An E-Commerce Business (£2M Turnover)

Problem/Situation:

A client had developed an eCommerce website which had grown very quickly to from scratch to £1.5m turnover which he wanted to grow to £10m over the next 5 years. There were 3 other related but different businesses or revenue streams within the business. The client was initially looking for a new eCommerce website to improve website conversions.

Despite growing sales the client was experiencing increasingly dangerous variations in cash flow and, due to a lack of proper and timely management accounting from the external accountant, he could not work out why. The client was very glad to get help from a team who could help with a wide range of issues including eCommerce, Internet Marketing, Business Strategy and Financial Management.

Solution:

A Business Diagnostic was carried out with the key management team. Key issues within the business were quickly identified, not least the poor stock, financial and management reporting controls. Our FD worked on this side of the business and quickly identified problems with profitability which were being hidden by the favourable cash flow cycle in a growing eCommerce business.

Whilst these issues were being addressed BGS introduced Internet Marketing consultants who identified the source of poor conversion metrics in the eCommerce website. Savings in Pay Per Click were quickly identified which resulted in annual savings of £60-70k for the same outputs. A new website was designed, built and launched by the web development team.

Despite improvements made it became clear over a 6m period that increased price competition in the the eCommerce business meant that this was not sustainable or attractive over the longer term and indeed that there was a significant risk of this business failing, taking down the other profitable businesses within the company. Our advice was to sell this part of the business and concentrate on the other higher margin businesses.

Results:

BGS supported the client through the sale of this part of the company realising £450-£500k for a business which was at best breaking even. Bank negotiations have been successfully conducted with the banks to refinance the remaining businesses which are now on a much stronger footing. A proper stock control and management accounting system is being implement to give timely reporting for informed decision making.