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?

Funding issues - are you prepared?

 
Despite assurances from the major Banks, we are still witnessing 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 financial crisis but that will not prevent them from playing hard ball with anyone trying to seek support in the current climate.

 

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.

The recent furore over the so called pay day loan companies (charging interest rates in excess of 4000%) further illustrates just how near the edge many families are.

At the same time the latest results from Marks and Spencer the favourite chain for the over 40’s reported Pre-tax profits by 14 per cent to £564.3m over the year to 30 March, which was its worst performance since 2005.

Data suggests there are as many as 160,000 so called “zombie businesses”  being kept from going under by means of low interest rates and patient tax authorities.

As the knock on effects 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 level of 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.

 

 

The overhead monster takes some feeding

 

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.

 

Adversity can forge strong alliances

 

All too often the focus on the current economic background accentuates the 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.

 

 

 

Diversification can be disastrous

 

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.

 

 

Commercial post mortem – could we have done better?

 

All too often in the course of commercial post mortems, the Management and Shareholders of troubled organisations end up asking “how did that go wrong?”

 

It is an incontrovertible fact that many companies fail to address problem issues early enough to avoid an oncoming crisis. When in reality the causes of the problems were all too readily visible.

The signs of a troubled business are always 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 variety of exercises ranging from ill judged acquisitions (think RBS/ABN), totally pointless projects such as rebranding or the launch of another product range destined to fail for the above reasons.

Inevitably the harsh realities come into play but for many companies it is at that stage too late in the day.