There are times to hold and times to fold

In business as in poker there are times when discretion is the better part of valour. Put simply, some of the best business eals are those you turn away.

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

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

However an objective assessment may well lead to the conclusion that in this instance the business would be left to others.

Obviously turnover may well suffer when stricter controls are in place over such elements as payment terms and credit limits.

The reward or such fiscal discipline is obvious. Avoiding defaults by customers not only protects the company’s bottom line but allows focus to be placed on more
profitable activities.

Consumer confidence – the litmus test

One of the tests of the English legal system is “what would the man on the Clapham omnibus think?”- Basically this is the reaction to any problem or situation that could be expected from a reasonably educated and intelligent but non-specialist person.
In the current economic climate many companies would do well to ask “what does the man standing in the queue at the Clapham Supermarket checkout think?”
The problem is that many people running businesses (or for that matter senior politicians) are too removed from the realities of life to effectively understand the economic difficulties faced by the ordinary consumer.
It is a very easy exercise but a few minutes spent in the supermarket or on a garage forecourt will give a true insight into the problems and frustrations currently felt by the ordinary consumer.
Until such times as the man in the street starts to regain some confidence there is little chance of economic recovery gaining momentum.

Revving up the bottom line

When attempting to boost the bottom line there are 2 obvious courses of action, cut operating costs and generate additional revenue.

Many organisations opt to reduce Staffing numbers as a quick fix but there is a danger that in line with reduced personnel there is an accompanying decline in operating standards. In such circumstances customers often choose to vote with their feet.

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.

In many instances companies would be advised to make customer service their USP but this requires the commitment of a dedicated work force not one that is pre-occupied with the spectre of further redundancies.

Relationship building

The rapid advances in technology have transformed the way we do business. Our everyday business tools would have been regarded as flights of fancy not so long ago.

With the unstoppable rise of e-commerce come challenges. Perhaps the biggest danger is the lack of personal contact between a company and its customers.

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.

All too often in the drive for greater operating efficiencies the relationship between
supplier and customer suffers.

We do not live in a perfect world and inevitably things go wrong it is at such times that the worth of good relationships are fully illustrated.

Low cost entry into the UK Market

Are you looking to launch or “power up” your business activities in the UK?

I have experience of starting up and managing UK operations for overseas corporations.

There are considerable opportunities here in the UK and with an already established sales and marketing operation (www.glb.consulting.co.uk) myself and associates can provide a low cost entry into this market.

In effect you could have all the benefits of a UK presence without the hassle and costs of commissioning and maintaining your own office.

Contact me
gordon.blackburn1@btinternet.com

Greek tragedy postponed.

The latest “deal” to avoid a default by Greece has been done or as cynics might say “cobbled together”.Essentially Greece will get loans of more than
130bn Euros (£110bn, US$170bn) and have about 107bn Euros of its debt written
off.A substantial haircut for lenders in the private sector who face taking
losses of 53.5% on the value of their bonds, with the real loss as much as 70%.

In many ways the Greek crisis is a metaphor for our times. A customer develops a pattern of late payments but far from being called to order the supplier fearful of alienating the customer allows this to become the norm.

When the inevitable tipping point is reached there is no alternative to continue to support the errant buyer or risk realise a loss.

There is a real concern that the problem is just being kicked down the road.

Fortunately in the UK there is not the exposure to the Greek situation that other EU nations are carrying.
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 fill control over all aspects of their operations. Reporting procedures must be strictly observed and
any potential problem areas or customers brought quickly into line. As it
becomes harder to borrow, positive cash-flow is critical.

Digging deep to survive

The retail sector is particularly challenged at the moment as domestic spending is reined in. Facing continual squeezing of operating margin the quest is for innovative ways to drive sales.
The new buzz phrase in retailing is "multi-channel", loosely defined as a strategy that involves selling through stores, websites, mobile phones, catalogues, social networking sites, et cetera. Basically it is an all encompassing process designed to maximise sales revenues.
Not all business models can embrace this system but there has rarely been a time when the old adage of “work smarter” has been more relevant. As more and more obstacles are thrown up to threaten operating margins everyone in any commercial organisation must ensure that they are operating at optimum efficiency.
Retailers are pinning their hopes on “multi channelling” – but they are not the only sector having to radically re-think strategy in these turbulent times.

Rewarding for failure- time for a rethink

The parting of the ways between the English Football Association and their expensive Manager is an appropriate metaphor for today’s business world.
After a period of 4 years and at a cost of some £24 million, Signore Capello has left the team in a demonstrably weaker position than when he took charge.
How often do we see the same in a corporate environment, forget the obvious example of Mr Fred Goodwin the architect of Royal Bank of Scotland’s woes, there are numerous examples of people commanding rewards far in excess of their skills or expertise.
It is an all too common fact that many people heading up companies have little understanding of the business which they purport to run.
The ultimate irony is that even when they manage to sink their business they are usually shown the door with a sizeable pay-off as a reward for their ineptitude.

