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Business Development & Marketing General Rescue, Restructuring & Recovery Turnaround

You just can’t get the staff these days!

 

A problem that many SMEs struggle with and have raised again in recent weeks is finding suitably qualified people who will fit in.

There are several issues that particularly affect the small employer.

As well as paying another salary, NI and pension contributions, there is the management and admin time spent on payroll which has significantly increased due to tax and employment legislation such as the recently introduced Real Time Information (RTI) for PAYE.

While there may still be many unemployed people available since the 2008 financial crisis, finding someone with the right set of skills can be a costly and difficult business and already would-be employers have been identifying a shortage of people with IT, sales and financial skills.

Also, according to new research, The Flux Report, produced by the talent management group Right Management, the most important qualities employers will want from future employees will be resilience, flexibility and the ability to cope with change.  This is partly because of the economic volatility that has been apparent since 2008, and partly because the pace of change in technology, marketing and other areas has accelerated dramatically.

So what other options are available to SMEs?  Plainly costs need to be kept under control and many do not have the resources to train someone.  One solution to consider is outsourcing basic functions such as bookkeeping, payroll, credit control, secretarial work or answering the phone. Other functions such as sales & marketing, IT, delivery, premises management, and even manufacturing or servicing clients are often best done by external experts brought in as and when necessary. This can leave an SME to really focus on what it does best.

I know of a number of professional service and management consulting firms that focus on marketing to bring in the work and then outsource it to others to actually carry out. I know others that outsource their sales and marketing so they can focus on doing the work.

Those who want to take on staff might consider offering work experience to interns, seeking help with the cost of apprenticeships or with new employment costs from the new Employment Allowance scheme that can contribute up to £2,000 towards an SME’s National Insurance bill.

Most importantly growth starts with having a clear business model, a clear plan and identifying what skills gaps will be needed before starting to search for the right person.

Categories
Business Development & Marketing General Rescue, Restructuring & Recovery Turnaround

Flavour of the month – MINT

 

It started with the BRICs, then came the PIGS and now it’s the MINTs.

What do they all have in common besides being acronyms?  They’re all groups of countries that have at various times been grouped together as either economies that are tipped to grow, and therefore offer good potential for UK firms wanting to expand and export their goods and services, – or possibly not, in the case of the PIGS (Portugal, Ireland, Greece and Spain) highlighted as problem economies at the height of the global financial crisis.

It seems the BRICs (Brazil, Russia, India and China) are old news.  The potential new kids on the block are the MINTs (Mexico, Indonesia, Nigeria and Turkey).

Although they are widely disparate both geographically and in terms of infrastructure they are being seen as emerging economies with growing populations of young people.

We’ve said before that SMEs in the UK need to become more innovative when researching markets for their products and services and to not discount opportunities for growth abroad.

We’re not pretending it will be easy so you need to do your homework.  If you can, it’s worth actually visiting the country to get a feel for how things work and what opportunities might exist.

The Government’s UKTI (UK Trade and Investment) is a good place to start.  It offers support and experts to help you and regularly organises business delegations to countries around the world.

Fancy a MINT anyone?

Categories
Banks, Lenders & Investors General Rescue, Restructuring & Recovery Turnaround

Economic recovery outside London?

 

From my office in Mayfair it would seem that economic recovery is gathering pace, but when I visit clients outside the M25 it is a very different picture.

A year-end editorial in the Observer highlighted the imbalance between London and the rest of the country, calling for efforts to redress the balance of wealth distribution across the regions.

In my last blog about the winners and losers over Christmas I cited examples to show the patchy nature of recovery.

However some research highlights the issue on imbalance:

The Trussell Trust, organiser of the food bank network, reports a 400% increase in demand for emergency food parcels in 2011-12 (most recent figures). More alarming is that the recipients are “ordinary families, who in the past would never have had to fall back on such support”.

These include recipients among the “squeezed middle” who according to the Resolution Foundation make up a third of the country’s working age households – people on an income of between £20,000 and £35,000, 60% of them owner-occupiers. These households spend 48% of their household income on essentials (food, clothing, transport, energy supplies) and 25% of their income on mortgage payments. 

This is no surprise given that energy prices have risen by 24% since August 2009, not including the most recently announced increases averaging around 7%, and that house prices have risen by 7.5% in the last year, according to the Halifax, while wage increases have at best only risen by around 2%, if at all.

The Foundation predicts that: “Based on current projections, the typical low to middle income household is expected to be no better off by 2017-18 than it was in 1997-98”.

