Revving up the bottom line

How do we boost the bottom line? – without doubt the most hackneyed question in business. There are 2 obvious solutions, (a) Cut operating costs and (b) Boost Revenue. If you’re the FD you’ll probably aim for the double.

The Sales Director only has one shot in his/her armoury namely increase sales. Sales targets can always be raised but a sense of commercial realism also needs to be applied.

If you are marketing a totally unique product or service the task is easier but for the most part there are many companies offering a similar range of products in a broadly similar price range.

If Sales people are required to shake the tree and harvest the Golden Apples then it is vital that they are not only supported with a superb product but an equally impressive after sales service.

The need for effective Management

One of my early business mentors once remarked to me that there’s no such thing as a bad business merely badly run businesses. At first sight it would appear to be rather a glib statement but when you analyse the performance of many companies it becomes a self evident truth.

In many organisations the management of the company are so far removed from the day to day working that they have little or no comprehension of the workings and therefore the potential problem areas for the business.

It is a problem common to both the Private& Public sectors. Take for example the UK Government Department who paid more than £3.2m to an aid agency which has ceased operations in the Afghan capital Kabul, amid fraud allegations. Documents show officials were aware of problems in 2009 but continued to pay the German agency until April this year.

As the list of companies heading towards administration / liquidation in the UK is rapidly accelerating it is a clear illustration of the lack of effective management common to many businesses/ organisations.

Symbiotic relationships

All too often the focus on the current economic background is negative. However one of the benefits emerging from the current business climate is the value that can be placed on a mutually beneficial Customer/ Supplier relationship.

As increasing numbers of business operate on a just in time inventory basis it is vital that a good understanding exists between supplier and Consumer.

In as much as a Supplier will be prepared to go the extra mile to ensure that his Buyer receives his goods on time and in good order so it behoves a Buyer to ensure that he pays as required and is not abusing the goodwill of his Supplier by “pinching” some extra period of credit.

If both parties work together in a professional and commercial manner then it will strengthen the relationship and both will emerge from the current difficult situation with a renewed confidence in each other and a better based business for the long term

Don't get caught out

A combination of recent market volatility coupled with latest pronouncements from politicians and economists alike have done little to restore confidence and now more than ever is the time for good housekeeping and firm controls.

Constant monitoring of counter party risk is the order of the day combined with disciplined inventory control.

Just because a customer has always being reliable in the past is unfortunately no guide as to future performance. Look out for tell tale signs such as unusual ordering patterns, delays in payments etc. Very few businesses fail overnight and there are usually enough warning signals which should enable a supplier to reduce its risk

The coming months will continue to test but undoubtedly there will also be opportunities for those placed to take advantage of less efficiently organised companies.  Make sure that when the dust eventually settles that your company emerges in a stronger position

Diversification the hardest trick to pull off

Without doubt one of the most difficult challenges a business faces is diversification. Very often a company is faced with the dilemma of diminishing   revenue returns and a tired business model which is either irrelevant or obsolete.

Diversification is seen as the solution to this dilemma. However, the mechanism for achieving this objective can be particularly difficult.

The first step is examining why the current business model is not working. This requires an honest appraisal from the Management in respect of their own performance. Then the areas of diversification have to be closely considered, very often people plunge into businesses in which they have little knowledge or experience and the results pretty quickly show up these deficiencies. Thirdly one should always respect geography it may be very tempting to consider that there are opportunities just waiting to be picked up but to underestimate the advantage of local knowledge and conditions can again prove costly.

In essence diversification can provide the answer to a company’s need for increased revenue but without a clearly defined strategy it can equally provide another drain on an already embattled balance sheet

Beware of Greeks bearing debts

The latest meeting of EU governments over the weekend has put together yet another plan to try and avert the crisis in the Euro zone spiralling out of control. The reality is that sooner or later the outstanding debt liability of Greece will have to be substantially written off with some analysts estimating as much as 50% of the amount owed. Fortunately in the UK there is not the exposure to the Greek situation that other EU nations carry.

