- 29 Mar 2011
Plastic Surgeon hits the headlines
Challenge: Turning a promising partnership with two insurance giants into revenues by getting claims handlers to understand the product.
Plastic Surgeon Fine Finishers had to overhaul its sales strategy and slash costs when its core market collapsed in 2008. Now, the cosmetic repair business believes partnerships with insurers could revive its fortunes, but getting the message through to the shop floor is proving a hard sell.
'You don't know who your customers are and you don't know how to sell to them." It's not something any business owner wants to hear during the due diligence process ahead of a major investment. However, that's exactly what Rob Mouser was told when he led a management buy-out (MBO) of cosmetic buildings repair business Plastic Surgeon Fine in 2008.
"It was a pretty harsh reflection," says Mouser, who has worked at the Devon-based business since 1999. Harsh, but as he would soon discover, possibly fair.
The company had grown from a one-man band – the "Plastic Surgeon", who specialised in cosmetic surface repair of vehicles – to a £6m-turnover business which focused on the house building industry. Plastic Surgeon's "man in a van" workers would approach building sites and offer to repair any damage to materials such as worktops, windows and doors, saving the site-manager the cost and inconvenience of ordering replacements. "All we'd really done was adapt the original systems for buildings, put a guy in a van and said, 'go and find some work'. I wish I could say it was more sophisticated."
The £2.2m MBO, backed by Matrix Private Equity, went through on the understanding the service could be applied to other industries. By then the company's core market was rapidly collapsing.
Volumes dropped dramatically, but the route to sale also became blocked as house builders moved buying power from individual sites to central procurement teams. The product itself hadn't changed, but a new way to sell it was required. "We had the wrong business structure and the wrong market," says Mouser. The due diligence then, was more or less correct. Mouser recognised that he quickly had to find a new market, implement a more conventional management structure and cut costs.
The company's workforce peaked at 126 in 2007, with the majority working in what Mouser describes as a "pseudo franchise model". "Although the guys were fully employed, each had to develop his own area and it was a direct sell to local house builders."
The management structure also resembled that of a franchise, in that it chiefly existed to offer support services to the mobile workers. "A franchise model works in a booming market but isn't so great when there's nothing happening other than closed sites in a 60-mile radius. We should have gone bust and we haven't. That's testament to a good product – and hopefully some decent management decisions."
The head count was reduced by 30pc, and staff began to be divided into operational and sales roles for the first time. "Before, everyone was doing both – even the management teams."
The most obvious – and fastest – route to new sales was commercial construction. "We said to our guys, 'start looking for cranes'. It had to be as simple as that at first. We had no marketing team and were just starting on the sales team. All I could do was mobilise the blokes in vans we had left."
The company sold to site managers and surveyors on a cost and time-saving basis – it's easier and cheaper to "repair rather than replace", Mouser says – and successfully found work on builds for offices, schools and hospitals.
At the time of the MBO, the company was turning over £6m. A year later, it had revenues of £4.2m, with house building contributing just half. "If we hadn't found that additional £2m, we would have gone bust. We should be credited with achieving a turnaround on a number of levels; the sectors we sold into, the overheads in the business and how it was run."
Plastic Surgeon broke even last year and expects to make a "very small profit" from revenues of £4.6m this year, but growth will depend upon continuing to find new markets. Around 40pc of sales now come from house building, the same proportion from commercial construction and 20pc from additional activities such as shop fits and partnerships with large subcontracting organisations.
The company has also made some headway with consumers, having been directly approached by home owners eager for repairs. "We do no marketing other than through our website, but get £10,000 a month in consumer sales. It's tiny, but it's interesting."
Mouser doesn't see the home market becoming a profit centre in itself – the cost of working in disparate homes at very low volumes means there's little margin to be made – but the
39-year-old does regard it as a testing ground for the clients he believes could transform his business – embattled insurers.
The industry's premium values have plummeted due to increased price competition, while underwriting costs have risen. This has left insurers desperate to reduce claim costs, and Mouser believes he can help.
To reduce administration and third-party costs, insurers will often resort to offering cash settlements. "If there's a viable repair service, they can make the settlement equivalent to that," Mouser says. The claimant could then be referred to Plastic Surgeon and, Mouser estimates, it could reduce a typical settlement by up to two-thirds. Insurers have welcomed the concept, and two of the UK's largest insurance companies have agreed to work with Plastic Surgeon.
However, as Mouser concedes, "there are some inherent problems", and the company is finding it difficult to translate the enthusiasm of senior procurement teams into sales.
Given the time, IT and sales resources being committed to the insurance project, Mouser is starting to feel the pressure to deliver results. "The challenge from our non-execs is often, 'Rob, this insurance thing is not delivering revenue. Go and sell to your core market'."
The company's annual marketing budget is tiny, at around £100,000, and while Mouser would like to raise money to pursue the opportunity in earnest, he doesn't think it's a viable option just two years into a turnaround. Perhaps, Mouser acknowledges, Plastic Surgeon would be better served sticking to its core markets. "We either have a philosophy of jam tomorrow, investing for where we want to be, or we just sell into commercial and house build, slash the costs and run it lean and mean and make some money."
A conservative approach would never allow him to realise his ambition for the business, however. "It's corny, but we want to be the household name for cosmetic repair"
Source: The Telegraph