Handing over

by Real Business - Thursday, 30th August 2007

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Cornish conservatory manufacturer Balticpine is one of the fastest growing companies in Britain. And it’s three years into an entrepreneurial to professional makeover that has - how can we put this? - not been easy. Any readers out there who have ever grappled with succession issues? You are not alone.
"They are headstrong. They have been entrepreneurs all their lives. If they are going to do something, they will just put everything into it – whatever it needs. They won’t necessarily analyse it first."
Ashley Warden chooses his words carefully. He means they wouldn’t dream of analysing it first. Not, at any rate, in his terms. "When I arrived, one of the things I found myself in charge of was a Mongolian restaurant. They picked up the idea on holiday in Hong Kong. Penzance needs one of these, get back, get on with it, two months later, it’s open. Admirable. But if your business is conservatories, a Mongolian restaurant is a bit of a diversion."
Then there was the diving holidays business. The classic cars business. The museum of army transport (that one was in Yorkshire, nine hours away). "They" are Peter and Sue Benstead, the creators of Balticpine. And he, Ashley Warden, is the professional CEO they hired in 1998 to lend a bit of order to their diversions. "They got to that stage where they had got the formula right," says Warden. "They thought they could transpose it onto other things. ‘The formula for conservatories?’ ‘The formula for business’. I think this characteristic often crops up in entrepreneurs. We have done this, ergo, we can do that. Let’s get on with it!" Peter Benstead has been ploughing multiple entrepreneurial furrows for 40 of his 58 years. Freight-forwarding, taxis, insurance broking, trucking, scrap, window frames. And that’s way before Mongolian eateries. He’s even dabbled in friends’ schemes: one friend was keen on classic cars; another had a passion for military vehicles.
"An aspect of being an entrepreneur is that you are an enthusiast," says Warden. "You are so enthusiastic that you get enthused about other people’s enthusiasms."
All these enthusiasms were paid for by Balticpine conservatories – another diversion that Peter had picked up back in 1988 when his window frame business was taking off. "An old friend [John Guiver] picked up the job of building a conservatory," Peter recalls. "It was not a happy job, from our point of view. It wasn’t like a window frame – you had to install it, too. Installing is a pain – something always goes wrong. But John thought conservatories were ideal for direct selling. Then we found a great idea at Wickes. They were selling them as kits. No installation! We could do that. So we did."
The Balticpine name was originally a marketing ploy. The idea was that the Baltic pine forestry companies would give you a grant towards building your conservatory. The price was £650, but you were eligible for a grant of £150, so in fact the cost came down to £500. The grant idea wasn’t a great success, but the name stuck. So the conservatories developed slowly. Then in 1991, Benstead and co bit the bullet. One Saturday, they put adverts in the Sun, the Express and the Mail. "By the end of the day, we had 35 orders. That was it."
Window frames were not a good business to be in during the UK’s last, mean, recession. That business went bust – and not just once. What does a Peter Benstead do when his business goes bust? He starts it up again, usually the next day, in the same factory, and so on. He looks after the people who need looking after, as in timber suppliers and employees. And he leaves government creditors to look after themselves. Once, twice, even three times. The DTI appointed an inspector. And just as Balticpine conservatories were proving to be the diversion to end all diversions, Peter found himself banned from being a director of any company. Benstead insists that this isn’t why he hired Warden. His line is: "I am good at starting things up but of course I don’t have any management skills and we were looking for an Ashley anyway."
By all accounts, Peter did not protest when the Mongolian restaurant went on the block. "Well, it was taking up a lot of management time," Peter confesses. "And this was where Ashley was frustrated. He saw it as wasting time taking us all away from the core business."
Classic cars soon withered. The museum closed itself down. Sue’s orangeries business was folded into conservatories proper. Ashley seemed to be conquering the lower slopes. But then Peter came across a firm making garden buildings. They were knocking out 50 a week and they had £700,000 in the bank. And Peter discovered from the industry association, that sales in this sector were running at 800,000 a year. "I had sat back and let Ashley do certain things, but this was different."
People such as Peter Benstead don’t let 800,000-units-a-year markets pass them by.

There are several fixes on what happened next, two of them from Ashley: "A lot of very strong-minded people can’t deal with opposition, or even a negative attitude. They become defensive about their proposition, making it even more difficult than it is already for a sensible debate to proceed. So you have to start off in favour of the idea, tacking round ever so carefully to ‘Have you thought about?’ Peter wanted to do it. Or rather, he wanted us to do it. I could have said no but I didn’t want a diversion outside the existing management structure. At the end of the day, it’s Peter and Sue’s business. As long as it’s not going to compromise the integrity of the core business, it’s for them to decide how they want to spend their wealth."
Peter: "We looked at buying that company – Ashley went to see them. We didn’t buy. So I insisted we start our own. It wasn’t with the sole blessing of Ashley [he means it was over Ashley’s dead body] but he finally agreed. I put him in a difficult position, which, okay, I shouldn’t have. We soon had 50 people on it."

