How we built a business out of recession - chapter 43 - life on Mars?
The story of CitNOW*
This is the 43rd chapter about CitNOW, the company started from a kitchen table in Winnersh, Berkshire. If you’d like to read from the beginning, here’s a link to chpt 1. Each chapter is a 5-minute read. It’s an early draft of a book.
CitNOW was founded by Andrew Howells and Donna Barradale in 2005, although the company was only registered in 2008. In February 2018, we sold the company to Tenzing, a UK private equity company. It has been sold again since.
To understand our need for change, it might be helpful to understand who was on the board and how it functioned.
The board meetings only really got going when Alistair joined, and Colin was our acting Technical Director. (Colin and the other Codevio** partners weren’t, as yet, shareholders or working full-time for CitNOW).
BMW had successfully rolled out, and we now had more cash to employ Codevio**. It still wasn’t enough, which is why we eventually conducted a debt-for-equity swap, a good outcome for everyone.
As we grew and hired more senior people, such as Gordon, Steve, and Nick***, it was assumed that they would automatically join the board. It made sense as everyone was required to provide a monthly update and have a good understanding of what was happening in the business. It was an obvious time for all this information to be shared with the key individuals who collectively contributed to the company's success. We wanted them to be a part of it, on the same journey, which naturally meant being a board member.
With the addition of Chris, our wise senior statesman, we had already become an unwieldy bunch, although I didn’t think so at the time. There were other drawbacks as well, which became more apparent as our problem escalated.
We never seemed to vote on anything. The acrimony had not yet reached a tipping point. The continuing underperformance, which we were reminded of every month, had metastasised. It had become a part of us. Nothing changed apart from its size and the constant growth. It caused very little upset now. There were usually several awkward minutes during Steve’s presentation, before it was largely ignored for the rest of the day, as the agenda moved on quickly to other matters and future results, which were expected to change everything.
It wasn’t that difficult to believe when you considered how many customer-facing reps we now had. Some of this pent-up opportunity sitting in the sales pipeline was going to come in. It had to, didn’t it?
Except for Steve, Colin and Geoffrey, who arrived later, we were a board of salespeople, and the answer was to sell our way out. Alistair’s favourite crass retort to sales and budgets was, Reach for the stars and land on the moon. A great sentiment which conveniently ignores our fiscal responsibility or what to do when the rocket can’t even reach the International Space Station, to play along with the metaphor.
The sales targets set by Alistair and Steve, sitting around a lake in North Wales, were as hopelessly inaccurate as the first German ones. Getting them agreed with Gordon and Nick had also been far more of a negotiation than it ever needed to be. Neither had been particularly happy, but perhaps a little sales bravado took over, deciding that if they considered it a stretch target, it was not as bad as it first seemed. I expect somewhere in the back of their minds, they thought it would be renegotiated if their initial reactions proved to be right.
As the year wore on, the situation worsened because, like all good sales forecasts, the monthly target increased as the year progressed. Every month, we were adding to our shit pile. It balanced beautifully on a spreadsheet; our burgeoning cost base was still able to return a reasonable profit, thanks to bounteous sales. The reality was, we were miles away.
There were conversations, of course. It wasn’t as if this was an insurmountable problem which couldn’t be fixed with a significant dose of common sense.
But discussions became discouraged, often being politely closed down by Alistair, who I assume was still star-gazing and working on the premise that we had enough time to come good because of our cash reserve. He certainly didn’t want to face the prospect of a new reality where we would have to address our cost basis and let some people go.
There was also another elephant in the room. Steve could not control Alistair, a complaint he expressed on several occasions. It would be wrong to say that he was always brow-beaten into submission, but he certainly didn’t want to be constantly arguing either. Steve was after an easier life, and going into battle with Alistair wasn’t worth the hassle.
Previously, he’d had his own modular housing business, which had failed. He was probably there a bit too early, didn’t have deep enough pockets to wait out the protracted planning processes and got caught out by at least one bad council decision.
For the most part, Alistair and Steve got along well. They would do, because Alistair was a fan of people who agreed with him. Decisions were made that shouldn’t have been, such as Steve deciding to change our accounting software without consulting the board. The only person who knew, of course, was Alistair, who trusted Steve’s judgement and didn’t want the hassle of board approval. The board was proving useful for obfuscation and unhelpful when needed for a decision.
As the Chairman (in name only), I realised that I’d failed Steve. He needed more support, but I was barely on speaking terms with Alistair. Any conversation about Steve’s backbone and Alistair’s bullying tactics was not going to be very productive and only piss the pair of them off.
We needed a strong, independent financial director who was prepared to go head-to-head with Alistair when required. Someone comfortable saying no.
It wasn’t a difficult conclusion to reach. With the help of Ken and Geoffrey, I decided that Steve would have to be the one who went. The alternative was far too complicated and could have potentially damaged the business. There would undoubtedly have been a lot more cleaning up to do.
The ambush was set to take place in Manchester after the board meeting. I had requested a meeting of all shareholders.
For once, the regional office, which we didn’t need, was going to be put to good use.
*CitNOW was our company’s trade name before we sold it in 2018.
**Codevio was a software development company owned by Colin, Michael, and Berrie. It was finally bought by Citnow in a debt-for-equity swap.
***Gordon - Sales Director, Steve - Finance Director, Nick - European Managing Director.