Workable plans

[admin]

Again a few thoughts for you to digest.

This month sees the 1st impact of negative cash flow to hit us, partly due to the fact we have £7,500 aged debt outstanding but also down to other factors such as ISE stock held around the country. Granted some of this is as displays, directors stock, unpaid distributor stock etc, but it all adds up.

Essentially we have moved at a very fast pace, adding agents enabling growth in terms of sales but as yet not selling more than we cost.

I see the CDA relationship being a prime source of trouble for us, why, read on.
I think CDA are contractually committed to buying in appliances from Beko in such numbers that we have been unable to shift, up to present. Therefore it’s impacting on their cash flow as well, causing them to re avaluate their position with us. Whilst we have increased sales they are looking for more. I’m uneasy about their situation.
I can not see a quick fix for us, we are unable to buy their stock and have no means of helping them in numbers that matter. Therefore my main concern is one of SUPPLY when we begin to reach the bottom of CDA’s stockpile, will they manage to maintain a reasonable stock level, for us.

Whilst that subject raises more questions than I have answered I would like to propose we plan our future a little better than we do at the moment.
As an example where we in need of £300,000 to ditch CDA we will need a firm business plan to get any joy from a loan institution. I therefore think we should have the plan in place and start following it.

As a start can I suggest the follwing.

To split from CDA we need distributors, who can BUY appliances from ISE for distribution, those distributors need a network of agents to feed along with a margin to fund the distrbution. Remember that pulling away from CDA will produce £37.00 per box to assist in producing that margin. We will still have to distribute from a container ( Exeter/Scotland) to those distributors.
Without going into detail, I suggest we plan HOW we are to recruit distributors, HOW we build a local network for that distributor, just what framework we use to set up a distrbutor, ie the deal. How the margins and parameters are set to ensure equality across the distrbution chain and exactly what parts of the counrty we do 1st etc etc. that way we all know where we are from one week to another. I suggest we try Birmingham as a possible start. we also need a written agreement with a distributor to protect us all.
I realise John is on holiday but he will read this on his return and I hope you can add constuctive comments for him to appraise the whole situation.
I think we can do much to help ourselves in working specifically to reuce the cost of moving away from CDA. Of course setting up an distributor does not impact on CDA at all, it just becomes one drop.

Kevin

[admin]

Re: Workable plans

Further to the above post…..

I’ve been re thinking due to the fact that UKW’s Exeter unit should be on line for the 1st October.

Therefore we should consider appointing UKW as distributor for the South West, Bristol postcodes and downwards(at least).

Data, our distributor in Yeovil does virtually no trade with us, Appliance World (Truro) does all his trade with one agent, CDA deliver once a week. There’s a load of agents who expressed interest who do nothing at all, who are not being serviced by our distributors!

With no disrespect intended, we do not have a set agent road map, and perhaps we do need a flexible set of parameters to call an “agreement” between us and an agent.
This is a good point to throw in cash flow, to highlight the problems. Where we give away a display model, it costs us; where we allow unpaid stock to non vat agents, it costs us; where we allow ditributor stock at lower margins and unpaid until sold, it costs us. Then include the stock that we hold at our premises and it all adds up to a problem we can’t continue to fund or expand operations with.
Throughout my time in this trade I have never been able to get stock for free and pay as I use it, every distributor I buy from insists on terms and conditions, whether that be COD or account, we should also be the same.
It’s my opinion that ISE has to sell appliances and get paid for them for it to pay it’s way. A daft statement? No, not if you analyze our present figures. Ok, I know we are trying to sell more and sign up agents as well, I just think we have to be smarter, more economical and get better results in terms of sales than we have been acheiving. It’s graet having 10 agents around Truro, but only 1 buys the appliances, therefore we have not been successful in that venture, and the distributor does not pay for his stock, creating admin excess for Cheryl.
Therefore we have an opportunity to get things back on a more traditional footing, call me old fashioned (or anything else for that matter) but these are my thoughts on the subject.
If we appoint UKW as agent for the South West, UKW can purchase the appliances from ISE. We will have to set a distributor discount, this could be flexible, having an initial base level which is increased with turnover by a bonus scheme, ie buy 10 @ xxx, buy 20 @ xxx – b{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d}. The figures are not relevent today, just the structure. Therefore UKW buys the stock and ISe gets paid for the supply. An ISE cash flow positive transaction.
At the moment the distributor margin has to come from ISE margin unless we can help that by buying at a better price from CDA in bulk. If and when we part from CDA we will have more margin to play with for distributors. This is now chicken and egg, for we need distributors before we can part company and we need a lot more sales.
The Exeter unit will be the goods inward depot for receiving a container from Beko, thats 177 appliances, eventually. ISE will have to distribute from there to distributors within reach. Lets just stay in Exeter for the moment. Therefore we will need at this time agents feeding of Exeter, distrbutors feeding off Exeter and most of all public sales from the unit.
So, I now suggest we channel energies to acheive sales and distribution from Exeter, to learn and adapt our stratergy on a “distributership” and how we channel agents to the distributor, paying heed to frequency of distribution.
At the same time, UKW has plans to move into No42, thats our code word for our next building John, that enables UKW to be considered as distributor for Scotland, same deal, UKW buys stock and distributes to agents and of course public sales. If the future is in distributorships then UKW should get involved. Bear in mind that between the four of us we cover a vast area of the UK, I’ll post a map via email to you all.