However as the international banking community prepares for another serious blow to its capital structure the UK banking community will not be immune. At the very least there will be a renewed focus on exposure and this will impact on their willingness to lend.

Now more than ever businesses must demonstrate that they have full control over all aspects of their operations. Reporting procedures must be rigorously observed and any potential problem areas or customers brought quickly into line. As it becomes harder to borrow, positive cash-flow is critical 

Avoid the slippery path

When asked to review operating systems and strategic plans, I find it surprising that even in these difficult economic times many companies continue to adopt a laissez faire approach to their financial controls.

These companies fail to recognise the need for strict discipline in respect of Stock turn and control but what is even more disturbing in the reaction to the Debtors book.

As more and more Customers seek actively to delay payment to Suppliers this element of business policing is even more critical.

When a Customer exceeds the agreed payment terms, they are in reality using the Supplier as an alternate (unsecured overdraft). I have seen this situation spiral out of control so that in a worst case scenario the Supplier is forced to keep “supporting” the errant Customer for fear of realising a bad debt. Think of the parallel to the current Greek situation – it is a slippery path.

Take a long hard look at your accounts receivable – are you happy to see 30 days drift into 60 and beyond? Have you considered the damage that is being done to your company’s financial position?

Ask yourself “who is picking our pocket?”

It may well be that you conclude that an overall appraisal of your business is overdue - this is where I can help.

Why not get in touch with me at gordon.blackburn1@btinternet.com and together we'll get back the control

Today’s Doomsayers yesterday’s Financial architects

It is a well known fact that history is written by the victors,one of the spoils of war.

I’m not sure however how the current Doomsayers be they high profile members of the international Banking world or senior politicians can justify their pronouncements when the problems we now face were created on “their watch”.

 It is the ultimate irony that politicians with the so called “light touch” and institutions such as the Bank of England/ US Fed were all too willing not to look too closely into the ways that the markets and sovereign economies were being structured for fear of rocking the boat.

There is a certain black humour that these very architects of disaster now turn round and pontificate about the dangers that the world faces. These were the same people who were lauding and applauding the likes of Sir Fred Goodwin. There also were a number of high profile cheer leaders for the Euro who are now conspicuous by their silence on the matter

Now the man in the street is told to prepare for more belt tightening whilst businesses find themselves desperate for funding as Banks are reluctant lenders as they look to repair their damaged balance sheets.

Plus ça change

Learning from past mistakes

Rarely in life either privately or in a commercial environment do we come across an entirely unique or new situation.

The current situation facing the world markets and business has parallels with previous financial crises such as the 18^th century South Sea Bubble, the Victorian Banking crisis of Overend & Gurney, the Great Depression which followed the 1929 Wall St Crash, the Dot Com Crash. In all of these episodes the common denominators were reckless pursuit of profit whilst fundamentals were ignored, the so called “get rich quick” school of business.

Following each of these debacles there was a collective reigning in and return to the principles of sound business.

However memories are short and it is not long before the blurring starts again and risky practices again become more and more the norm.

When managing a company it is always worth remembering if something sounds too good to be true it generally is.

As George Santayana commented “those who cannot remember the past are condemned to repeat it”.

Riding out the Storm

Viewing the general air of gloom they now prevails in the current climate it is hard to remember the halcyon days of easy money (credit) and the all pervading feeling that the party would never stop.

There is no doubt the world and his wife embarked upon a collective spree for which we are now picking up the bill. With the benefit of hindsight the warning signs were there to see but these were readily ignored. One quotation springs to mind “They that sow the wind, shall reap the whirlwind"

The problem now is that as always there is an over-reaction and just as we never saw the top there is also the certainty that we will not see the bottom.

What is needed is a clear and unemotional assessment of the current climate, whilst few would dispute that difficult times lie ahead we are far from a financial Armageddon.

As always the markets are driven by fear and greed but the importance of sentiment should not be overlooked. Until and unless the Doomsayers gain a sense of perspective it will be hard to imagine business and markets on a sustained stable footing

 

Stay ahead of the game

If you are running a business in today’s environment you obviously relish a challenge, have you ever thought about taking up 3D Chess?

