. Indeed, cost control seems very tight right now and sales are a bit ahead of what I’d have hoped for. But what I now want t do is break down the idea that people will work to a central agenda set by me. If I’ve got the right people I need to be their chairman, much as I need my own chairman. And my job is to set parameters and then be a sounding board plus someone to remind them of the courser when necessary. That way I have the chance to manage more people better, and that way we have a chance for still more growth.

It’s not a control freak’s management plan. Now I have to find out whether I can do it. I do like control, and there’s going to be some conflict in this whilst I try it out, but I think it might work.

* * *

For previous installments of the CEO's Diary, see:

May 2007
April 2007
March 2007
February 2007
January 2007
December 2006
November 2006
October 2006
September 2006
August 2006
July 2006
June 2006
May 2006
April 2006
March 2006
February 2006
January 2006
December 2005
November 2005
October 2005
September 2005
August 2005
July 2005
June 2005
May 2005
April 2005
March 2005
February 2005
January 2005
December 2004
November 2004
October 2004
September 2004
August 2004
July 2004
June 2004
May 2004
April 2004
March 2004
February 2004
January 2004
December 2003
November 2003
October 2003

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Replies (12)

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By listerramjet
12th Jun 2007 23:00

when
you talk about the board meetings and the shareholders you sound like a different person. As they don't seem in the slightest bit interested in the Company, dividend apart, then perhaps it is time for them to sell up?

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By User deleted
06th Jun 2007 23:47

One step forward - two steps back?
Tuesday: "I said I planned to give my managers more leeway."

Wednesday: "I told North to pull out of negotiation, immediately."

The CEO doesn't often put a foot wrong but he might have to do a bit of work to convince the team that they have lots of leeway. North & co. might have reached the same decision too.

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Richard Murphy
By Richard Murphy
12th Jun 2007 11:54

The CEO might like Dilbert
Perhaps he should read that for 12 June:

http://www.dilbert.com/comics/dilbert/archive/index.html

Richard Murphy

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Richard Murphy
By Richard Murphy
12th Jun 2007 11:55

The CEO might like Dilbert
Perhaps he should read that for 12 June:

http://www.dilbert.com/comics/dilbert/archive/index.html

Richard Murphy

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avatar
By User deleted
29th Jun 2007 16:46

Another interesting storyline, CEO....
... and I can see your logic behind not taking on the South. In a traditional set up, the accountant (or FD) would have made the argument that you, the CEO, has made. But he would have been overruled by the Sales Director and Managing Director and possibly Operations Director. The FD then would go off in a strop but be happy that he had covered himself and done what accountants are expected to do.

The company would then have come up against many obstacles and life would have been stressful for a while but would have been ultimately successful (because you are in charge and would have made it happen!).

Also, have you considered that the client is going to be rather peeved that it can't have a single supplier?

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By User deleted
29th Jun 2007 09:57

Dodgy claims
I'm with the CEO on this one - why the 'eck should someone pull a fast one and get away with it. But I understand his dilemma.

A few years back I was told I had a good case for constructive dismissal, but I really didn't want the hassle or the history. Even if you win, I'm not sure prospective employers see beyond the tribunal itself... I chose to walk away and got a better job.

If her case is really that weak, is it worth calling her bluff? Has she thought out the long term consequences of a tribunal, whether she wins or not?

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By AnonymousUser
15th Jun 2007 10:40

The teamwork you are getting shows more than you think...
You describe yourself as "an accountant who seems to be an OK SME manager" but at you seem to building a good balanced team around you rather than just looking to surround yourself with clones of yourself.

Take a look at the growth you have seen both in yourself and in the other individuals in the management team and in the development of the team itself...

You might like to manage by spreadsheet, whereas Newcs like to take a more entrepreneurial approach but put these together and you get synergy. He can be outward looking knowing you are there as a sober evaluator to cover his back. You can afford to be the sober evaluator of these opportunities because you know you have him looking for the growth and opportunity.

When you have to say stop negotiating immediately, that is fulfilling part of your team role. Making the judgment call on where to draw the line on the Northern deal that Newcs enthusiasm might have run past without you there... And look what you got as a result. Where would you be now with that Northern deal if instead of drawing a line (and getting pretty much the deal you wanted) you had softened the negotiating postion to try and get closer to price the customer told you that the existing provider was offering...

You have chair as your backstop with his insights into the people side of management and his challenge to the existing boundaries of your own thinking.

You have Office keeping you from being disturbed too much by the day to day admin.

And all the other people there... each contributing differently.

The team you are building is already more than the sum of its parts.
And you know it has a lot of growth ahead of it still.

So when you describe yourself as an accountant who seems to be an OK SME manager you are demeaning yourself. Look at how you have grown and developed from when you were just Finance. You have more growing to do and are still learning to get out of your finance comfort zone but you are doing so.

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By djw090
25th Jun 2007 12:49

Remote restocking of engineers
From your comments I understand that the East Mids satalite you feel you would need is to enable the restocking of your engineers.

Some of the overnight parcel companies provide a service where you would send a restocking parcel to be held at their depot for your engineer to collect.

Last time I was in local Royal Mail depot, to collect post with too small a stamp on it, British Gas engineers were coming in and picking up such parcels.

This type of service would cut your set up cost.

I am sure you don't need me to say take care doing a big expantion on the back of 1 low margin customer.

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By AnonymousUser
25th Jun 2007 15:13

A few questions...
If you expand to take on the new contract:

How long is the time span to reach break even point and what happens if things go sour (customer walks, margins aren't what you need, etc)? The longer this time span is, the greater the risk of the unexpected.

Is there other growth you could find to underpin the expansion and reduce the risk of relying on one big low margin customer? Is there someone in the region you could buy out to obtain a platform of other customers?

Have you achieved enough stabilty in the current structure to go for this growth? On the other hand, how would Newc and the rest of the team react if you did not go for it? Can you use this potential expansion as a driver to assist you in maturing your team?

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By AnonymousUser
22nd Jun 2007 22:04

Risks of overtrading
I know as accountants we all learned about new businesses overtrading and its effects on cash flow. I think the CEO needs to think about human overtrading. He's been scraping around to find new area managers and has scarcely got them in situ, with lots of new work and responsibility. It sounds as though this new contract prospect would require a new area manager and new staff in a number of divisions. Can staff who are still just getting used to their new responsibility and modes of working cope with that extra load? I'm reading between the lines that this new contract is a significant percentage of an area manager's staff and budget. I'd be tempted to see if the parent company is prepared to wait a year - or even 6 months - to evaluate performance on the first contract, and to give your own staff time to bed into new ways of working - and perhaps for new leaders to come out of the woodwork.

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By User deleted
20th Jun 2007 13:44

It all depends
The reason for private equity is to fund things that cannot be funded in other ways. I have seen a number of MBOs where the funding comes from a combination of debt, asset and vendor finance. It comes back to what the shareholders want. Yes, all they seem to want is cash at the moment. Have you ever considered that Mrs in particular wants to retain the shares as a means of getting back at ex CEO? If they do want to go their separate ways, but are willing to take their capital stake over a period of time (with the tax benefits that accrue - 10% rather than 25%), then it may be possible to reach a deal.

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By listerramjet
20th Jun 2007 09:15

re the buy out and the why question
OK you have two shareholders who are providing capital, which seems to be more than adequate for your expansion plans, and would seem to be effectively locked in because of their circumstances. The downside is that you don't seem to enjoy dealing with them, although you actually manage that well. My main concern would be how long it will last. Of course private equity might not be any better! I would have thought it would be sensible to plan for the future now so that you are able to control it.

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