Nick Hopkinson is a legendary industry figure but his company, Mark Two, nearly went under following the collapse of MFI and BGH. It survived thanks to years of goodwill and reputation and now has ambitious growth plans...
"We pulled off the impossible". That's how Nick Hopkinson, known to the industry as Hoppy, started an email he sent in October to all the customers and suppliers of the distribution company he runs with his brother Chris - Mark Two.
In it was a candid and personal thank-you to everyone who, he said, had helped them survive and pull back the company from a double whammy of its biggest customer and second biggest supplier going bust at the same time.
His willingness to share his problems and not disguise them meant that his suppliers and customers were willing to help and persevere with them to see them through.
However, an over-reliance on that one customer - 40% of Mark Two's business was with MFI - was a catalyst for the problems in the first place and the disasters that followed its collapse have made Mark Two take painful looks at the mistakes they'd made.
Now, with the impossible achieved, Hopkinson is looking to the future and with customers such as Wickes and Tesco as well as a considerable independent base, the lessons learnt are being put into practice.
But just how close did Mark Two come to disappearing forever?
Q What position was Mark Two in before the downturn?
A We were in really good shape, we had a profitable business that was growing every year and the only downside was that we had too much business with one client - which was MFI.
Q Did you see its demise coming?
A We noticed that MFI was affected by the recession earlier than our other clients, and towards the beginning of 2008 we saw it was going off the boil but it wasn't too bad.
But then as the year went on it got more serious. We always thought MFI would survive, we thought that it was too good an opportunity and someone would come in and buy them. So when they actually went bust, we realised that we'd just called it wrong, we were waiting for someone to step in and it never happened.
Q Do you regret not acting sooner?
A We had over 40% of our business with MFI, so we just lived on hope I think. In retrospect, we should've put them on stop much earlier and when they did the pre-pack we shouldn't have extended any credit to them. We backed the wrong people. The new directors looked us in the eye and said 'trust us' and we did - and that cost us nearly an extra million pounds.
Q So on the day they went, did you just think 'what do we do now?'
A We had a disaster recovery plan. It wasn't written down but we'd discussed it at a couple of board meetings and as soon as we got the bad news we sprung into action. We decided that we needed to take cost out of our business fast so we put most of the company on consultation for redundancy because we legally had to. We sub-let one of our warehouses almost immediately - which was nearly 100,000 sq ft - and got stock levels down fast. Then everyone took a pay cut of between 20% and 40%.
Incidentally, every single person who took the pay cut is already back at the original pay and that'll be backdated to the cut in their December pay packet. We never promised it but we've decided that they supported us when we needed it so we'll support them.
Q Taking cost out is one thing, but driving sales must've been a priority too?
A We knew we had to be more profitable with every sale so we started selling smarter. We knew we couldn't get price increases out of people like Wickes, Focus and our independents so we put our energies into selling products that gave us more cash per order. So instead of just a plain old bathroom suite we tried to sell one with a bath shower mixer, or with a shower screen. We also tried to sell more, it sounds obvious, but we went to all our customers and said 'we're in this together, we need you to find ways to buy more stuff off us'.
Q And you backed the right horse with Wickes, it has done very well in the recession, particularly with kitchens and bathrooms
A Wickes had one of their conservatory suppliers go bust so they gave us a huge challenge. They said 'if you can find a way to put bathrooms into that area, where the cost to us is minimal, we'll give you the space.' So between January and March this year we refitted the whole Wickes base with new bathrooms and it's been very successful. Every single one of the suppliers who lent us money to do it have been paid back in full within the first 12 months. It was a leap of faith for them that's worked out.
Q It wasn't just customers going bust, suppliers did too
A BGH was our second biggest supplier and when they went that could have been the end of us. It would've been too if it hadn't been for some other suppliers working night and day to fulfill our orders because they could see it was an opportunity. BGH went bust in December 2008 and in February 2009 we gave all our independent customers a guarantee that if we couldn't deliver any complete kitchen order on the day we said, whatever was missing we'd give it to them for free. Since then, we've given less than £1,000 worth away.
Q Was there ever a point where you thought about giving up?
A I don't think so, no. I knew that, in some shape, we would emerge from it. I always had confidence in our ability and our plan. The only time I wavered was before we actually wrote the plan down and we were just formulating it. It only took three days but in that period I was thinking 'I do not know what the full consequences of this are.' But once we'd put the numbers into the plan, we knew we could survive it. We also knew we might not all be here around the boardroom table at the end, but the business would survive.
Q Did it feel like you were cashing in years of goodwill and reputation with customers and suppliers?
A If your reputation is genuine people will stick with you. You have to be in it for the long term and consistently treat people with the kind of respect they're looking for. If they see chinks in your armour and think you're just trying to sell any old thing then they'll see it. You have to believe in what you're doing and deliver your promises - people remember when you let them down a lot more than all the times you got it right. People will forgive you if they really feel you're trying your best.
Q What lessons have you learnt?
A It's not a case of making a list of things we won't do again. The real lessons are that when you've got a problem, make a plan, keep it simple and share it so that everyone knows what they've got to do to get you out of the hole you're in. Richard Branson is one of my heroes and he said that key to success is to keep it simple and overcommunicate. The other thing I would add is to always pay your bills on time. Our suppliers looked after us because that's what we've always done.
Q Have you seen bad debt from independents?
A Just under 23% of the business is with independents and we've actually seen very little bad debt and we have very little insurance on them. We have a customer who owes us about £60,000 and he can't pay it. He rang and asked for a meeting and said 'this is the problem, I will pay you and pay you first, I just need a bit of help' and we said we'd support him as much as we can because he'd come and talked to us. If we didn't do that he'd go bust tomorrow.
Q What are your future plans?
A We're profitable now, for the full 12 months of the year we will show a reasonable profit, not a huge one but we'd budgeted for a fairly significant loss. Next year our overall business will grow by 50%, the things we've put into place and the customers we've brought on are building up to that already. I'm really bullish about next year because our customers like what we're doing. Our core of independents will be grown around our own brands of Balterley and Lakes, and they figure pretty highly in our growth strategy.
Q Do you think you'll look back on this crisis and see it as the best thing that could've happened?
A Absolutely, 100% yes. If we'd have been carrying on with MFI, we'd still be having our weekly scrap with them - it was an old-fashioned adversarial supplier-multiple relationship and I don't have any of them anymore and I don't want any. Any new business we take on is with a clear understanding that it's a partnership and doing what's right for the consumer, not what's right for the retailer. It's been harrowing, one of the most difficult experiences in my business life, but as soon as the plan was in place and I could see it working I started enjoying myself in a way I hadn't done for 10 years and everyone knew it.
Sweet charity
Despite Mark Two's business problems, Nick Hopkinson still managed to carry on with his other passion - raising hundreds of thousands for charity.
He's just come back from climbing Kilimanjaro with a team from Wickes raising over £100,000 for leukaemia research. In particular, he works closely with the Bolton Lads and Girls Club - a centre that help hundreds of young people a year, an endeavour that earned him an MBE in 2007.
"Charity work is one of the most important things I do in my life," he says. "I don't understand why more people don't do it, it's not that hard and it makes a huge difference to people's lives."
t also, he says, puts office problems very much into perspective.
"When all the problems were happening at work I wrote to everyone and said 'when there's a recession, it's the poor people who get hit the worse, so don't even think about changing any of the support for our charity events. If you stop giving they're going to be even worse off.'
"It's a bit tougher this year but people have just been a bit more innovative in the way they're giving. These kids need every bit of help we can give them. We are so lucky and there are loads of people out there who aren't as lucky and most of them are kids."