Particularly for the owners of SME’s it has never been harder to keep track of the various elements which are buffeting the business.

Now might be an appropriate time to run a check over those areas of the business most likely to cause problems in the coming months.

It is a self evident truth that most crises could have been averted by timely intervention. This is where an independent appraisal can identify areas of potential concern but more importantly the ways and means by which to address them.

The questions that need to be answered initially – are we positioned comfortably? Or are we in denial?

Some business deals are best left to your competitors!

All businesses operating in today’s climate need to have constant and rigorous focus to their commercial exposure.

Against the current competitive background it is very difficult to contemplate turning away business especially from a customer of long standing.

However, there are times when subsequent events show that on occasion the best business decision was to leave it to your competitors.

When stricter controls are in place over such elements as payment terms and credit limits the result is likely to be a reduction in turnover.

The upside of such fiscal discipline carries its own rewards. Avoiding defaults by customers is the surest way to protect the company’s bottom line at a time when profits are hard won and losses easy to establish.

Time to lighten up

Daily we are seeing clear cut evidence that the last quarter of 2011 will be a difficult time for business as Consumers further reign in their spending. Without doubt now is the time to tackle potential problem areas with some effective housekeeping.

One of the first areas for scrutiny is the level of inventory which you are carrying. Make sure you are achieving the best level of Stock Turn and that you are not carrying any obsolete Stock. Rather than face a “fire sale” it may well be prudent to lighten up now with some innovative marketing strategies.

How is your Company’s cash position? With the ominous backdrop surrounding financial institutions and Governments alike, don’t expect the Banks to readily provide additional finance- it is an absolute priority to maintain positive cash-flow and this can only be achieved by keeping Debtors under control.

Undoubtedly, the casualty rate will climb in the final weeks of 2011 – now is the time to do everything you can to ensure your Company doesn’t become part of these statistics

Hairpin bends ahead - check your Brakes

All the present economic data illustrates the very real danger that the fragile recovery is in very real danger of being derailed.

There has never been a more pressing need to maximise your profits whilst avoiding locking your company into increased overheads

This is a time for a root and branch analysis of your business. As an independent Consultant I can give your business a full evaluation and provide you with a range of successful sales strategies and cost saving efficiencies.

Why not check out my profile at http://uk.linkedin.com/in/gordonblackburn

Liquidity crisis - how well are you positioned?

As the Banks continue to labour under the weight of their previous errors the knock on effects are percolating down through the economy.

We are already seeing a reduction of loans to companies in the face of tightening liquidity – now is the time to take a long hard look at your Company’s financial situation.

Any approach to your Bankers could be very uncomfortable in the current climate so it is necessary to demonstrate you have full control of your exposure. Make sure that the Debtors book makes for healthy reading and that inventory control and stock turn are being monitored very closely.

Ironically it is the activities of Banks themselves who have once again precipitated the impending crisis but that will not prevent them from playing hard ball with anyone trying to seek support for additional funding in the current climate.

Banks – horrible sense of déjà vu

The Global stock markets continue their gyrations and once again it is the Banks under the spotlight.

Many of us find it incomprehensible that despite all the evidence to the contrary the Banks still seem to behave with a staggering arrogance towards their Shareholders and their Customers alike.

The level of their incompetence is only matched by the level of their arrogance.

Whilst the would be Masters of the Universe dream up more and more exotic financial instruments destined to lose more money their counter parts at retail level have turned Branches into a cross between a Disneyland and a Fast Food Outlet complete with piped muzak and garish Staff uniforms.

Who on earth has dreamt up this theme park approach to Banking? I don’t want to become friends with the Bank’s representative extolling me to “have a nice day” I just want a good professional service.

As we are witnessing yet again, the Corporate Bankers are even more incompetent, it’s just that there rewards are more lavish. Is it any wonder we find ourselves once again staring into the abyss when the calibre of these Bankers is so poor. Bear in mind the European Banks now have an estimated exposure of £258 billion arising from the Debt Crisis.

 Would you really feel confident sending them out to get you a sandwich?

