Category: Finance / Strategy /Sales

Business Principle:
Seeing the true essence of your Business

Specifics:
Huge Sales Growth without Over-trading

The Issue

Our Expert was involved with a manufacturer of licensed clothing and other merchandise. Obtaining licensed permissions to produce and sell to UK retailers product bearing images and logos associated with leading Film, TV, Cartoon, Sports personality and international sporting events. The client company was hugely successful at acquiring the “hottest” high profile licenses – Disney, Warner Bros, World Cup, Premiership Players etc.  – manufacturing much of the product and importing additional production. The growth in sales was reaching a rate of 100% per annum, and creating a common problem of “over trading”, where the company and shareholders could not provide sufficient finance required for the cost of production and stock holding.   Classic solutions to over trading normally involve invoice factoring, increased company loans, or dilution of shareholding to raise finance.

The Solution

Our Expert, looked beyond the face value of the business model – that was ostensibly a manufacturer securing a licence property, in order to then supply product to a retailer.  Instead the “Business X ray” (looking beyond the surface detail) revealed that the key added value the client company was selling was actually identifying the next “hot” license, and then working with key product retailers to ensure that they had appropriate product and stocks to meet anticipated consumer demand.  The actual manufacturing of product was a secondary concern, after the priority of identifying and securing the licensed rights (who actually supplied the product was not critical). Our Expert then approached key channel retailers such as High street, Supermarket, catalogue/on line. Selecting the largest volume retailers as prospective Key Sub license partners.

Essentially the client company was sub licensing a key retailer to “self-source” product from their normal white label suppliers. In return, the retailer agreed to pay the normal license royalty fee, plus a significant management fee.  The management fee negotiated was equal to the gross profit made by the client using the traditional manufacture supply route, but the cost of supply and manufacture was now financed by each retail partner. With an additional benefit that each retailer would now also have the additional responsibility and liability of achieving the required Quality standards, delivery date schedules and holding stocks for call off.  The clients cash flow stress, and the over trading issue was thus solved, without the need to acquire expensive additional finance. The solution effectively moved the production function over to the retail client, who was only too happy to assume responsibility for self-supply. A true win win solution that allowed further increased sales growth, as cost of supply was no longer linked to the rate of sales. Innovative and brave solutions – that created a precedent for the industry. Gross margin was increased, cost of supply reduced and clients and license owners all happy with the increased revenues.

Perhaps your in house part time expert could find such a revolutionary solution for your business. Call today to start the journey