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Getting your strategy right

Published 14th September, 2011 by Neil Nixon

Getting your strategy right

221 companies in the UK cleaning services industry are following a strategy that has led them into a blind alley and they must change quickly or risk disappearing altogether - according to a new study assessing the strategic, financial and commercial performance of the top 1000 companies in the market.

David Pattison, author of the new Plimsoll Analysis, said: “It’s undoubtedly tough out there with demand still subdued and costs rising all the time. With too many companies chasing too little market, many are finding it difficult to pass on rising costs to customers. As a result we have seen profitability fall with average margins in the market now down to 1%.”

Pattison then went on to explain that this latest study shows performance in the market is fragmented into four distinct categories.

Based on these categories, he has been able to recommend strategies for the next 12 months to improve or protect each company’s performance:

• Get back to growth: “There are currently 89 companies in the UK cleaning services industry that are struggling for growth. Granted they have healthy profit margins and most have little or no formal debt, but they are just not growing. I recommend these companies change strategy, wake up and sacrifice some of their profits on finding new growth as they are in danger of being left behind.”

• Fix the profitability hole: “136 other companies in the UK market are at the opposite end of the spectrum. They are growing at a pace way beyond the rest of the market, but they are doing so at the expense of profitability. Many of these companies could be accused of ‘overtrading’ by continuing to make losses and/or financing growth via increasing debt. They risk running out of cash unless they return to profit soon.”

• Maintain their advantage: “There is a band of 511 companies that are clearly the market leaders. They are achieving above average sales growth, are retaining healthy profit margins at an average of 3% and carry little to no debt. Their challenge is to maintain this outstanding performance in such a difficult trading environment and avoid complacency. They might even consider the acquisition of distressed competitors.”

• Try to survive or be rescued: “Finally, there are 221 companies for whom the strategy for the next 12 months is mere survival or rescue via a takeover. These companies have high debts as a percentage of sales at 21%, are averaging profit margins of -1% and are often seeing sales fall. These companies need to downsize their operations, focus solely on the profitable parts of their business and work at making a profit or the end is nigh. Some will attract buyers to rescue them but others won’t be so lucky.”

The new Plimsoll Analysis - Cleaning Services will tell you which companies are following the right strategy and those heading in the wrong direction. With an individual commercial, strategic and financial study of each of the top 1000 companies in the market, it is the ultimate guide to performance in the market.

Readers of Cleaning and Maintenance are entitled to a £50 discount on this new special edition of the Plimsoll Industry Analysis - Cleaning Services. Call 01642 626400 for further details and quote reference PR/ SV20.