MISFORTUNE IN THE 1980s
9134 Computerland Follow-Up Prospectus 1987
[this was the document we unsuccessfully used to try and find extra funds!]
1. SUMMARY
Whilst it has to be admitted that the first 5 months of sales effort were less than fully productive (with, in retrospect, a lack of sound sales management practices), reasonable sales were generally achieved and the foundations of the business are strong; as can be seen from the accompanying half year accounts. Following the establishment of the new sales manager the necessary controls have now been put in place, and sales have been turned around in the first month. March figures show sales of £200,000 (see Sales to Date section of accompanying document), almost £50,000 ahead of target and above the critical break-even point.
The very rapid recovery, from the low February sales, is a function of the basic strength of the franchise in terms of its new management team, and personnel, based on excellent facilities ideally located; with the necessary key expertise and authorisations. Indeed almost all of the key factors incorporated in the original business plan (attached) have now been validated in practice.
2. HISTORY TO DATE
The franchise opened on October 16, 1986, six weeks later than planned; and 3 months after the building was leased. These delays were caused primarily by the late availability of funding.
Although the basic structure of the franchise is very strong, as can be seen from the other sections, we made a number of mistakes;
a) SALES MANAGEMENT
Based on 3i and Computerland advice a "streetwise" sales manager was hired and given total responsibility for the sales operation. In practice the choice of manager proved to be an error (as was the decision to give him total - effectively autonomous - responsibility), and this resulted in the following problems;
i) The initial team of 4 salesmen recruited on his personal recommendation (and mainly brought by him from previous work) turned out to be almost totally non-productive; accounting for less than 5% of total sales. All these unproductive salesmen now have been removed.
ii) The prime territory, within 10 minute radius (planned to account for better than 80% of sales), was given exclusively to the worst, untrained, trainees. The best salesmen had remote, relatively unproductive territories. This territory has now been reallocated to the best salesmen.
iii) The sales plan called for almost all leads to be generated by telesales girls (who were in any case even less experienced, and even more unproductive, than the sales team) with salesmen not encouraged to make their own cold calls. The salesmen are now largely generating their own (better quality) leads.
iv) Only minimal training was provided. Training is now scheduled.
v) Conventional territory management techniques, and specific targets, were not stressed. The only "management" session was a once a week informal sales meeting; from which the directors were excluded (and there were no formal reporting procedures). Formal controls are now in place, and weekly targets are monitored.
vi) For the last 2 months before the sales manager resigned he had effectively undertaken no sales management whatsoever. A new, strong sales manager is already firmly in control.
It is now possible to see, with the benefit of hindsight (and now that the full facts are open to inspection), that for most of this period the sales team was generally mismanaged. It is, however, reassuring to note that despite this generally poor level of competence (with less than half the sales force productive and little or no sales management) the strength of the basic operation was such that sales of £50,000 to £60,000 per month were still achieved.
b) SET UP COSTS
A number of costs were not included in the Computerland provided "model" accounts, or were significantly underestimated. Of these the most important was that of stock which now runs (realistically) at £125,000 rather than £40,000 originally forecast. Another major element affecting cashflow was prepayment of costs (primarily car and premises rental) which added another £40,000; where there was no allowance in the "model" for such up-front costs.
Both the above factors were, however, containable within very generous overall reserves, but the very high costs associated with obtaining the 3i loan (f30,000 in direct professional fees - 10 times the amount in the model - and £40,000 due to the late, start-up) were not.
The overall net effect is that until the March recovery the operation was lagging some 3 months behind plan; at a net extra cost/loss of £50,000 (according to the half year accounts) - though at least £20,000 of this has since been recovered by the March over-performance.
