Background
- Ecommerce business selling electronic gadgets
- Market – UK consumers
- Initial Goal – Increase profits
Understanding from Analysis:
Since the business owners goal was to increase profits, I wanted to take a look at the whole business. Cash flow was tight and profits looked like losses!
Profit and Loss – The business had been trading for a couple of years but revenue was falling, not only that but the Balance Sheet was weak.
Once all costs were assessed, it was obvious that the business was running at a loss.
A new and better website was already being commissioned. The business owner thought that this would aid sales. It might have done but the real problem was that each time a sale was made, losses crept up.
The business needed to scale and grow because fixed costs as a percentage of sales was too high. Not enough capital and high cost of borrowing meant the business was in a bind and not able to invest for growth.
Main Discovery & Insights:
Business hadn’t kept track of some key accounting numbers. If it had it may have allowed a different course to be taken
Action Points
The business owner decided to wind the business up and pivot to another model.
Eventual Outcome
After closing the business and over the course of several months, the business owner’s new business model has proved very successful. The key innovation was to use experience gained in the ecommerce business and apply that to a service based business.
By working with organisations who sell via Amazon, the business and new team are going from strength to strength.
