It’s been a hard year for me as CEO of a thriving company in a challenging environment. Not because of the steep increase in demand for our services, not because of the MoJ contract, not because of our drive to keep delivering at 98% fulfilment and not because while we strive to keep prices down, we also make sure we pay all our suppliers bills on time.
It’s been a hard year because I have had two of my most important companies file for insolvency within 4 months of each other. One was my local gym. Ethos which provided me with a great space to keep fit, strong and healthy so when I go to work I can focus 100% on quality and service for my clients. The other was one of my clients.
Two very different companies, but when they dropped into insolvency, it caused surprise and delivered some shared lessons for 2017.
This is what they did right.
Clients liked them. Every yummy Mummy in Cambridge liked Ethos, it was different, warm, welcoming – a little bit like your family. The quality of the teaching was superb and they made a real difference. And say what you like about cheap and cheerful agencies, but clients talk about them fondly with a twinkle in their eyes. Those charismatic leaders persuaded and negotiated, with Ethos even achieving £800,000 worth of crowd funding in 4 months.
They had a good business model with good values and didn’t need to go bust. We can criticise small agencies but they give their clients what they wanted – if they didn’t they wouldn’t have kept growing their top line. It was the bottom line that they couldn’t get right.
Talented staff. Both companies led great, energetic teams, Finance Managers who spent most of the last ten years hiding under desks, pretending to be out when suppliers came knocking for their money, Operations Managers that pulled people together and delivered for their clients time after time, dealing with the most intractable problems with cheer and a chuckle. Ethos had Rosie, with a triple A* in economics from Cambridge who gave it all up to be a yoga teacher. However, neither had statesmen and women of steady hand and temperament, so necessary in times of strife and stress.
This is what they did wrong.
Vanity. It’s great to look flash, with offices of steel, glass and concrete, but if you can’t afford it, don’t buy it.
New offices in Central London with the latest technology can sometimes tip you over. Ethos had prime Cambridge office space with 5 glass partitions that cost £5,000 per panel. Year after year, we are strongly tempted to say “blow it, let’s go crazy”. But we’re still here, working on our farm, with the very unglamorous cows and farm machinery.
Greed. Both companies operated with intent; contracts are chased after and won at prices that were unsustainable, with shaky delivery and ultimate failure. Ethos had visions of an international brand when the reality was that an expansion to London crippled the Cambridge branch, sucking out energy, time and resources and bringing it to its knees.
Most importantly, they didn’t do their maths homework. There’s only one reason companies go bankrupt and that’s because they run out money. Risk isn’t analysed, cashflow isn’t looked at and profit margins aren’t maintained. Since setting Clarion UK up we have instilled a rigour about numbers – how many bookings, at what price, with how many interpreters, budgets on a weekly, monthly and annual basis and it works.
Lessons learnt and we will be keen to observe how the market and interpreters react. Next week- Steven Dering and other disasters.