SME focus - Consultant raises profit 22% but managing partner is cautious about future growth

Consultant John Rowan & Partners is in the midst of change. It is less than a month since the senior management was restructured after founding partner John Rowan retired because of ill health.

Now managing partner Stephen Gee, pictured below, who has been at the company for 20 years, is refocusing the business to keep it profitable. After tough times from the late 1990s to 2002, JRP is about to post healthy figures for profit growth and turnover in the year to 30 April.

The departure of Rowan has led to a round of promotions, and these have taken the total number of equity partners to seven.

In the year to 30 April margins remained flat at 9.5% whereas turnover rose 22% to £3.8m and gross profit increased 22.5% to about £660,000, a sum shared between the five equity partners.

The main factor in that growth has been work in the hotel sector where it is about to make its name as project manager of an £85m refurbishment of the Savoy, one of London’s best known luxury hotels.

Although Gee would not comment on this triumph, which has yet to be announced, it is understood that JRP beat Gardiner & Theobald and AYH to the job.

The plan is to try to maintain the company’s 20-25% annual growth, which translates into £800,000 of fees a year. But Gee is keen to keep it at that. He wants to avoid the over-expansion that JRP has suffered from in the past as this has always proved to be unsustainable.

He said: “We can manage growth along those lines but wouldn’t want to do much more than that, unlike the late 1990s.”

To boost growth Gee plans geographic expansion. JRP has formed an alliance with consultant Walker Sime in Manchester, and part of the thinking behind that move is to develop its public housing business, which has so far been limited to the South-east.

We can manage growth of 20% to 25% but not much more than that

Managing partner Stephen gee

Like many companies in the industry, JRP has made a beeline for development and regeneration in the housing sector, although Gee strikes a slightly quizzical note about this, commenting that while turnover has risen, profit has not. Gee, who was an unsuccessful Liberal Democrat candidate in the general election in May last year, is cautious. He has been with the business through thick and thin and he’s had his fingers burned before.

He was the second member of staff to join the company in 1986, when he teamed up with Rowan, who had set up shop in his own living room in 1981. He saw it grow rapidly but in a lopsided way. JRP’s problems started when it became reliant on one client, Dixons. It started doing project management, design work and quantity surveying for the retail chain in the mid-1990s. At the peak of this workload JRP employed 80 staff.

But the bubble burst when Dixons scaled back. Gee describes that as the “catalyst” behind the bad times, but it was not helped by the fact that another big client, Safeway, was bought out by Morrisons, which has its own consultants.

A team of 12 were made redundant as a result, and as Gee puts it: “A whole series of redundancies followed.”

Things got so bad that to save money the management team, including Gee, drew up a rota to clean the office, including the toilets.

The firm has now settled down and staff turnover rates have fallen from 20% three years ago to 5% last year.

The retail sector is still important, says Gee, but now the company has diversified into hotels and leisure as well as regeneration to avoid a rerun of the Dixons calamity. Forty per cent of turnover is in the public sector.

Gee concludes: “We learned from out mistakes. The most fundamental thing is to get the price right and be prepared to walk away. The rest has been about getting systems and structures right, like incentivising staff.”