Keeping all the plates spinning

Managing a business in today’s environment is a complex affair – it has been likened to playing 3 D 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 many a crisis 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 question that needs to be answered initially is – can I keep all those plates spinning?

The Banking community –will they ever get it?

Last week’s announcement that the boss of state-owned Bank of Scotland is to receive a bonus of nearly £1 million has once again put the Banks under the spotlight. 

Apparently there was concern that if he did not receive his bonus he would resign. Considering that on his watch the share price of the Bank has slumped by 40% and the turn-around strategy seems very much based on laying off Staff (currently in the region of 3500) it would appear that this wasn’t the most alarming threat. By any measure the performance of Bank of Scotland since the UK tax payer bailed it out has been sub-standard.

It is incomprehensible that despite all the evidence to the contrary the Banks still behave with a staggering arrogance towards their Shareholders (in the case of some UK institutions the Tax Payer) and their Customers alike.

The level of managerial incompetence demonstrated by these self styled “Masters of the Universe” is almost unbelievable.

It is small wonder that we find ourselves again staring into the abyss.

To an outsider it appears that despite all the rhetoric, nothing has been learnt and little has changed and the only calculations which are being rigorously scrutinised by the Bank’s management are the size of their forthcoming bonus payments.

It is one of the great ironies that is that despite all the evidence of their incompetence and sheer recklessness we once again find ourselves in thrall to the very architects of the global financial disaster – the Bankers.

Partnerships only benefit from equal input

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.

Tapping the barometer

Very often the best indicators are the least sophisticated. The UK economy remains in a very fragile state – the clearest evidence of this can be seen as you walk down any High Street.

The rising number and popularity of charity shops tell underscore that many families are struggling whilst at the same time the spectre of Administration looms large.

With many people continuing to struggle with debt and job insecurity it is hard to imagine a return to the heady days of consumer excess.

As the knock on effect percolate back down the chain many businesses will suffer. External factors by definition are difficult to handle but at the same time in-house disciplines can at least provide some insulation.

Cash-flow will be very difficult to manage over the coming months so as always strict governance of Debtor and inventory control will provide some measure of comfort.  

Today’s Doomsayers were yesterday’s Financial architects

Setting the tone ahead of the Davos meeting, IMF chief Christine Lagarde has warned the world faces an economic spiral reminiscent of the 1930s unless action is taken on the Eurozone crisis.

Ms Lagarde, speaking in Berlin, warned of a danger of rising unemployment if governments did not act together.

She said the Fund needed 500bn Euros more to help sustain those countries worst hit by the Eurozone crisis.

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

It’s good to feel valued

We are operating in times when everyone expects ultimate value for their cash be it the corporate customer or the man in the street.

It is a paradox that as times become tougher and business harder to win the level of service offered by many Suppliers is falling very short of acceptable standards.

From the frustrations of automated answering (devised surely to test anyone’s patience to the ultimate degree) to the failure to meet agreed delivery schedules Customers are left feeling that their business is not valued.

Little wonder that they choose to vote with their feet. Customer service is not a difficult act to pull off – in reality all that is required is to give the Customer the feeling that their business is important and they are valued not just “one of a number” or even worse a nuisance.

Those businesses that master the art of Customer service will emerge from this current difficult period all the stronger.

Are you interested in acquiring a Rolls Royce for the price of a Ford?

Whilst I won’t be able to pull off that particular stunt, I am able to give your business a thorough overhaul on a cost effective basis.

I can help you to tighten up your operational procedures and drive sales performance. Maybe after this exercise you could well be in the market for a new luxury car.

Why not get in touch and let’s see what we can put together – email me at gordon.blackburn1@btinternet.com

"Knowing your Customer" means understanding their business

In keeping with every financial crisis, the accompanying media reports are 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 familiar shorthand for financial Armageddon.

There is no doubting that rapid advances in technology have transformed the way we do business. However 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. This relationship and mutual understanding is impossible to build and maintain thru a key pad and email ordering system.

The person on the spot is baffled, the onlooker sees clear

Based upon my experience across a variety of sectors and businesses one observation holds true – whilst some companies are doomed to fail there are many whose survival and future profitability could be ensured from a fresh input.

 When you are personally involved it is not always easy to change direction or take appropriate remedial action.

This is where an “outsider” can be of assistance – an objective appraisal can very often mean the difference between merely drifting as opposed to decisively moving forward.

Has the UK economy hit the buffers?

The UK may have already slipped back into recession, economic forecaster the Item Club has warned.

