The mission
HCS is a business interiors and fit-out specialist based in Glasgow.
The company prides itself on its complete design-to-delivery service
and numbers Alcatel, the University of Glasgow, JCI, GlaxoSmithKline,
Mitie, Scottish Enterprise, Scottish Natural Heritage, the Scottish
Funding Council and Edinburgh Napier University among its clients.
Sales and profitability are growing strongly and there are plans to
double profitability again in the next three years. In the meantime,
Managing Director Tony McKee and Construction Director Robert Connelly
want reassurance that they have the right people, strategies and systems
in place to deliver that.
Lucy Armstrong,
a management consultant and Chair of the SME Council at the
Confederation of British Industry, specialises in advising fast-growth
entrepreneurial businesses and met the HCS team for our Business
Bootcamp session.
The background
“I think what’s important to us at Hunters Contracts (Scotland) is a
sanity check that what we’re doing strategically is right,” explains
Robert, who heads up HCS’s Technical Services (fit-out) division and
also oversees the financial elements of the business. “For example the
redistribution of redundant office furniture is a natural fit for the
company. But it would give us an element of comfort to know whether what
we’re doing is correct or whether there are other ways. A lot of
companies just need someone to stand back to let them know whether
they’re doing OK and to ask, have you thought about this?”
Tony’s passion is sales. A 20-year veteran of the furniture industry,
he set up HCS in 2003 to build on his experience delivering major
projects for local authorities, higher education institutions and
national government – as well as blue-chip businesses. “When we started
the company eight years ago we had three people,” Tony recalls. “We now
have around 30, with 60 to 70 subcontractors on top of that who depend
on us. We aim to grow the company throughout the UK over the next 10
years and our wish is now to succession plan the business.”
Succession and strategy
In the past six weeks Tony and Robert have set up a management team
of five people covering sales, logistics, design, administration and
finance, with a share scheme to promote a sense of ownership. The plan
is that each manager will gather and filter information from their own
areas and report the key headlines to Robert and Tony.
“We identified that we need to see how the business is moving forward
from a strategic point of view and to do that we have to free the
shackles so that Tony and I can stand back and have a helicopter view of
where we’re going to be in six months, 12 months or five years,” Robert
explains.
“We have decided to invest in the people already here. They may not
have all the experience, but if we put the proper controls in place we
can develop them to their full potential.” Board meetings were felt to
be too formal, so there are management meetings every two weeks instead.
Cash flow is king
Sustainable growth is also discussed. “One thought that crossed my
mind when looking at your accounts and getting an overview of the
business before coming today is that you’ve really had quite explosive
growth,” Lucy says. “And from what you say the company hasn’t slowed
down during the recession. So what’s that doing for your cash flow and
management of your cash flow, because your contracts must be growing in
size?”
Tony agrees, describing HCS’s two biggest contract wins to date –
involving the fit-out of data centres in Edinburgh and Germany. “We have
customers who pay us in 30 days and customers who pay in 60 days,
although we try to avoid those ones if we can,” he explains. “When we
negotiate with suppliers we work on the basis of the end client’s
payment terms and negotiate that with the subcontractor so we don’t put
ourselves under pressure. We also use interim payments and try to work
on the basis of 25 per cent-25 per cent-50 per cent depending on the
length of the contract. We’ve got to make sure with the size of the
contract we don’t over-extend ourselves. I don’t know how many companies
have gone out of business with a full order book because they can’t
manage cash flow.”
Tony adds that the company avoids being a subcontractor, where it can
be a hostage to cash flow issues further up the food chain with the
main contractor. “It’s good that you’ve learned from your mistakes and
that by managing cash flow all the time you’ve not got carried away by
the idea that bigger is better,” Lucy responds. “You’re much more
focused on generating cash and generating profit as a mechanism for
growth.”
Service vs price
“How are your competitors going to compete with you two to three
years down the line?” Lucy continues. “They’ll try to win on price,”
Tony replies. “But if you’re always delivering the cheapest possible
price, you’ll fail. Our unique selling point is service and I think
that’s what differentiates us in the market. If we’ve got a client with
six sites that they have to finish by 25 November, we’ll deliver those
six sites. If there’s a slight delay, it can have a massive impact on
their business, so it’s not all about price for the clients we deal
with. To deliver a quality service you must make a profit to make it
sustainable.”
Design – including high-end brands such as Orangebox, Morris, Sven
and Akaba – is also a key element of the HCS package. “It’s about living
and breathing,” Robert explains. “Workplace design isn’t about
regulated desks and chairs any more. You now have a different
environment – particularly in universities – where there are special
zones and there’s more social space than workspace because people
interact more in social space.”
Growing pains
Public sector work makes up a large proportion of work carried out by
HCS, with contracts including the installation of furniture in Aberdeen
University’s new library and the fit-out of new campuses for the
University of the West of Scotland and Banff and Buchan College.
Tony and Robert want to continue growing in this sector while
expanding geographically into London and laterally into the
redistribution of office furniture. With the help of Scotia Aid, a
Scottish charity, and the Scottish Government, HCS has shipped
containers of furniture to Sierra Leone and Malawi to help with schools
projects and wants to formalise this part of the business.
“It’s an area of growth for us because Corporate Social
Responsibility is important to our customers, but we want to grow it,”
Robert explains. Tony adds: “We’re bringing this together as a charity
but we’re in search of a name. We believe the social impact we could
have by revamping and redistributing office furniture will bring big
benefits to local communities as well as exports internationally.”
Lucy feels HCS’s team have built a solid base on the back of public
sector contracts and their service reputation and must retain that as
they grow. But she cautions: “One of the challenges once you spread
geographically and increase the number of people working for you is that
the ability to control that in some way reduces.” She compares the
business to a growing child.
“A baby needs to be fed and winded and as long as you fulfil those
basic needs you’re in control,” she explains. “But a teenager starts to
make judgements; they start going out with people you don’t approve of
and they answer back. You’re still a parent but a different kind of
parent.
If you keep spoon-feeding them and winding them, that’s not an
appropriate approach for a teenager. In the same way, being a parent of a
business you need to change and adapt your style so the business can
grow into what it is capable of being.”
Letting go
For Tony and Robert, spending less time in the business and more time
on the business will be a key stage in this process of change and
development.
“It’s quite obvious that Tony loves being out with the customers and
that Robert also likes a hands-on role with projects,” Lucy concludes.
“It would be really easy for you both to step in and solve issues, but
if your business is going to grow you’ve got to develop and change what
you do so you’re less operational and more strategic. You’ve got to
spend more time coaching and mentoring your team to deliver. It’s not
your job to deliver yourselves – it’s your job to ensure your team
delivers.”
Name: Lucy Armstrong
Experience: CBI Chair of the SME Council advising
private and family businesses. Former investment controller of venture
capitalist 3i and founder of The Alchemists, a boutique consultancy
supporting fast-growth businesses in the £10m to £100m range. Career
also includes Whitney Tyzack and Courtaulds.
Website: cbi.org.uk
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