Black White Denim: A Case Study
In 2014 Jo Davies, owner of Black White Denim (BWD) a womenswear boutique in Cheshire, approached me to be her accountant. She felt she wasn’t getting the guidance from her previous accountant to help her run her business. The contact came because Jo’s partner was a CEO for whom I’d previously worked.
I was really excited about working with BWD as it had all the ingredients to be a success: ambitious, energetic owner, strong turnover but incurring significant losses year on year. I knew then that this was a likely future case study for BKPS.
Working closely to improve performance
I worked closely with Jo, studying the business and how it worked, discussing financial and performance improvements we could make. Initially we focused on the obvious areas: reducing costs, controlling stock by reducing levels held, buying objectives and staffing levels.
In 2014 we set the initial budget. Jo then received monthly financial updates and we revised the forecast each quarter in line with current conditions. Although we started working together half way through 2014 (year end was 31 August), despite a fall in turnover, we managed to halve the operating loss for the year compared to all previous years.
In 2015 we had a full year to work with. We set the budget at the beginning of the year, providing Jo with monthly management accounts comparing month and year-to-date performance against budget and revising the forecast for the rest of the year each quarter. We continued to review costs, stock and staffing throughout the 2015. We worked on the basis that Jo had to “justify” spend to me before she spent it, not because I knew more than Jo about what her business needed, but because it made her think twice before spending anything. In 2015, despite another drop in turnover, the business managed to break even for the first time.
In 2016 we followed the same formula and, despite a third successive drop in turnover, the business achieved an 8% operating margin, a major turnaround for the business, becoming profitable for the first time.
By 2017 we had costs and stock truly under control, so we decided to focus on growing turnover, as this was our best opportunity to improve profit. In 2017 BWD achieved a 40% increase in turnover and, as a result, an impressive 13% operating margin.
In 2018 we continued to control costs and invest in increasing turnover, achieving a 21% growth in turnover and a magnificent 16% operating margin.
BWD is now performing strongly. Indeed BWD won the prestigious Drapers Independent Womenswear Retailer of the year 2018, a big part of the judging of which is the financial performance of the business.