SME Focus: For all the talk about the importance of visionary qualities to effective business leadership, successful entrepreneurs will tell you that attention to detail can also pay big dividends.

SME Focus

FOR all the talk about the importance of visionary qualities to effective business leadership, successful entrepreneurs will tell you that attention to detail can also pay big dividends.

While their success was based on their ability to spot an opportunity, the likes of Sir Tom Hunter would have got nowhere without proving they could deliver what people wanted without running out of cash.

This may sound obvious but many have only found out the hard way.

It took some tough times before the subject of this week's SME Focus, Grant Welsh, appreciated the importance of keeping the right sort of records and always studying the fine print.

But when it looked like all might be lost, he discovered that help was something that could be found in unlikely places.

Name: Grant Welsh.

Age: 37.

What is your business called? Grant Welsh Commercials.

Where is it based? Dundonald, just outside Kilmarnock.

What services does it offer? We maintain, service and repair trucks, trailers and buses. As an official DAF service dealer, we do a lot of work on DAF vehicles. However, we also work on other major brands, including Scania, Mercedes, Volvo, Renault and MAN. The truck and trailer business is subject to ever-increasing levels of regulation and testing. For example, VOSA (Vehicle Operator Service Agency) requires that trucks be inspected at least every eight weeks (more frequently in some cases) to maintain an operators licence.

To whom does it sell? Our customers are transport companies or businesses that manage a fleet of vehicles. Our principal focus is on well-established medium-sized businesses.

What is its turnover? We are projecting a turnover in excess of £1.4m this year.

How many employees? 18.

When was it formed? April 1, 1997.

Why did you take the plunge? Well, as you can see we started on April 1st, so some would say that I was barking mad and I suppose you do need to be a dash barmy to take the risk, especially when your wife has just given birth to twin boys. At the time I was foreman at Reliable Motors in Renfrew, a Scania service dealer, and always felt I could do things better. I left Lourdes Secondary school in Cardonald when I was 16 to become an apprentice mechanic. I was always hardworking, winning apprentice of the year three times and earning an HNC in motor engineering at night school. As I worked my way up to foreman, I guess I always had a dream to have my own business.

How did you raise the start-up funding? I used my own savings of £10,000.

What was your biggest break? While I'm still convinced that our biggest breaks are yet to come, a few individuals have played key roles. Meeting them was a real break. The first was Robert Laidlaw, owner of Reids of Minishant, a transport firm with 35 vehicles. Robert invited me to take over his workshop back in 1995. I serviced his fleet and from 1997 was able to have external customers. This was the break that enabled me to get started. In 2005, the business was going well, in the sense that we had plenty of work, and customers seemed to be happy with the quality of work. I thought that we were doing really well, but could not understand why we were struggling a bit financially. The pressure was beginning to build, and I knew I had to do something. Although it was a long shot, I decided to put an ad in a newspaper seeking a business partner. To my surprise, I did find a candidate, Hugh Easterbrook. Although he does not know one end of a truck from another, he has a sense of humour, is honest and has a lot of business experience. Essentially, we complement each other well.

We have now been working together for the last two years, me running the business day-to-day and Hugh monitoring and advising from a distance.

Together, we have been able to sort out many of the problems we were facing back in 2005.

What was your worst moment? As mentioned above, 2005 was difficult time. It was a real wake-up call and I learned very fast that there is more to running a business than keeping busy and having happy customers. We had made, or were making, some very basic errors that I am sure a lot of keen but naive business founders make. Firstly, we were not producing regular and reliable financial statements, which meant we didn't really know where we were or how we were doing. Secondly, had we been able to assess the performance, we would have noticed that we were operating at very low levels of profit. Thirdly, our "accounts receivable" or debtor days - basically the amount owed to us by customers divided by an average days sales - was running at about 110 days of sales. Fourthly, we had signed up to a factoring agreement with the Royal Bank of Scotland, without looking too closely, and had accepted a level of fees that was prohibitively expensive. We were paying an effective interest rate in excess of 20% on the outstanding balance. The main consequence of these errors was that the business was running out of cash and pressure from creditors was mounting fast.

We worked out an action plan, which was centred around the following key steps: Firstly, we started producing more regular financial statements, which Hugh and I now go through every month. Secondly, we identified areas of cost saving and also where we could raise our prices. Some basic market research showed that we were charging a good bit below the market rates. Thirdly, a target of 60 days of sales was set for debtor days. We also started being far more choosey about who we took on as a customer and if in doubt required payment to be on delivery by credit card. Fourth, we met with Royal Bank and renegotiated the terms of our factoring agreement to reflect more closely prevailing market rates. A few months later, possibly spooked by a quite large bad debt we incurred as the result of the failure of a customer, Royal Bank decided to terminate the factoring agreement. This was definitely a "near-death experience" for our business. However, we found an alternative source of funds, which in fact enabled us to reduce our factoring costs by 60%. We are now trading profitably, although we could do better. Most importantly we have got our debtor days down to around 60 and bad debts have, touch wood, all but been eliminated. We are now in a much stronger financial position, but it cost me quite a few grey hairs.

What do you most enjoy about running the business? The challenge and excitement of building something and overcoming the everyday challenges together with the team.

What do you least enjoy? Generally, we have been blessed with an excellent and dedicated team of employees. However, we have had a few instances where a parting of the ways was unavoidable. I always find this hard.

What is your biggest bugbear? Slow payers and bad debts.

What is your ambition for the business? To be recognised as a leader in our field with a reputation for excellent service.

What are your top five priorities? To have high levels of customer satisfaction; to continue to invest in training our team and new equipment to keep our workshop at the forefront of our field; to trade profitably every month; to keep our accounts receivable down to 60 days of sales; to grow the business. If we succeed in doing the first four, number five tends to follow naturally.

What single thing would help most? Two or three more major customers who appreciate the need for a quality service.

What could the Westminster and or Scottish governments do that would most help? The danger, as I see it, is that governments always feel that they must do something. The result is that they tend to want to raise more tax so they can spend it and introduce more rules and regulations. I think most businesses just want to be left free to get on with things. So I would like to see taxes, particularly business rates, coming down and red tape being cut.

What was the most valuable lesson you learned? There is a lot more to running a business than running a great workshop.

How do you relax? By spending time with my wife and three children. I also enjoy getting out on the jetski during the summer. However, even when I am relaxing I find it difficult to tear myself away from the world of trucks. On a recent holiday in Spain I do admit to slipping away from the beach to pay a quick (just the three hours) visit to a local DAF dealer. I'm a bit of a sad case really.