I’m all for developing a distributor, help with stock etc is exactly what I’m doing with GT at the moment. Let me expalin.

Gt (Nigel at Hull) took 5 appliances 2 weeks ago, on the basis that he pays for his sales not his stock. This helps his cash flow, but also gives him stock. He has already sold 3. I will be supplying 3 more to him this week returning his stock to 5. Nigel fully understands that this help is geared to establishing him as a distributor for North Yorkshire and South Humberside, that he will eventually have to buy his stock and trade independently of free stock. Therefore UKW is already acting as distributor here in my area, albiet on no margin at present, but developing a distributor and supporting a local agent. Therefore it’s putting in place the groundwork to enable that transition from CDA without effecting sales. Events with Stamps of Hull who are currently on stop for non payment have allowed me to introduce Stamps refferals, from Steve Foster, to Nigel. You can all see the benefit to ISE and GT from this event. Whilst ISE is owed money we potentially won’t lose all the sales.
So, with an eye on ISE cash flow, offering help to develop a distributor is handy, but we can’t do it all over the place, we simply don’t have enough cash. However once Nigel is established that help could be given to another business.
Lots for you to think about, especially when you add Sean in Anglesey into the equation, have a look at the map I’ll email you, these could be areas cover by distributers…..

Kevin

[kwatt]

Re: Workable plans

We certainly have to make plans to move from CDA, no argument there.

Storing machines in Exeter, no problem there.

Storing machines at No 42, no problem there.

Setting up existing accounts as distributors, no problem there and in fact pretty clever Kev.

I too am more than a little disappointed with the performance of the distributors as they stand as none have produced any tangible results as yet. Whether Sean’s trip this week will help or not in Yeovil, who knows.

Even Nicola has commented that CDA’s delivery schedule and errors seems to have had a negative impact on sales.

I also agree that we have to more careful with the stock levels held by us and the issue of display models as, so far, we’ve seen little if any return on those that we have given out so far. Admitted I’ve not been monitoring it closely this past week or so as I’ve been concentrated on UKW training and spares, but orders this week have been abysmal from what I can see. That could just be a downturn, I don’t know, but it is a concern.

The aged debt I know you and Cheryl have been working on, but it does show that we need to get tighter on credit control. We discussed that on Monday and that’s in hand to my knowledge.

But I see where you’re going. Before we pull away from or get kicked out by CDA we need to have all the pieces in place to be able to do it. No argumetn there from me and it needs doing.

K.

[derbyhoppy]

Re: Workable plans

hi Guys,

I have read Kevin’s comments with interest and have discussed the points in detail with him this morning and we are in complete agreement of the action required and I agree that the distribution / distribitor situation is likely to be high on our agenda for the next phase of ISE’s development but should not be rushed into without us all being in agreement with the plan.

Kevin covers a lot of gound so for the record I would like to put my own perspective on the business position of ISE to give context to what Kevin has said.

1. Start up businesses never show profits imediately. It is worth noting that appart from the initial UKW loan for start up costs (primarily to cover my car), ISE has required no additional money from it’s parant company and not taken money offerred most notablly to pay for van stocks.

2. From day one the sales volume has not been as we hoped. If we look at machines actually sold in March and April compared with July and August it gives an indication of how the sales have built and will continue to build; but it is worth highlighing that of the 100 plus agents who signed up prior to my arrival only a handfull have actually purchased anything and it was on the back of these agents that the original volume forcasts were made.

3. On the back of the 1st three months trading I revised our sales forcast and with Cheryl we built a financial model pridicting machine sales of 1050 and a trading profit of £16,000 at the end of March 2006. This model includes the cost of me, the van stock, fault costs, marketing material, user manuals, display machines and distributor commisions. To date we have exceeded our revinue and underspend on costs. Which means that though I anticipated losses in June, July and August they have not materialised to date and we are on schedual to out perform the business plan.

4. What is not accounted for is bad debt. The money owed came as a shock to me when I returned to work this morning and the chasing of this money is my top prioity particularly Stamps which is 1/3 of the debt. Recovery of this £8,000 resolves the cash flow issue at the route of Kevin’s concerns.

5. ISE has come a long way since our last strategy meeting in April, all our promises have been delivered, the brand values and finacial infra-strcture established and bad debt perminitting we are trading ahead of plan.

When we meet on September 6th we must review what we have done and set prioities for the next phase of our evolution.

Cheers

John

[Author]

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