Friday thoughts - Threshers

[Marcus Cauchi]

Hello everyone, I thought that I’d open up a new topic for everyone to have a bit of a think about.

Threshers. Very sad. But what could they have done to combat this in a Sales context? Why hadn’t they identified their possible structural and system errors earlier on and taken measures to rectify these issues?

The withdrawal of trade credit insurance ultimately damaged the company’s ability to buy stock and suppliers became reluctant to supply without upfront payment. What could Threshers management and sales teams done about this? Why weren’t they able to reassure and secure suppliers?

I look forward to hearing your thoughts...

Marcus

 

[Former Member 1]

For those that didn't catch the story.....

Threshers owner falls into administration - Times Online

To be honset Marcus businesses on this scale, with this sort of structure, are the key reason why I'm largely disinterested in working with big-ish corporates...

Woolworths, EUK, Entertainment Rights.... All 'disconected' from reality by senior management teams blissfully removed from the core process.

At this level (as is the case with public service) there is too great a prevalence of managers who ply their trade by rote and are over reliant on largely vacous paper targets and performance indicators; all of which are designed to massage equally vacuous statistics... And those in turn used to fuel the fires of the 'fantasy business league' that is the blue-chip world.

For some bizarre reason I'm sent, on a monthly basis, a certain Scottish business magazine. And when I read it and scan all the stories about the stuffed shirts with their awards and their dinners and their smug grins and their bloated bellies... TOTALLY divorced from the real world!

Were it not for the fact that the pawns (and losers ) in this game are those who have to put up with this nonsense, those who do the REAL work and produce the REAL wealth I'd be rolling around the floor laughing...

Trade credit indemnities or not the credit-worthiness of those companies should have rested on the credibility and skill of the management teams. Suppliers should have had the confidence to 'invest' their trust in them. But they couldn't could they?

They weren't able to reassure and secure suppliers because people KNOW that ultimately those pulling the strings carry little real personal risk. They KNOW that these businesses aren't run through any true engagement with the core activity or interest in the workforce or committment to the community; but with the main eye on the intra-arterial drip that leads to the coffers of the already bloated and (in practical terms) largely non-contributory...

They weren't able to reassure and secure suppliers because in the absence of an underwritten 'gambler's bond' there was absolutely no reason to trust them!

...And that's especially true for smaller family concerns where typically the owners WILL be carrying the personal, financial and moral burden for their companies.

 

[Scottish Business Owner]

This business has been in trouble for a while and it's also not the first in this industry to fall this year. I'm not entirely sure whether they suffered any structural or system errors but more the victim of ever-dominant supermarket chains that drive down prices and commoditise things.

There's nothing unique about these businesses just glorified "offies" that probably attract their fair share of lager lout customers.

This business probably only lasted as long as it did due to it's ability to generate cash. You also cant blame trade credit insurance solely either as this is really something that is affecting many businesses even outwith that industry.

I'm not really sure what of been done to be honest. Could they have went down the discounting route? hardly sustainable. It strikes me as hard to innovate in that type of market as well to kind of try and differentiate and besides that would have cost lots of money anyway.

Matt - Care to give us the "Inside" scoop on what magazine (Thats for another thread completely)

Marcus - What's your take on their situation then?

 

[Former Member 1]

Matt - Care to give us the "Inside" scoop on what magazine

Not really... :lol: It does see the contents of the odd scoop though...

On the botton of the cat's litter tray! :001_tongue:

I made the mistake of subscribing for a year. Actually got so irritated with it I wrote to the editor on a couple of issues telling him that I wouldn't be re-subscribing... Told the sales woman who called to renew my sub that I didn't want it but still it comes...:001_tongue: As do the offers of tickets to the regular 'stuffed shirt balls' and random seminars that they punt...

It strikes me as hard to innovate in that type of market as well to kind of try and differentiate and besides that would have cost lots of money anyway.

I'm of the honest opinion that if this group were still in its component parts then the greater level of control and engagement at grass-roots level would have saved many of the stores that will inevitably close...

There's nothing unique about these businesses just glorified "offies" that probably attract their fair share of lager lout customers.

Surely the inevitable result of corporate 'blanding'? Exclusivity, credibility and loyalty all being things that will have been shaken out of that particular tree. There will be a fair number of those shops that would do well under a local management buyout...

 

[Adventurelife]

Hello everyone, I thought that I’d open up a new topic for everyone to have a bit of a think about.

Threshers. Very sad. But what could they have done to combat this in a Sales context? Why hadn’t they identified their possible structural and system errors earlier on and taken measures to rectify these issues?

The withdrawal of trade credit insurance ultimately damaged the company’s ability to buy stock and suppliers became reluctant to supply without upfront payment. What could Threshers management and sales teams done about this? Why weren’t they able to reassure and secure suppliers?

I look forward to hearing your thoughts...

Marcus

Hi Marcus

I know you are a sales expert and without doubt Threshers could have increased their sales by various methods. However, would that have saved the business?

