Biopsy of a Cleaning company

Cleaning company tidies up its strategy: Cleaning company GOL Group was created 24 years ago by Peter Gray (pictured) and Rikkie Lewis, both now 44. “We both enjoy playing golf and decided that, by cleaning in the morning, we would have the rest of the day to go and play,” says Gray. “We really didn’t take it too seriously.”
Today, however, GOL Group is anything but a lifestyle business. The Potters Bar-based company currently has a £1.1m income from a range of cleaning, maintenance and gardening contracts for private landlords and property agents. “We found our niche market was residential – looking after the communal areas in blocks of flats,” says Gray. slow and organic growth over the past quarter of a century, Gray now has his sights set on taking GOL to a £4m-ayear business within five years.
There is, though, a hurdle. A period of consolidation among its customer base means Gray and Lewis are being forced to explore new ventures just to maintain their current income levels and retain the services of the 34 skilled staff. The pair have always worked on the basis that no one client would account for more than 5pc of income. The consolidation means that ratio is ruined. But the challenges for GOL go much deeper. An overdue invoice – more than eight months late - has now been put in the hands of a debt collector. It’s not a huge amount – £16,000 – but enough to impact cashflow and profitability.
GOL has also terminated the contract. “We were providing a lot of manpower which was costing our company and we couldn’t afford it to carry on. If we had, it would have threatened the business,” says Gray. That client was one of several – together accounting for around 40pc of GOL’s income – that have been subsumed into a growing conglomerate. It means the GOL action has repercussions far wider now than the initial defaulting business. “It will potentially have an effect on our relationship with the main group,” he adds. The upshot is that Gray has to scout around for new revenue streams. “We have two options,” he says. “Take our current offering into the social housing sector, or find a new offering for the private residential market.” Both have their drawbacks. Competitors in the private residential sector tend to be small, he adds.
But in the social housing sector, competitors are much bigger meaning they can operate with a proportionately lower fixed cost base making it hard for the likes of GOL to compete on price. Net margins are also lower. GOL sees 8.5pc from its private market contracts but because of the volume, those working in the social sector do so on 5pc, says Gray. But it is a growing market. “Social housing now has to account for 25pc of all new builds.” Also, most housing associations, he adds, pay promptly. “We are starting to build relationships with housing associations. We are confident we can compete on service but the problem is breaking in and getting across the awareness that we are able to provide that service.
“We are at the stage where we need to diversify but we are in a predicament. “In social housing we are a very small player in a very big pond. We are not well known and to break into the market is hard. For most of these contracts your turnover has to be three times the value. “All we can bid for are £300,000 contracts. I have thought about acquisition to bring our turnover up and so make us able to bid for bigger contracts.
“However in our current private lettings market we are perceived as being quite large and a lot of property companies like to go with much smaller, one-manband operations because they have more control over the contractor. “These smaller businesses can also undercut us as they don’t carry the overheads we do. We are too small for the public and too big for the private sectors.”
Which brings Gray to his third option – stick with the current sector but expand the offering. “One of the services we have been providing is clearing items fly-tipped on clients’ property. The margins are much better and it seems to be a market we could go into.” Targeting domestic, retail and offices, Gray sees this opportunity as a way to give an instant boost to cashflow. “You get paid up front.” Such a move would, admits Gray, involve a lot of marketing. “We haven’t been very proactive with our sales and marketing so far and I’m not a natural sales person,” says Gray.
Which raises the question, shouldn’t GOL be looking to employ a dedicated sales team? “We did employ a sales consultant in the past – on a retainer for two days a week,” he says. “It cost us £30,000 for a year and we didn’t get one job from it.” Time is not on his side. Unless Gray can secure new revenue streams by the end of the year, he fears he will have to start shedding staff.

Expert comments on GOL Group - Business Club:

David James - Director, Henley Business School at the University of Reading:
In the best of times businesses often overlook their fundamentals, which in the worst of times comes back to bite them hard. A key fundamental of any business is marketing and relationship management and neglecting these has been partially responsible for the challenges Peter Gray and Rikkie Lewis face now. But if GOL is to grow they are going to have to take a more market-oriented approach and build awareness of what they can do and how good they are. Now is the time to get serious and push the name out in the market and identify the best growth opportunities and drive for them single-mindedly. Going for a niche in messy cleaning jobs such as clearing flytipping and fast response SWAT cleaning teams for jobs “too dirty for anyone else” may be their best bet. Working with the police on clearing up crime scenes may be an opportunity; drug clearances may also be a route. But without strong sales and marketing, a known name and strong client relationships will never develop. Focus on those basics and growth will come.

Tony Ford - Executive chairman, B2B Data. Com:
The retail and office market, which offers higher margins, is where GOL should take its business. This avoids the need for size and the requirements to meet set criteria of housing associations in a very competitive, lower margin market. The fact that the private market is fragmented is an opportunity and GOL’s size should impress land and property agents. It should be able to compete due to its critical mass. First GOL should research the offerings of its competitors. Does GOL provide the same services? What about window cleaning or changing lights? Find out what GOL’s competitive advantages could be in terms of price and services. Secondly look at internet presence and marketing material and then determine routes to market. This might be telesales following market research or could be direct face to face presentations and pitches. Bring in some professional help. The best salespeople are usually the founders as they have the passion. Sales training is worth considering and Peter Gray and Rikkie Lewis could decide to do the initial sales this way.

Rupert Merson - Teacher at London Business School:
GOL is sitting on the horns of several dilemmas. It’s not alone – all successful, growing businesses get stuck on them. Getting out of them demands change. Firstly, there’s the changing client. As you get bigger your clients get bigger too. Potentially there’s more money to be made, but bigger clients come with grief. Secondly, GOL is wondering which growth lever to pull – different services to existing clients, or different types of clients for existing services? Both routes present challenges. Thirdly, GOL is stuck in the middle – it isn’t as cheap as its small competitors nor as well resourced as its big competitors. The answer to dilemma three is: get big fast. That will then enable it to pitch for the bigger client (the answer to dilemma one). The answer to dilemma two lies in the answer to another question: which of the choices open to them will give them the best chances of securing business from larger clients soonest? None of this is easy. GOL will need to recruit and invest. And the owners will have to play less golf.

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