You can’t always trust your sat nav

  

One of the most valuable assets available to any organisation is local knowledge. 

How many times has a venture ended badly owing to a basic failure to understand and deal with local market conditions? 

The UK is a mature and sophisticated market and though offering different challenges to operating in a 3rd World destination there are still obstacles in trying to establish a presence.

Operating overheads present a crucial challenge and this is where we can assist you to achieve a cost-effective solution to marketing your products in the UK.

Take a look at our website www.glbconsulting.co.uk 

Or check out our video link http://youtu.be/ruUtQnlJwVM

 

Greek crisis lurches on

 “If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank's problem” the famous quotation from JP Getty neatly sums up the dilemma faced by the international community in dealing with the Greek debt problem.

The fact is the international community will have to learn to accommodate the spectre of countries failing to grapple effectively with their debt burdens. In turn this will inhibit growth and limit the speed and strength of global economic recovery.

If Greece does not repay its creditors, a dangerous precedent will have been set. This will make investors increasingly nervous about the likelihood of other highly-indebted nations, such as Italy, or those with weak economies, such as Spain, repaying their debts. If investors stop buying bonds issued by other governments, then those governments in turn will not be able to repay their creditors - a potentially disastrous vicious circle.

To combat this risk, European leaders have agreed a 700bn-euro firewall to protect the rest of the Eurozone from a full-blown Greek default.

Equally, if banks that are already struggling to find enough capital are forced to write off money over and above that which they have already agreed to, they will become weaker still, undermining confidence in the entire global banking system. Banks would then be even more reluctant, and less able, to lend to one another, potentially sparking a second credit crunch, where bank lending effectively dries up.

For example, Greece owes French banks $38bn, German banks $5.5bn, UK banks $8.2bn and US banks $3.5bn.

It will be an uncertain time but one undisputable outcome of the above will be the hard ball attitude of the Banks towards companies seeking funding. It will become ever more necessary to demonstrate effective control over all areas of cost and exposure as the banks will undoubtedly remain reluctant lenders.

 

 

 

Back with us again – the usual suspects fear and greed

Currently with all the talk of gloom and doom in the financial markets, fear is the overriding factor with a sense of panic gripping many operators.

Politicians seem to be hell bent on outdoing each other as to who can send out the direst warnings.

Now is the time to remain focussed and consider the implications for your business. 

Just as was evidenced during the credit crunch crisis in the summer of 2008 there is a question mark over the manner in which the Banks will respond to the current inputs. 

The problem for the Banks is that because of the legacies of their previous mistakes they are effectively stifling their customers businesses as they look to batten down the hatches and strengthen their own balance sheets.

It will become increasingly difficult to gain support from the Banks in the coming months therefore it must be the absolute priority to keep a strict rein on your finances – make sure that your Debtors Book is strictly controlled and ensure that Stock turn and inventory levels are well policed. 

With their houses far from in order, the Banks will undoubtedly become increasingly conservative in their approach to lending, so the order of the day is work within your current limits and maximise your profits.

Diversification – sometimes silver bullet, often poisoned chalice

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 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.

Squeezed by leverage

  

As a legacy of the private equity boom an increasing number of companies are now finding their activities largely targeted to satisfying their repayment obligations to the Banks. Companies are finding their growth restricted as money which is needed for new projects is swallowed up in servicing debt. 

Over the next four years British companies owned by private equity firms must repay or refinance £100 billion of debt. 

The Banks that formerly were willing to take a more lenient attitude and renegotiate loans are playing by much harder rules. 

As more and more companies find their ability to borrow restricted, they have to revisit their own payment terms with their customers. It becomes a vicious circle from which very few are immune. 

The key is to make the most of available cash resources which inevitably leads to some hard commercial decisions. Late payers are a luxury that no company can afford in this climate. Stock must be turned as efficiently as possible. 

Those who either will not or cannot adapt to the demands of today’s business will join the growing list of casualties.

The Dragon catching its breath

China's export and import growth slowed for the second straight month in July, raising fears about the strength of the world's second-largest economy.

Exports rose by 1% from a year earlier, down from 11.3% growth in June, amid slowing demand from key markets.

Meanwhile, imports rose by 4.7% compared with 6.3% in June, indicating that domestic demand was also slowing.

Analysts said the data was weaker-than-expected and may see Beijing introduce stimulus measures to spur growth.

"Trade data has come in dramatically below expectations - the worst export growth number (excluding Chinese New Year) since November 2009 - highlighting the risk that the external environment poses to an economy in the midst of a rapid internal slowdown," said analysts in Beijing.

"The government is likely to respond by ramping-up its stimulus efforts, with both monetary and fiscal guns firing."

European markets are crucially important to China but with European economies in a fragile state the implication for Export growth is obvious and the potential for the euro debt crisis to spread would result in a further decline in export growth in the months ahead.

US Mid West drought – global implications

The US is experiencing the worst drought in decades with the subsequent disastrous impact on grain production. The latest USDA Corn Crop production report indicated production of 10.8 billion bushels a fall of 13% to a 6 year low.