Maybe in the short term, however, longer term they were still going to fall. Many, many companies are in the same position as them and we will see a constant drip for the next several years of known branded companies failing.

You mentioned why in your post. Structural Systems! Companies have been encouraged to grow at all costs over the last several years from pressure from shareholders, or over ambitious management. In order to do so huge amounts of finance had to be raised and used in order to find grow. All good when the plan works and the cashflow is available to fund the finance, however, how many of them did third grade risk assessments and senario planning on what would have if xyz happened?

You play for high stakes to you take high risks nothing wrong with that but they cannot cast the blame or be surprised when many if not the majority of high risk plays do not come off.

Peter

 

[Marcus Cauchi]

Marcus - What's your take on their situation then?

I'm happy to answer as well. What i would ask first though is when did they know they were coming in to trouble? Did they address their problems or did they think they would just go away. Did they cut down on marketing and training or did they invest? Who were in charge of making these decisions and were they listening to their accountants or to their (potential) customers?
Did everyone know exactly what they should of been doing day to day? I doubt it, they mostly probably sat back and hoped things would sort themselves out and as a result Threshers are selling off their assets which is a money loss tactic which they are doing to try and save the core business.
They penny pinched and went down market - why?
These are the key considerations for any business to truly assess their structural pipeline.

Let me ask you this - when looking at your business, are you doing these things to ward off a similar situation?

 

[Former Member 1]

They penny pinched and went down market - why?

Because, as is so often the case with businesses on this scale, the senior management were operating by rote with little understanding of the realities on the ground. The purpose of the management's activity had moved away from the core activity, and towards the generation of worthless P.I. Data. So many of these bigger firms are the same. Prick them and no, they don't bleed, they just trot out some piece of random 'doublespeak' and start arguing black is white in support of whatever dellusionary target they've adopted fro themselves....

They actually seem to believe their own lies in many cases. But as the saying goes, you can't fool all of the people all of the time. And the result is often that they alienate the very clientelle that were at the core of the business or brand they originally bought into...

In this case facilitating the 'bucket o Buckie' brigade may seem to be a profitable game, but its a mistake on several counts. For one it means exposure to a slice of the market that is driven solely by price (and thus volatile). And in that respect it's plainly impossible to sustain a position against the big-volume shifters such as the supermarkets...

What's more that shift will have driven off much of the core business. And it would matter not one job what fine wines, exclusive beers or top quality Malts they stocked... Who's going to buy (or even look for) such things in a place where it means rubbing shoulders with Jakeys and neds?

These aren't things that would have been overcome by marketing or training. Once a brand has its core values eroded in this way its almost impossible for it to recover as its credibililty and the core goodwill of the business are what have been sold off for the sake of volume...

Let me ask you this - when looking at your business, are you doing these things to ward off a similar situation?

Personally, no. My business is (quite deliberately) kept on a small scale and is tightly targetted at other small businesses. I know the nuts and bolts of the core activity intimately. And where tasks are delegated I ensure that the people involved aren't just qualified properly in academic terms, but have worked their way through the basic key roles to earn whatever degree of responsibility they've achieved...

And I suspect you'll get a similar response from owners of other SMEs that actually are Small or Medium sized...

 

[Adventurelife]

I'm happy to answer as well. What i would ask first though is when did they know they were coming in to trouble? Did they address their problems or did they think they would just go away. Did they cut down on marketing and training or did they invest? Who were in charge of making these decisions and were they listening to their accountants or to their (potential) customers?
Did everyone know exactly what they should of been doing day to day? I doubt it, they mostly probably sat back and hoped things would sort themselves out and as a result Threshers are selling off their assets which is a money loss tactic which they are doing to try and save the core business.
They penny pinched and went down market - why?
These are the key considerations for any business to truly assess their structural pipeline.

Let me ask you this - when looking at your business, are you doing these things to ward off a similar situation?

Marcus

Although your points are relevant they are relevant at a 2nd level. This first level is that the business of the parent company was financed in a way that meant the larks had to be singing good songs every day. They had not planned or accounted for the " what if " happenings that will impact on even the best led and managed businesses.

The actions that you are talking about led by better management would have helped the company without doubt but it would be similar to keeping a dying patient alive for several more days or months. The end result was going to be the same.

Many, many businesses are in the same position with financial structures that are so wrong in today's new world that it is not funny. However, 24 months ago no one would have thought anything of the debt levels they were trying to service.

In my small world what do I do to stop the same happening? I gamble because that is what it is at a level that is sensible and I am comfortable with and if it goes belly up it will not take me down. With the current economic situation that means I am being very aggressive on growth and on buying other businesses as my nature tells me to attack when others hide. But I also like to sleep at night so as yet I do not need to speak to bankers of financial backers so as well as sleeping sound it lets me focus on what matters in the businesses rather than being in survival mode as many , many businesses are.

Peter

 

[Marcus Cauchi]

Marcus

They had not planned or accounted for the " what if " happenings that will impact on even the best led and managed businesses.

