Generating cash for growth
A MFI Furniture Group case study

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Page 3: Pilot test and invest

Successful companies seek to grow the business for shareholders, as well as to delight customers. Growing the business involves generating profits through the turnover (value of sales) being substantially greater than the cost of sales (costs that go into achieving business turnover).

Provided that products are sensibly priced, the profit margin a business achieves will be high when customers' needs are well met (resulting in a high turnover) and costs are well managed. Of course, the profit then needs to be channelled into growing the business and paying a dividend to shareholders rather than into paying heavy interest charges. Interest is the payment that a borrower has to make to a lender. Interest payments have to be made regularly over the loan period. At the end of the agreed loan period the borrower will have paid back the principal (i.e. the original sum borrowed) and interest.

The new management team was able to use the cash from the sale and lease back programme to rehabilitate the business. In particular, MFI was able to invest in New Product Introduction (NPI) to replace tired and non-modern styles of furniture. This involved working with the best designers in the field and carrying out extensive market research with customers to find out what 'delighted' them.

MFI piloted new concepts, ideas and products in its stores, tested them to find out customer reaction and then invested in the most profitable lines. MFI has changed the shape of its stores to emphasise that it provides furniture for 'every room in the house'. Each 'room' in an MFI store gives design-conscious customers a picture of how they can make their own homes attractive and design-focused.

To change the shape and feel of its stores, MFI worked with a design partner (Conran Design Group) that had the closest understanding of MFI customers. Conran Design Group proposed an environment in which customers would take pleasure and pride in their homes. This was achieved by looking at the store as a home - as a series of rooms in which customers can be inspired, seek advice, create their own room styles and be well served with a value-driven offer.

Another success has been the growth of Howden Joinery, which provides a personal service to small builders and contractors involved in fitting kitchens.

MFI and Howden Joinery are therefore part of an integrated business designed to meet the needs of retail and trade customers and their different requirements.

MFI Furniture Group | Generating cash for growth