A couple of months ago, I started to work with a new client. This business owner was recruiting in a buoyant sector but his sales revenue had dipped a little over the last two years, due to difficulties retaining staff.
However, this wasn’t the most concerning revelation!
His net profit had dropped significantly.
In fact, his business ran at a loss last year, despite generating hundreds of thousands of pounds of sales. For the last two years, the business owner had engaged the services of a business advisor. This individual had come up with some attractive ideas.
And when specific detailed work was required, he brought in his own staff. Who billed the recruiter. Every single time.
At no point had this ‘advisory’ service advised my client how to save money or work more efficiently.
They had more than happily continued to invoice him, despite taking the business from a profit-making situation to a loss-making one.
Among their recommendations had been a large marketing investment, the replacement of their CRM and a top range of employee terms, conditions and benefits.
These were all desirable!
However, they were not affordable.
I believe my first duty as a Non-Executive Director is to steer the business on a path of profitability (closely followed by how to avoid the potential killer cost of non-compliance).
It is not to recommend other suppliers because they pay me a referral fee. That might mean that the sexy marketing campaign will have to wait. It might mean that we don’t hire any other staff until our current employees start to generate a profit. It may also mean that the business has to remain in the premises that are at capacity for now.
Without a keen eye on net profitability and cash flow, this business had been forced to fall back on my client’s personal reserves. Had he carried on taking the advice of his ‘advisor’, the business would have gone bust. And the advisor would have walked away unscathed.
I thought all Non-Executive Directors would have the same priorities.