In this second piece based on a Royal Bank of Scotland study of recession strategies we look at how a small UK business has concentrated on client basics, and turning bad debt to its advantage.
COBELL is a distributor of fruit-based ingredients to UK and European food manufacturing industries. Its on-site storage, packaging and mixing facility enables it to provide clients with a high value-added service. Cobell’s turnover was more than £20m in the past financial year.
Managing director David Pearce says that despite good sales, a threat to its bottom line has been bad debt and late payment, “which is of critical importance in market such as ours, where margins are tight”.
But Cobell recently managed to turn a potential calamity to its advantage, Pearce explains: “One of our major clients went in to receivership earlier this year, and part of its assets was a majority interest in a premium soft drinks brand. We made the decision that there was a strategic fit, so we bought a majority share in the drink company.”
Two-pronged recession strategy
Cobell has had a two-pronged recession strategy: responding to immediate danger, and providing a platform for continued success once the recession is over.
Pearce says: “As well as taking out protection against bad debt, we’ve been improving our systems and protocols to ensure that it is easy for clients to pay on time.”
This involves back-to-basic steps such as getting paperwork right and ensuring clients are kept informed at all times.
We’ve continued to invest in improving our customer service, storage capability and technical compliance competences,” says Pearce. “In this way we’re increasing the value we are able to offer clients, to ensure the long term health of our business.
“We’ve worked hard on the fundamentals – our people and our passion for client satisfaction which ultimately leads to loyalty. To get loyalty you need to communicate well, and let people see you are investing for the long-term.”
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Two-prong recession strategy for SMEs
10/12/2009
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