Meet the Warden
Peter found Warden from an entrepreneurial background with unentrepreneurial edges. Warden studied computer science at university, then articles at Arthur Young. While there, he set up a microfiching business. After he qualified, he built it up to five branches, before selling and starting two other companies, both in fragrances. But his focus was finance, and he wanted to move into general management. That’s when Peter arrived.
"Ashley had a tough start here," says Peter. "He was bound to have. It was a family company, in which I had appointed all the directors including my son and John Guiver’s son. They’re both talented people but it puts the accent on it being a family company. All of a sudden Ashley was in charge. I wouldn’t say I am a brilliant diplomat. Maybe not everybody expected this turn of events. So it took him some time to get the senior people behind his approach."
Mike Jackson, marketing director: "Peter asked me to meet Ashley over dinner in London. All he said was something like, ‘I think this may be the way forward’. I didn’t know whether Ashley was to be the finance director or the managing director. Even when Ashley arrived, Peter never said, ‘I’m handing over to Ashley. I want you all to work with him’. If he had, I’m sure it would have been an easier process."
Jason Guiver: "Peter had asked us all round to his house. Ashley was there. But no-one said anything about him coming to work for us. Still less about coming to run us. We had a managing director. Then after a few weeks we realised we had two managing directors. That regime lasted for several months. No-one knew where anyone stood. You can imagine that Ashley had his work cut out, with me and Julian Benstead in particular."
Warden doesn’t use the word Byzantine in describing the management structure that he inherited. But that’s the word that comes to mind. Everything and everyone was home-grown. Seniority was based on reliability, not expertise. Structures had grown up because that was how individuals wanted them, not because that was what suited the company. Every area had its own pay policy, holiday policy, you-name-it policy. "People just got on with their own bit," Warden recalls. "If it was working, they would be left alone. You wouldn’t dream of dipping into anyone else’s area – for instance to say ‘If you did your bit like that, I could do my bit in half the time’ – because that simply wasn’t how it worked. Everything was running along okay, and everyone left everyone else alone. It was a bunch of individuals rather than a team working together. Getting people to talk to each other has been the major thing I have had to do here. I spent a lot of the first year organising us back down to conservatories and unifying 12 free-standing operating companies. Each had its own shareholding structure – there was no top company. We cast some off, kept the rest, put them all under one roof and reallocated the shareholdings into the top company. At last, everyone was actually working for the same company."
Warden’s next big issue was accounting. There were three accounting functions, but they didn’t talk to each other. Basic accounting was being done thoroughly. But there was no analysis. "Only two questions were ever asked," says Warden. "What are the sales? And what are the profits?" Everything else was deemed irrelevant.
"There were all these activities going on and the challenge was ‘How do you get the information out?’ There was no budget. So I wrote one. It was one of the first bases in getting people to talk to each other. For me, this was very important. You cannot empower people unless they know what they’re being measured against."
But no-one understood budgets. They understood raw material cost. But not standard cost. Not provisions. Balticpine needed training.

It was the first training that the company had ever carried out. And not everyone was comfortable about sitting in classrooms receiving lessons and being put on the same level as subordinates. In fact, 35 people did the course. Everyone who has a cost centre attended – supervisors along with directors.

The effects have been dramatic. Budgets became working documents. Key performance indicators have been introduced. Nowadays, production director Julian Benstead judges his performance against a quarterly review of his key indicators: the number of units despatched; timber wastage versus usage and reductions in production-related errors. That latter indicator has been halved in a year. And wastage is doing well, too, with help from Jason Guiver, technical director and timber buyer. A bout of brainstorming brought forth a new specification for timber supplies: no odd lengths. It costs Jason a bit more. But it costs Julian a lot less.

Clever Trevor
The training courses were an important staging post. So, too, was the trainer, Trevor Howard. After 13 years with a multinational insurer, he had spent five years creating a business studies faculty at Truro College, but had itchy feet – Cornwall is not heaving with go-ahead commercial opportunities. "It didn’t take long to establish that Ashley thought I could help here and that I was interested in doing so," says Howard. But there were some delicacies involved in actually getting Trevor on board. The company was not short of directors. And then, manna. Marketing director Mike Jackson suggested that Trevor’s advice be sought on some passing issue. Peter Benstead met Trevor. Peter thought the training had gone well. He recognised the future. It would be a good move to put Trevor permanently on the payroll, he suggested. A year ago, Trevor joined Ashley Warden, Sue Benstead and Mike Jackson on the group board as operations director.