Not all of those in the squeezed middle can get on the train in order to exploit the opportunities available in London – especially not when the cost of a season ticket is around £3,236 from Southend, £6,760 from Grantham, £5,440 from Rugby and £7,480 from Norwich.

All of this underlines the lunacy of relying for recovery on a growth in consumer spending and property sales – and why many SMEs outside London are somewhat sceptical that there is economic recovery at all.

Categories
Banks, Lenders & Investors General Insolvency Rescue, Restructuring & Recovery Turnaround

Transformation of the High Street

 

 So far the end of year trading results are revealing a mixed picture of High Street retail winners and losers.

While Debenhams saw profits drop, John Lewis, House of Fraser and Next have all reported healthy overall profit growth at 6.9%, 7.3% and 7.7% respectively. Most significant in all three cases was the increase in online sales with Next recording a 21% increase, John Lewis 23% and House of Fraser a colossal 58%.

One of the most encouraging stories is the turnaround in the fortunes of the clothing store Bonmarche. Its  400 stores, then owned by Peacocks, went into administration in 2012 and were bought by private investors for c £10 million. 

Restructuring involved closing “dozens” of unprofitable stores and renegotiating rents on others, classic turnaround basics.

One significant factor in this success story that has seen the business now valued at more than £100 million was the laser-like focus of new CEO Beth Butterwick identifying its niche customers and then catering specifically for them.

Bonmarche identified its market as the 40-plus woman, defined how this group preferred to shop and provided clothes they wanted to buy, with the help of designer David Emmanuel best known for designing Princess Diana’s wedding dress.

Another example of a terrific turnaround is Jaeger the fashion retailer that was bought by Better Capital from Harold Tilman in 2012. 

Jaeger has reported a sales jump of 23% in like for like sales for the 13 weeks to 28 December 2013 when compared with 2012. These include a huge increase in online sales which also offered a click and collect service.

Such examples are proving that the High Street is undergoing a transformation.

Categories
Banks, Lenders & Investors Business Development & Marketing Cash Flow & Forecasting General Turnaround

It’s all about getting the balance right if SMEs want to grow

 

There is a lot of optimism in the press and the New Year heralds confidence about the prospects for growth.

What does this mean for SMEs hoping to take advantage of the predicted improved trading conditions?

In a word: realism.

It requires deep knowledge of a business’s current financial position, specifically its current assets and liabilities, as these are crucial for funding growth.

If an SME is operating on very slender margins, or just about hanging on from month to month, it is unlikely to be able to take advantage of increasing orders without some additional finance and preferably not of the kind that relies on personal savings or support from friends and family, as a quarter of SMEs currently are, according to research by Bibby Financial Services.

SMEs will need to be mindful of two things when planning for growth. Firstly, it is looking increasingly likely that interest rates may start rising towards the end of 2014 which suggests that having a robust forecast will help assess the impact of interest rates before taking on more debt.

Secondly, there is as yet little evidence that lending to businesses is becoming any easier, especially loans from the banks or extended credit from suppliers which suggests that growth will need to be funded by either reserves or shareholders.

So an SME’s first step in planning for growth is to not only to know the current financial situation but to also have realistic forecasts that may need to be prepared with input from an external business advisor.

Categories
Banks, Lenders & Investors Business Development & Marketing General Rescue, Restructuring & Recovery Turnaround

Growth for SMEs in 2014?

This is the time of year when all the pundits, stargazers and assorted “experts” start predicting what the next 12 months will hold for businesses.
K2 is not planning to join them, but we do have a few questions that may affect SMEs in the months ahead.
So let’s set the scene.  We have some indications of a recovering economy that many believe will consolidate in 2014.  However, there are plenty of experts already warning against a repeat of a consumer debt-driven, housing bubble- led upturn that is inherently risky after the property market collapse in 2008.
CBI director-general John Cridland made this point in his New Year’s address: “As a country, we need to move away from an economy that was far too reliant on consumer and government debt.”
He has, rightly, called for well-balanced growth, with a renewed effort from business to focus on new markets and exports, of both products and services.
So the questions for SMEs who may be hoping to grow their businesses are: how will they finance growth? Is now the right time to be taking on additional risks? How are they going to minimize the risk of getting their timing wrong?  Is the growth likely to be sustainable? What is growth – sales, margins or both? Are there any options for growth without taking on more risk?
We will be looking at aspects of these questions in coming blogs and would welcome comments from SMEs about how they see the future for their businesses and how they are addressing these questions.