Wheat and Soyabean prices have also risen sharply in recent weeks and the UN has warned that the drought in the US mid West will drive up food prices reviving memories of 2008 when record prices sparked riots in developing countries.

Livestock and milk related products will rise in accordance with the higher costs of grain based feedstuffs.

Food manufactures are caught in a vice; the buying pattern for many has been “just in time” reflecting the need to keep inventories as low as possible. However without the safeguard of a “buffer stock” they are now more than ever exposed to the harsh reality of having to “pay up” in order to secure the raw materials to keep their facilities in production.

There also have the problem of the general economic background with buyers seeking to delay payment, renegotiate contracts etc.

The order of the day is strict policing of each and every element of operating costs, stock turn and the all important question of receivables.   

That horrible sinking feeling

A bizarre thing happened earlier this month. The New York Stock Exchange launched a new electronic trading platform.

A company called Knight Capital had created a new computer program to link up with the new platform in order to trade shares on it. The stock market opened, and Knight Capital prepared to launch its new software.

"There was some problem with the program," says Felix Salmon, finance blogger for Reuters in New York.

"We don't know exactly what. They switched it on and immediately they started losing literally $10 million [£6.4m] a minute. It looks like they were buying high and selling low many, many times per second, and losing 10 or 15 dollars each time. And this went on for 45 minutes. At the end of it all they wound up having lost $440 million [£281m]."

Humans still watch the systems, but the computers move far too quickly for us to react to everything they do - and at Knight Capital, the computer glitch meant the company was making trades it didn't intend to make. That's how to lose almost half a billion dollars in a little over half an hour.

To illustrate how fast high-frequency trading can be, in the time it takes Usain Bolt to react to the starting pistol, a high-frequency trading platform could complete about 165,000 separate trades.

Imagine the feelings of the technician responsible for that trading programme called in front of the Board to explain what went wrong.

For most people monitoring their company’s activities the consequence of a bad decision or badly executed plan rarely produces such catastrophic losses.

However, when looking at the latest list of receivables/delinquent debtors there are usually some causes of concern.

When you experience that “sinking feeling” in the pit of your stomach then it’s time to make that all important call – “show me the money”

The Bank of England –still marching to its own tune.

Further proof that the Bank of England remains out of touch was provided by the news that Staff bonus payments have totalled  £25m in the 5 years since the credit crunch began.

Despite failing to spot credit crunch and rate fixing scandals thousands of Bank executives have received bonuses of up to £30,000 in performance related bonuses.

The timing of this announcement  could hardly be worse coming days after Governor Mervyn King warned a recovery for the economy is still years away and slashed its growth forecast for the year to zero.

In response to criticism that the Bankers were being rewarded for failure a former Bank of England chief said “it should have done more when credit crunch struck five years ago” demonstrating a flair for stating the obvious.

Figures released last week showed that the level of payouts actually increased last year by £200,000 to £4.9million – as Britain returned to recession.

It begs the question what would the rewards have been for a competent handling of the situation?

Nurturing and maintaining relationships

 Business practises have changed markedly in recent years.

Although many operations are completed electronically in this virtual world we should never forget that essentially commerce is about people trading together.

The reality of the real world is that goods need to be moved from point of production to point of consumption and obviously the diverse elements which make up this chain cannot be achieved solely via a computer terminal.

It makes sound economic sense to foster and maintain good customer relationships as it has been determined that it costs up to five times as much to win a new customer as it does to retain one.

There is an old adage “know your customer,” this dictate has never been more important than in these uncertain and challenging times.

Timewasters – certainly a growth sector

The life of a Consultant is certainly not without its frustrations but undoubtedly the most irksome is the prevalence of the timewaster.

A typical scenario - contact is made by a company who wishes to engage the services of a Consultant to address the problems within their organisation.

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 timewaster has reared his head again.

It is an all too familiar story - the troubled company appreciates it has problem areas but when faced with the implications of 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 fudging of the issue will in most cases signal the slide into administration and or liquidation.

Red light signal – danger debt zone

The Bank of England has cut its growth forecast to close to zero from the 0.8% predicted in May, as the double-dip recession intensifies.

The quarterly inflation report indicated no growth for 2012 compared with 2% predicted a year ago.

The data has fuelled anticipation for fresh stimulus measures, including an interest rate cut to another all-time low from the current 0.5%.

Against this background it is vital to maximise your profits whilst avoiding locking your company into increased overheads. Delinquent Debtors are a liability that no company can afford.

Now is the 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

Be an altruist – leave some deals 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.

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

The person on the spot is baffled whereas 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.

Adding value

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.

Time to tighten up

When asked to review operating systems and strategic plans, I find it surprising that even in these difficult economic times many companies still adopt a lackadaisical 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 recent Eurozone debts (Eire/Greece etc) – 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?

From Triple A to Triple Dip

 

The UK Chancellor was given some brief respite with, the Standard & Poor's (S&P) agency saying that the UK will keep its top AAA credit rating.

It expects the British economy to pick up in the second half of this year, despite a slip into recession earlier in 2012.

Following this came the announcement from leading economists that the UK could suffer a triple dip recession next year citing the ongoing Eurozone crisis as providing the tipping point.

As the UK government wrestles with its 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.