3. MANAGEMENT TEAM
After the problematic initial experiences of weak sales management, we believe (based on strong evidence - not least of the £200,000 worth of business closed in the first four weeks of March) that we now have a very strong middle management team;
a) SALES MANAGEMENT
Our new sales manager, Allen Bool, was in fact our original choice (but was then lost due to the delays in 3i funding); and, as such, set up many of the theoretical controls of our sales operation (but which unfortunately were not implemented in practice). He has had extensive, successful, sales management experience with Bonzai, First Computer and (most recently) 01 Computers. This is evidenced by the fact that in less than 4 weeks he has established his grip on the sales team; putting in place the controls that were missing (and in the process allowing us, for the first time, to observe - and rectify - the underlying problems). The effect has been to boost the morale of the sales team; and to produce immediate sales activity to the tune of £200,000 - with a further £200,000 already identifiable as genuinely firm for April.
Both our team leaders, who are as yet mainly occupied as salesmen (and are financially rewarded as such), have previously been branch managers with other PC dealers.
b) TECHNICAL SUPPORT/ADMIN
Both these managers (each of whom had relevant management experience prior to joining us) have established demonstrably well run departments.
4. PERSONNEL
Again we have now established a particularly strong team;
a) SALES
The sales team has now been consolidated to the existing (productive) 5 salesmen, with the addition of one new salesman and the redeployment of the two directors (both of whom have had significant, relevant, sales experience) to a more direct role;
ACCOUNTS Geoff Hewson (£20,000 target - £14,000 achieved)
Ron Thacker (£40,000 target - £39,000 achieved)
GENERAL Peter Cameron (£20,000 target- £15,000 achieved)
CORPORATE Rob McRairen (new)
David Mercer (redeployed)
CAD Mark Stoves (£40,000 target- £124,000 achieved)
Ian Donaldson (redeployed)
As can be seen from the figures in brackets (which are the target/forecast sales for March - with the actuals achieved) most of the 7 salesmen are already exceeding, or have previous track records of exceeding, £20,000 per month; and 6 of them have records of performances in the range £30,000 to £60,000 per month.
A further two similarly highly qualified salesmen are in the process of being recruited.
b) TECHNICAL SUPPORT/ADMIN
The support team has been pared back to two very strong performers, with excellent hardware and software skills (particularly in networks and communications). A third member, with specialist accounting package skills, will join at the end of the month.
The admin team has developed well as a tightly controlled multi-disciplinary team covering all functions from accounts through to demonstrations.
5. EXPERTISE/AUTHORISATIONS
The sales and support teams have significant expertise, beyond that available in most other dealers, in a number of areas;
a) ACCOUNTS
Over half the sales to date have been in sophisticated multi-user accounting systems; usually Tetra or Sky. The two specialist sales personnel (and the three trained support personnel) are backed up by the rest of the team (who have been partially trained). Authorisations are held for Chameleon, Tetra, Sky, Multisoft, Pegasus and Teamwork. An IBM "Business Centre" authorisation is held.
b) CAD
It was always expected that the specialised CAD market would require 6 months to become established, and this in fact has proved to be the case. However, the prospect list for this month and the immediate future is very encouraging. With more than a hundred architects having passed through the seminar programme, the investment in this area is now beginning to pay dividends; with sales in March of more than £120,000 - all at good margins. The level of expertise is recognised to be very high; and a full AutoCAD authorisation is held.
c) NETWORKS/COMMUNICATIONS
Significant expertise is available in these areas; with full authorisations held for Torus Icon, Novell Netware and IBM Token Ring - indeed we have in house almost 107. of the total UK personnel authorised to sell Novell Netware. This expertise is reflected in the number of computer/electronics firms using our services (with, for example, Prime using our support team to connect sophisticated presentation graphics on their own PC's to their mainframes and thence to Calcomp Colourmasters!).
IBM have agreed to commence the process of authorisation as a "System Centre" (although this is not expected for up to 6 months this will be one of only 20 or so such authorisations). Authorisation is also held for Compaq Xenix.
6. PREMISES/LOCATION
As described in the original business plan (attached), the premises were deliberately chosen as the near ideal location to serve the large West London market; via the excellent road system (with the end of the M3 just 250 yards away - and both the M4 and M25 less than 10 minutes drive away). That has proved to be the case, with a very large market within the 10 minute driving radius. The future potential has been enhanced by the fact that 7 of the 13 major competitors in this area have recently closed down
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