Glass houses
Balticpine’s conservatory business is an impressive cash cow. How so? Because it is pretty much unique. Conservatories sold direct by the manufacturer are generally sold by field sales forces who make home visits. Balticpine has taken a different route: selling by phone. "When I arrived here as a salesman, I didn’t see how you could possibly sell a conservatory except by a home visit," says Mike Jackson. "It was Peter who said we should try selling by phone. Our advertising was generating leads in places we simply couldn’t reach."
Peter: "It comes down to people wanting a bargain. One: we never knocked on doors. You should always get people to come to you – that’s far and away the best footing on which to initiate a sale. Two: we were advertising in the classifieds. That in itself is a statement that you are offering a bargain – whether you actually are or not. Three: no salesman’s visit. It’s all unstated, but there are a lot of people who can figure out that not having a salesman round is likely to entail big savings."
So telesales it is. Tacked onto the side of Balticpine’s manufacturing premises and in a converted industrial unit down the road are two call centres. Inside, 60 telesales people explain the product, tempt punters to get a tape measure out, send plans and get them back with a signature and deposit. Your kit arrives eight to ten weeks after ordering, at which point you can put it up yourself or have a builder do it for you. As you are doing your own project management, the cost, even including the builder, comes in significantly under the installed alternatives such as Anglian and Everest. Furthermore, their products are only available in plastic, a well-populated sector of the marketplace. By contrast, although wood is the material of choice at the top end of the market, there are only two serious suppliers of wooden conservatories in the mass market. And just one, Balticpine, with UK manufacturing, allowing it the flexibility to meet bespoke or semi-bespoke requirements – that’s around half of Balticpine’s market. It all adds up to a powerful market position and, although it is not on public view, what would appear to be a surprisingly good profit margin for this neck of the woods. Backing up this product platform, Balticpine has proved adept at marketing. Mike Jackson: "A couple of years after those first adverts in the Sun and Express, we thought we had taken the classified ads as far as they were going to go. So we looked for other outlets and we decided to try door-to-door leaflets. Peter and I figured out that these would make sense if we could get a 0.2 per cent response rate. We trialled them with a 300,000 drop in Truro and Northampton. And we got 0.4 per cent. So for the next couple of years we simply rolled them out across the whole of the UK and that leapfrogged our turnover. This year, we are putting out 14 million leaflets. And there’s always more you can do. In the past we have simply identified the postcodes we want to hit and they’ve had one leaflet a year. Now we have moved onto identifying our hotter prospects within each postcode and delivering them several leaflets during a year. Last year Balticpine’s conservatory sales topped £13m.

Light and shade
But what about those garden buildings? Sales last year stood at £1m. But they were not creating light and happiness. Trevor’s check-up of Peter’s baby had proved terminal. Ashley: "The board finally came to close-down decision last autumn. It was going to drain money over Christmas. It would take three months to wind it up anyway. We announced 14 redundancies and I have to say I heaved a sigh of relief."
Balticpine’s conservatory formula is such a fairy story, it comes almost as a disappointment to hear that it’s time to move on. While sticking with the downmarket position, Balticpine plans to move into upmarket segments. That will mean a field salesforce. There’s money in them there bespoke constructions: and Warden & Co want more of it. They are also going to have to get into installing: builders, footings and grief. It’s a big programme, which will constitute phase two of the makeover. "We think we’ve done all the negative things," says Warden. "But it’s still going to be challenging to do what we want to do next. Our manufacturing side is building the existing range efficiently. But to fulfil the strategic plan, we need to re-engineer the product: wider doors, deeper rebates, better roofs. That is a big project to run in a working factory."
The path is being smoothed with more courses. Trevor currently has nine managers on his top course and 13 supervisors on his middle course. "There is a lot of training just now," says Mike Jackson. "It’s the right thing to do and it will pay dividends in time, but there are days when you look round and see a lot of empty desks. I’m not sure its impact has been accurately factored into all those key performance indicators."
From Peter’s perspective, the company appears to be in overdrive already. "I haven’t been in here for a couple of months. There has been a marked change of pace. I can’t talk to anyone without hearing about budgets and key performance indicators. Everyone is more aware of their job. And the more you involve them, the better it seems to be."
What is the prospect of Peter discovering that greenhouse sales are surging and directing a push into greenhouses? "Absolutely inconceivable."
says Warden "Their brief is conservatories. That’s what this has all been about. And why it’s so important. Peter created a winner. But creating a winner and riding it are two separate skills. My job is to ride Peter’s creation to its destination: the winner’s enclosure."
On the other hand, there’s life in those garden buildings. A month after the announcement it would close down, Peter announced that he wanted to take it over. He’s since moved it to another site. His daughter, who had been general manager and was going to move back into the conservatories side, is joining him. "I was fully consulted about closing it down and I assented," says Peter. "But afterwards I looked at the costings and decided I could see something they couldn’t. We’re going to reduce the range, make a few design modifications to make them more profitable. In fact we have already. There were 50 people on this. Now there are 15 and output has increased."
Not surprisingly, Warden has a slightly different take. "For Peter, it’s a small, exciting opportunity, if you move fast. And I am sure it is. But the style here now is that you don’t think up an idea in the morning and implement it in the afternoon. And you don’t implement it at all unless it is strategically compelling."