Far from letting them have access to more money to fritter away we would be better off giving them a payment to go now before they wreak any more damage.

Do you know your Customers?

This week in keeping with every financial crisis, the latest media reports have been highlighted by scenes of earnest young men and women staring intently at their computer monitors as the latest wave of red flood across their screens. It is has become a far too familiar shorthand for financial Armageddon.

In a few short years, rapid advances in technology have transformed the way we all conduct business.

Whilst we watch the scenes unfold in this virtual world we should never forget that essentially commerce is about people trading together.

Whilst Computer “stop loss” mechanisms are the order of the day for “paper trading” the reality of the real world is that goods need to be moved from point of production to point of consumption and obviously this cannot  be achieved via a computer terminal.

There is an old adage “know your customer,” this dictate has never been more important than in these uncertain and dangerous times. One of the biggest problems associated with the rise of e-commerce has been the accompanying lack of personal contact between a company and its customers.

Obviously this is not an issue for an online retailers selling products over the net and being paid via a Debit Card or Pay Pal etc.

However, there is an increasing tendency for B2B sales to be concluded by email or even SMS. The personal element has been lost and so has the identity and customer relationship. The surest way to avoid problems is by knowing your customer and understanding their business.

It is not possible to nurture this relationship and mutual understanding thru a key pad and email ordering system.

Low cost entry into the UK market

The UK offers a very attractive market for companies wishing to export their products. Counter party risk is identifiable and can be successfully managed.

However one barrier may be the perception of high operating costs.

There is no doubt that to commission and run a UK operation can prove a costly commitment. The lists of outgoings such as rent, communications, staffing costs are daunting, particularly in a start up situation where income streams are lagging far behind these costs.

This is where we can assist you, as an established independent company, we have experience of representing overseas organisations in marketing product into the UK.

In addition to opening up new markets for your products and services we can also police the all important areas of logistics and payment of your invoices.

An introduction to our activities can be seen on our web site www.glbconsulting.co.uk or alternatively why not contact me at gordon.blackburn1@btinternet.com to arrange a meeting to discuss how we assist you in entering the UK market.

Customer service - getting the balance right

The old adage the Customer is always right has come in for a fair amount of criticism recently and there are many times when plainly the Customer is in the wrong.

Notwithstanding it is of paramount importance to the sustained growth of any business that the Customer is kept onside.

One sector that has drawn much negative comment recently is Banking. It will not have come as any surprise that recent figures released by the FSA, showed that in the first 6 months of 2011 Barclays Bank received 251,563 complaints, with 53% of closed cases upheld in customers' favour.

Other Banks also racked up equally impressive levels of Customer complaints.

The key requirement that any Customer wants is to feel that his/her business is valued and appreciated.

 In business securing the deal is only the start of the process and the repeat order very often stands or falls with the after sales service (or lack thereof).

Simple but effective measures such as ensuring all contracts are performed efficiently and within due time and that any complaints are handled promptly and with courtesy will go a long way to building and maintaining long lasting relationships.

We have all encountered the difficult Customer with whom it would be easier not to deal. However, in these difficult times there are many who would willingly take this “problem” and revenue off of your hands.

Time wasters - Don't you just hate them?

The life of a Consultant is certainly not without its frustrations but undoubtedly the most irksome is the prevalence of the “time waster”.

Picture the scenario - contact is made by a company who wishes to engage the services of a Consultant to address the problems within their organization. The Consultant spends time studying the brief and formulating a strategy for tackling these problem issues.

At the end of this initial process (often involving a series of meetings) it appears that it’s all systems go - then the Client goes cold - the time waster has reared his head again.

It is an all too familiar story - the troubled company appreciates it has problem areas but when faced with an objective assessment it is all too easy to duck the issue and try to muddle through.

The downside for the troubled company is this inertia will in most cases signal the slide into administration and or liquidation.

If you need an assessment of your business and (and I take it as a given that you are serious!) then why not check out my profile at http://www.linkedin.com/in/gordonblackburn or contact me at gordon.blackburn1@btinternet.com