TJ Transport’s finance team’s work to build relationships with its supply chain and improve back office systems has helped the company’s turnover more than double to £27.5m in the last four years.
The phenomenal level of growth led the business to be highlighted among the Scale Up Institute’s longest scaling scaleups last year, a slight mouthful of a category for companies achieving at least 20% growth per annum.
TJ is a founder-owned business based in South Hampshire that offers skip hire, bulk haulage, commercial waste management and other services.
“One thing we do keep talking about a lot is the gross profit margin because ultimately that's where you can make or loss your money. If you're not monitoring it closely you can get into a sticky cashflow place quite quickly.”
Its rapid growth started with a measured effort to look at the business’s compliance and financial systems, according to head of finance Barry Curtis, leading to a big investment in driver training, safety equipment and back office systems.
“There was an action plan for growth. It was on the back of upgrading our level of corporate compliance so that we were more aligned with larger corporates in the construction industry,” he told AccountingWEB.
Being able to service contracts during rapid growth relied upon having conversations about credit limits (not terms) as soon as possible.
“That's something that we're trying to push down to our customers as well,” says Curtis. “From our point of view, the invoices might not be due, but the credit offering you have is to do with the invoice term and the credit limit itself. It's a multi-part offering and you need to comply with all terms. Some of that is about communication and education.”
The team is working to get the most it can out of working capital by making these debtors and creditors work harder, and talking to these stakeholders accounts for a large share of his job role.
The finance function has had to evolve too. The team has moved to a paperless system for its waste business, integrated its systems with large customers and increased headcount. The team now includes six people with an additional admin team of five.
The finance function has had to evolve too. The team has moved to a paperless system for its waste business, integrated its systems with large customers and increased headcount.
Curtis was brought on as head of finance nine months ago to address the increase in company size and the complexity of the role. His background includes being an auditor for BDO and a financial controlled at an AIM listed med-tech firm.
In terms of monitoring company performance, gross profit margin and EBITDA are Curtis’s key yard sticks because of their link to financing.
“In terms of the senior management, retained profit is always key,” he adds. “One thing we do keep talking about a lot is the gross profit margin because ultimately that's where you can make or loss your money. If you're not monitoring it closely you can get into a sticky cashflow place quite quickly.”
Although the company’s turnover has increased by 120% from £12.5m in 2012 to £27.5m in 2016 they haven’t set a target for 2017. Instead, they are planning a year of consolidation and taking opportunities “where they fall”.
Growing business with existing clients has led to geographical expansion and several new facilities. The idea is to use these locations to knit together the patch between Hampshire and new sites in Bristol.
“It's getting the brand exposure and the awareness of what we do to that local market,” says Curtis. “We need to build on that on a little more of a self-perpetuating basis, rather than relying on the large corporates that took us up there in the first place. They provided us with a launch pad and now hopefully we'll get more organic growth on the back of that.”
About Chris Goodfellow
Journalist and editor with eight years' experience covering politics and business. His work has been featured in a range of publications including The Guardian, The Financial Times, The Independent, the BBC and Vice magazine.