Business Bootcamp

Specialising in business interiors from idea to installation, HCS has enjoyed rapid growth in the past eight years. Aiming to double profitability by 2015, it sought the help of our Business Bootcamp expert...

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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