The think tank said gross domestic product shrank in the final quarter of last year and would contract again in the current three-month period.

It said that even if the Eurozone could resolve its problems the UK economy would grow by just 0.2% this year.

It also predicted unemployment would rise by a further 300,000 to just below three million people.

Consumption was very badly hit by rising inflation last year, business spending has been paralysed, and of course recruitment has also gone on hold as a result of the euro crisis.

There has rarely been a more pressing time for a root and branch analysis of your business. It is vital to maximise your profits whilst avoiding locking your company into increased overheads

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.

Triple AAA Rating – the failure rate continues to climb

Every business transaction contains an element of risk, yet at the same time how satisfactory are the mechanics for managing risk?

In recent years we have witnessed just how costly the laissez faire attitude to risk was in many institutions be they large corporations or smaller SME’s.

In the never ending quest for larger profits many of the saner measures of business were abandoned. An analysis of recent disasters from the subprime fiasco in the US through to the Greek Debt debacle all have one common denominator – the architects of these calamities went hurtling over the cliff like lemmings.

Now Europe has received a severe judgement from one ratings agency - Standard and Poor. Nine Eurozone countries have been downgraded.

France lost its much valued AAA rating. It risks now seeing its borrowing costs rise. It needs to raise 290bn Euros ($370bn; £241bn) just to pay off old debts. Almost certainly they will now have to pay more.

A forensic analysis of your company’s current Debtors Book might make for uncomfortable reading but like most unpleasant tasks it should not be ducked. Better to take remedial action such as a write down whilst you are in control of your own destiny rather than have a 3^rd Party appointed to do it for you. 

Sharpening up performance

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.

As such for most companies it is about getting back to the basics – ensuring orders are processed efficiently and in a timely fashion. Following up on customer satisfaction, in short providing what in old fashioned terms was called “service”.

Action this day!

Daily we are seeing clear cut evidence that the first quarter of 2012 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 commercial casualty rate will climb in the early weeks of 2012 – now is the time to do everything you can to ensure that your Company doesn’t become part of these statistics

Don't get blind sided

From a company Manager’s perspective the recent market gyrations and latest pronouncements from politicians and economists alike have done little to calm nerves 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.

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.

The trick is making sure that when the dust eventually settles that your company emerges in a stronger position.

Sales & Marketing Services for the UK

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 it can also be an expensive market in which to operate. This is where we can assist you in achieving a cost effective mechanism by which you can trade on an efficient and cost effective basis.

By engaging the services of GLB Consulting Ltd (www.glbconsulting.co.uk) you can effectively market product through our intermediary and have the presence in the UK without the accompanying cost of establishing and maintaining a UK Office. Essentially we become not only your marketing channel but also your “ears and eyes”.

As insight into our activities is available via the following link:

www.youtube.com/user/MrGblackburn

Avoiding banana skins

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 I’ll help you get back in control.

Diversification – not always the silver bullet

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

Toughing it out

Viewing the general air of gloom that 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

 

Do yourself a favour – leave some deals for your competitors

Much media focus has been given to the burst of retail sales in the pre Christmas/ post New Year period. However, when an objective analysis is made the results will show that although retailers moved stock their operating margins were unacceptably low.

With tightening household budgets it should have come as no surprise to retailers that consumers would be hard to attract and some more innovative marketing in the last quarter of 2011 would have paid dividends. As it is Kamikaze discounting makes little commercial sense and the results of this policy is likely to be more casualties in the High Street in the coming weeks

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.

The integrity of Accounts

Towards the end of 2011 more reports surfaced in respect of companies who had been camouflaging their poor performance with some suspect off-balance sheet shenanigans undoubtedly the camera giant Olympus being the prime example.

This is not an isolated event, think of the recent problems with losses incurred by various Banks. However it highlights how vital it is that Senior Management set clear defined operational and reporting procedures.

In many companies the Directors simply do not have the understanding of the mechanics or the day to day activities of the business which they purport to run.

In trading environments it is not uncommon that totally unrealistic profit targets have been passed from Board level to trading departments. No cognisance having been given to the disproportionate risks which need to be taken to achieve these targets.

Some of the most spectacular financial flame outs have followed a period of ostensibly highly successful trading. In their desire to recognise these “profits” no thought were given as to how they were being made. In such times it would be well to take note of the old adage that is something looks to be too good it usually is!

If your company is bucking the trend in these difficult times it may well be that you are implementing a winning formula.

However history tells us that it is often a prudent course of action to look under a few stones – just in case.