It was 1 o’clock in the morning. It was February 9, 2008. I was in a solicitors, D&W, in the centre of London. We shook hands and the man opposite reached into his pocket and took a pound coin out. He handed it to me and I took it, stood up, walked out and tossed the coin in disgust into a charity collecting bin. I had just sold the company that I worked for, sweated over and would have done anything for. The pound coin was the result.
In fact it was worse than that. I owed the advisers a hundred thousand pounds and other organisations who had helped with the deal another hundred thousand. It had just cost me £200,000 to sell the company for a pound. But at least no one died, everyone was paid and we all lived to fight again.
When I had set the ball in motion to sell the company I had agreed with the firm of solicitors their fee structure. It consisted of an agreed amount plus disbursements. It still rankles that whilst I travelled down to London on the train second-class they felt that they could travel first class and charge me accordingly. All the advisers also felt that staying in five-star hotels was required. Even when we returned having done the deal I went off to my second-class carriage whilst they, all of them went off to their first-class carriage.
How Did It Happen?
For years my father had blocked progress in the company. When he unexpectedly and suddenly died in 1995 I decided to go for expansion of the company. We were then turning over around £18 million a year profitably. I set the goal of £100 million turnover and £4 million profit within five years. We did it. An amazing achievement. Everything we touched turned to gold. We won project after project. We won awards. We open new premises. We hired new staff. The money poured in. I even made the cover of Electrical Contractor Magazine – you can read the article by clicking the image. It all seems so easy, make the correct strategic decisions and everything else will follow.
Whilst clearly, I made some bad decisions, one great decision I made was to set up a separate company to hold the properties that we were buying to occupy during our expansion. That one decision saved me from bankruptcy when the wheels on the company came off.
The way that we went about expanding was through geographic expansion and to do that we found people who were working for our competitors and were keen to set up their own organisation in their own offices but without any risk to them. We already had branches in Worcester and London and Manchester. Of these London was proving successful but Worcester and Manchester had struggled. We found some premises in Southampton and opened there in 1996. We followed that with Nottingham in the same year. 1997 saw this win a major project at Gatwick and we opened an office there. We followed that by opening offices in Edinburgh and Reading. By 1998 we opened in Cardiff and we bought another office by Tower Bridge in London. 1999 saw us open in St Ives, near Cambridge. In 2000 we opened in Newcastle and Leeds. In 2001 we were open in Glasgow and we opened an alarm company. So now we had 14 regional centres.
As we expanded it was obvious that management resources were stretched too thin. Worse though at some point people who were under pressure to make a profit began to lie. In construction, it is essential to know exactly where you are on a project financially. I had known of several companies where losses were concealed by charging costs to the next job rather than the current project. I never thought it would happen to us but once it starts it is almost impossible to stop. They booked profits today and let tomorrow worry about itself. This of course is only visible with the benefit of hindsight. At the time it felt as if more and better processes would control the company.
Providing you continue to expand rapidly there is no day of reckoning. However, as the rapid expansion began to slow the problems inherent came to light. I introduced new systems and spent more on IT. Turning the ship around in construction is very difficult. Projects have to be completed and project managers have to deliver the project. You cannot go and hire a whole raft of new people.
On the way up everything you do turns to gold, when the tide turns all of the factors that made success possible now turn against you. Whereas once you could hire staff because they would knock on your door now staff left leaving behind their problems. To get new people you had to overpay. There became a complete gulf between the directors and the rest of the staff. Board meetings became acrimonious affairs and eventually felt that I had to take direct control of projects. So I went from doing what I could do well, to doing things I had never done before. I delegated my core competencies as I sought to sort it out.
We had invested heavily in the company so there were considerable assets. However, profits that we had booked disappeared and we saw a considerable outflow of cash. The new staff we hired from out of industry were completely ineffective. The new commercial managers we hired achieved little. By 2006 I was criss-crossing the country as I fought to make it work. On one day I went to London to attend a meeting in the morning and then drove to Glasgow for a meeting the next day because the planes were out. Flights to Glasgow became a regular occurrence. One of my directors began briefing that he would sack me and become MD – which since I controlled all of the shares was madness.
I guess the defining moment was when I went to look at a school which we were wiring into some remote area of Glasgow. We had claimed that we were two thirds complete and we been paid in line with that. When I actually saw the job we had barely begun and there were no staff there. We had booked a profit in line with the claim and the payments. The reality would be the job would be heavily loss-making. The pressure increased day by day by day until I felt that the end was near.
I found a new experienced Managing Director who was willing to take over and in 2007 he did so. Effectively I became a non-executive director. The relief when the pressure came off was amazing. But it was too little too late and the new MD concluded that the best option was to sell the company and I had to agree. There was some interest and eventually, we managed to do the deal in 2008.
I have to say that I’m glad I tried to expand. I always wanted to regret what I did, not what I didn’t do and in that, I certainly succeeded. I gave it my best and I fought for that company for 30 years. I guess I’m glad that I survived to fight another day where many people in my circumstances haven’t. To those people who helped on the way up I’d like to say a great thank you and those who had their own agenda towards the end I’d rather forget.