The actions that you are talking about led by better management would have helped the company without doubt but it would be similar to keeping a dying patient alive for several more days or months. The end result was going to be the same.

Many, many businesses are in the same position with financial structures that are so wrong in today's new world that it is not funny. However, 24 months ago no one would have thought anything of the debt levels they were trying to service.

Peter

Thank you for your thoughts Peter. I'd like to know why had they not planned/accounted for the "what if" happenings?

I don't agree that the end result would of been the same no matter what. If they had fully strategised and planned for this they would not be in this current situation.

Marcus

 

[Adventurelife]

Thank you for your thoughts Peter. I'd like to know why had they not planned/accounted for the "what if" happenings?

I don't agree that the end result would of been the same no matter what. If they had fully strategised and planned for this they would not be in this current situation.

Marcus

Hi Marcus ,

I agree if they had fully strategised at the financial level they would have had a much better chance of survival. The facts are though when you look at many, many medium to large companies in the UK today the obviously have not done that because they are carrying a debt that makes no sense apart from only in the very best of economic situations.

Example I can thing of is the Yell business group. Have a look at their debt levels:w00t: I think they have managed to get their backers to stay with them for some more pain as the amounts are so huge the backers do not have much option.

I am no accountant , far from it but a business no matter how good it's product, service and middle management and people are,can be hamstrung if the strategic management do not get the funding levels correct.

Nothing wrong with being very ambitious, I am infected with that, but ambition should not overrule good common sense as it has in so many businesses of the last few years.

Peter

 

[Former Member 1]

The facts are though when you look at many, many medium to large companies in the UK today the obviously have not done that because they are carrying a debt that makes no sense apart from only in the very best of economic situations.

Example I can thing of is the Yell business group. Have a look at their debt levels:w00t: I think they have managed to get their backers to stay with them for some more pain as the amounts are so huge the backers do not have much option.

This is essentially what I'm alluding to when I say these businesses are being managed by rote. The vacuous P.I. data they so eagerly chase served the central and sole purpose of justifying these levels of debt or 'investment'. And that happens at the expense of the core activity. The debt makes sense if you're in the businesss of (and profit directly from) securing finance... And once 'hooked' it can become VERY hard for investors to walk away...

Yell is an excellent example... To anyone on the ground it beggars belief that they remain in business at all! Yet the model is packaged and re-packaged and regularly re-financed (and money made by individuals through THOSE activities) and re-sold... To what end though?

Entertainment Rights was another (albeit much smaller) example... Even as the company faced certain suspension from AIM there was talk of re-launching and re-branding and deals being brokered to re-finance! But the truth was there was nothing to finance! And the debts already in place FAR outstripped any real assets! Their stock-in-trade would revert to its original rights owners anyway in the event of collapse; and eventually the company was thrown to the dogs (along with the shareholder's investment and the bank's lendings) with the good bits being 'cherry picked' by the very people responsible for driving the firm to the wall in the first place!

Sales drives and better training at middle-management/shopfloor level can only ever avert this sort of disaster temporarily. The core problem is that these businesses are financially marginal even in boom times... And that's compounded by SMTs that are often completely disconnected from what's going on at core-activity level...

Why didn't they do the risk assessments? Simple; the risk assessments would have rained on their parades and prevented them from doing what they wanted to do! It seems to be part of what is almost a 'disease' in management culture these days that negative truths aren't welcomed and rarely faced...

And one thing you can be sure of is that the people who will really suffer from all this aren't the ones responsible for it!

 

[Marcus Cauchi]

Why didn't they do the risk assessments? Simple; the risk assessments would have rained on their parades and prevented them from doing what they wanted to do! It seems to be part of what is almost a 'disease' in management culture these days that negative truths aren't welcomed and rarely faced...

And one thing you can be sure of is that the people who will really suffer from all this aren't the ones responsible for it!

Good oservation. Have you witnessed this personally or within your own business? Our sales training teaches CEOs who are having these problems to nip this in the bud.

Marcus

 

[Former Member 1]

Good oservation. Have you witnessed this personally or within your own business? Our sales training teaches CEOs who are having these problems to nip this in the bud.

Marcus

I think this is something readily observed across many different levels and in many different contexts. I tend to refer to it as 'Emperor's New Clothes' or 'ENC' syndrome. I could cite dozens of examples of it at large, and it's a serious failing in business culture. Nipping this sort of thing in the bud is only possible where there are no hidden agendas that may be at odds with the real interests of key stakeholders... Unfortunately this often isn't the case; and a plain lack of integrity characterises many at SMT level both in the public and private sectors...

This is something I've observed directly. When I started out in business 23 years ago we did target the blue chip market. And we played that game; with the plush sofas and the leggy receptionist and the whole nine yards... And so very very often it was possible to observe the machinations of these 'types'. And in more recent times too, in other places, in other contexts...

You can educate an honest man to avoid making an honest mistake. You can educate an ignorant man to avoid a stupid mistake. But there's little you can do to stop a dishonest man making a deliberate mistake...