Diversification, a hard trick to get right

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.

Funding issues - are you prepared?

The latest figures for Bank lending in 2011 under the Merlin Project show that £74.9bn was lent to smaller firms, less than the £76bn target
As we witness a continuing 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 in the current climate.

The Eurozone crisis –poised to claim further victims

The Eurozone crisis continues to dominate the economic backdrop. The latest development has seen US credit ratings agency Moody’s putting the UK on negative outlook meaning it thinks that there is more chance (30%) that the economy may lose its triple A status.
France and Austria who similarly share a triple A ratings have been similarly graded whilst Italy, Spain and Portugal rating’s have been lowered.
As governments wrestle with their respective debt burdens the only certainty is there is no silver bullet.
The all pervading sense of nervousness will continue to impact on all business sectors. The days of easy access to finance are long gone. Companies need to focus on their exposure at every level ranging from inventory levels, rate of stock turn and the integrity of the debtor’s book.
Operating in this current climate of austerity will provide the ultimate challenge for those managing companies, be it an SME or a large multi-national corporation.

The New World Order

One of the staples of the Hollywood B movie was the Mad Scientist working away in his laboratory desperately trying to engineer a monster or come up with a powerful formula which would lead to world domination. Inevitably all these grandiose plans ended in failure and the world carried on as before.
Fast forward to today’s world and the threat originates from a different source, best described as the Mad Banker. Working away not in laboratories but behind banks of computer screens these would be Masters of the Universe were also trying to control the world through their own form of financial engineering. By developing trading instruments and programmes of ever increasing complexity they created monsters which just like Dr Frankenstein they could not control.
The results of these spectacularly flawed experiments are now clearly visible. Companies and countries alike are experiencing a sense of unease about the world’s economic future.
The greatest irony of all 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 disaster – the Bankers.

It often pays to keep your powder dry

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

Management Style – time for an overhaul.

In these difficult economic times we are constantly bombarded with negative news.

As I move from company to company there is no doubt that this is having a significant impact on morale and therefore impacting bottom line results.
It is important that Managers take on board the effect of these outside inputs on Staff and wherever possible reduce the "fear factor".

All too often I observe the management style to rely on pressurising people to attain often unrealistic targets. Far from improving performance it has the opposite effect.It is time for a rethink - instead of relying on the stick approach, how about hitting with a carrot?

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.
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.

Lessons from history

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 18th 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.
Complacency has resulted in the demise of numerous orgnaisations.
As George Santayana commented “those who cannot remember the past are condemned to repeat it”.

Red Flag warning or Acceptable Commercial Practice?

The traditional response from recalcitrant Debtors was “the cheque is in the post”. This generally bought some time as generally Suppliers met this response with a weary resignation.
Times have moved on and the latest mantra is “its set up for next week’s payment run”.
Basically the name of the game remains the same, buy some time - achieve a payment extension thereby effectively squeezing the Supplier’s margin.
Obviously it is a difficult balancing act between keeping the customer happy and managing your own company’s cash-flow.
However, we are all operating in difficult times and it is vital to keep full control of receivables.
Delays in payment will impact on the bottom line; however the worst scenario is that neglecting to strictly monitor a failing company could result in a total write off.

The cost of denial

How often do we see that by ignoring obvious problems the Management and Shareholders of troubled organisations subsequently end up asking “why did that go wrong?”
It is simple, a large number of companies fail to address problem issues early enough to avoid an oncoming crisis.
The signs of a troubled business are all too apparent – these include lack of controls, lack of strategic vision, a demotivated workforce and obsolete or valueless stocks etc
Instead of grasping these nettles, often the preferred option is to engage in a totally pointless exercise such as a rebranding exercise or the launch of another product range destined to fail for the above reasons.
The operating style of such companies can be likened to the exercise of rearranging deckchairs on the “Titanic”

The value of a Pre-emptive strike

The current economic data point to the fact that the coming months will produce difficult challenges for all. As domestic budgets are ever more squeezed this will impact on businesses across the board.

This is an appropriate time to conduct a top to tail analysis of your business. Undoubtedly there are areas which would benefit from some radical adjustments/ change of direction. The consequence is not acting now could have very negative effects in the next few months.

Now is the opportunity to prepare for difficult times rather than adopting an ostrich "head in the sand" attitude.

When trying to explain a disastrous strategy to your Shareholders or Bankers it will be of little comfort to trot out the tired old defence “it seemed like a good idea at the time”. 

Recessions catch what the Auditors miss

Recent events have underscored 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.

For example I have worked in trading environments where totally unrealistic profit target 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 sometimes a prudent course of action to look under a few stones – just in case.

Who's helping themselves to your hard earned?

When asked to review operating systems, 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 “trading” with the errant Customer for fear of realising a bad debt. Think of the parallel to the ongoing 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? What damage is being done to your company’s financial position?

Ask yourself “who is taking advantage of us?”