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Banks, Lenders & Investors Business Development & Marketing Cash Flow & Forecasting General Rescue, Restructuring & Recovery Turnaround

Turnaround, Transformation or Pivot?

Many businesses get into a rut after a time and if they are not in difficulties the temptation is to carry on as they are.
This may be natural on the principle that if something is not broken why fix it, but this is actually the point when they would be well advised to reflect on their future survival.
Sooner or later, unless there is a culture of continuous improvement, businesses sink into decline and the longer change initiatives are put off, the more difficult it is to ensure a business has a future.
Turnaround usually involves making an existing business more efficient and generally this will involve cutting costs which can involve brutal downsizing if a company is losing money. The focus is on existing activities that are profitable and perhaps returning to the core business.
Transformation involves revisiting the business model or product/market mix. For example a manufacturer might sell the same products to a different market or sell via different channels. Or they might close factories and outsource the manufacturing perhaps to focus on assembly or distribution and marketing. This is more to do with reorganisation and can be risky if carried out when a company is in financial difficulties.

A third option is the pivot

lightbulb filled with banknotesThis involves retaining some essential elements of the original business but fundamentally changing everything else.
Examples of a pivot are adapting a product to a different market.  If, perhaps, Yahoo were to become an investment vehicle this would be a pivot.  Similarly one of the original social media sites, Friends Reunited, originally set up as a social network for friends to reconnect and keep in touch, was taken over by the Dundee-based publisher DC Thomson in 2009 and in 2013 re-branded and repositioned as a family history site. The original Friends Reunited platform was closed down in January this year.
Another example of a pivot was a product, an airbag invented to stabilise washing machines fitted under kitchen counters. The invention caught the eye of another person who saw it as the ideal solution for protecting musical equipment when it was packed and being transported. It is now sold to the freight handling market.
It is not enough for a 21st Century business, however currently successful, to stick with the status quo.  With the pace of technological change accelerating business leaders need to be visionaries and to be always on the lookout for the next opportunity.
An early transformation or pivot can avoid the need for a major restructure further down the line.
(Image courtesy of iosphere at FreeDigitalPhotos.net)
 

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Business Development & Marketing Finance General Interim Management & Executive Support Rescue, Restructuring & Recovery Turnaround

Do you manage your staff or do they manage you?

word cloud people skillsRecently I have come across a situation that I call Upward Management.
This is where staff are managing their managers rather than management setting goals and managing their staff.
An extreme example was a situation where an administrator was supposed to complete their daily workload before leaving the office but instead they often went home leaving critical work unfinished. This meant that her boss was having to complete client reports due that day under service level agreements.
Despite frustration and resentment, the boss was not confronting the staff member or the situation in order to resolve it. Instead the boss simply made oblique comments to the person concerned which triggered an emotional and somewhat aggressive response.
There can be a number of reasons for this, including a failure to set measurable goals, or having set them failing to monitor performance.
This situation can also arise where a manager is either afraid of confrontation or has not been properly trained to manage people. Perhaps they have risen to manager level but are not entirely comfortable with it. Perhaps they fear that staff might walk out or hold the threat of doing so over their manager’s head.
In this particular example my personal view was that the subordinate controlled their boss through passive aggressive behaviour.

The qualities of an effective manager

To manage people effectively a manager should be able to empower people, motivate them and be confident about delegating work.
Effective empowerment is about setting boundaries so that people understand and take responsibility for their work. It also means encouraging them to stretch their abilities and to be innovative. This will work provided there are proper support structures in place.
When staff are motivated they are likely to perform better, and this does not depend solely on salary or bonuses.  An effective manager should be able to motivate people with interesting work, creating a sense of their being part of a team and most importantly by recognising and appreciating hard work.
Delegation works well if a manager understands people’s strength and weaknesses and is able to match the person to the task in a way that stimulates them and shows that they are considered competent to carry out the work successfully.
Ignoring poor performance is not helpful either to the staff or ultimately to the business.  Dealing with the situation does not have to mean an uncomfortable confrontation. A supportive conversation that identifies, what is the problem and what support a person needs to improve may be a more constructive approach.
When the situation like the example cited involves a level of bullying, it is crucial that the inappropriate behaviours are highlighted and addressed.
Finally, it is worth remembering that the longer a problem goes on the harder it will be to remedy.
(Image courtesy of David Castillo Dominici at FreeDigitalPhotos.net)

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Business Development & Marketing Cash Flow & Forecasting Finance General Rescue, Restructuring & Recovery Turnaround

How far do you take your business online?

working digitallyThe opportunities for putting a business online are almost infinite, regardless of the sector it is in.
At the most basic level it is rare for a business to not have a website. It is an almost-universal expectation from customers for even the smallest and most local of businesses.
In its simplest form a website is an online brochure for a business’ goods or services, but arguably they are missing a trick if they don’t use the opportunities for marketing, interaction and administration that a website offers.
Even a basic website can do much more than simply being a brochure. Including a news and blog page allows the business to keep clients up to date with its activities and share useful information.  Including customer testimonials and recommendations and having a contact form can help with marketing and handling enquiries.
These days additional software will allow for Customer Relationship Management, so that a business can capture contact details and respond quickly to queries by interacting with clients.
Including facilities for viewing products or services, placing orders and paying online are time saving and cost effective.

A website is only one part of the digital operations and marketing mix

There is software via cloud computing that allows a business and its accountants to update records and communicate with each other in real time.
Similarly, tracking orders from initial order through final delivery, invoicing and payment can be done online and for customers the option of tracking goods they have ordered can be helpful.
Digital confirmation of receipt of goods or satisfactory completion of service can also help resolve disputes and proof of debt when pursuing payment.
Some of these operations can be outsourced to other businesses to manage, but if security and confidentiality are concerns, a business might prefer to keep them confidential and manage them in-house.
Backing up data and records is vital and can be inexpensive if done via cloud services, as is remote IT support.
Then, a subject we have touched on before, there are the online opportunities for marketing a business. Social media platforms like Facebook, Twitter, LinkedIn, Instagram and others are now part of the mixture.
For some businesses a regular e-newsletter using a properly managed database service that includes regular analysis of interactions by recipients can also be a worthwhile investment.
We recently came across a business that has taken on board the digital message and runs entirely from the owner’s iPad. Every activity for his tyre fitting and MOT workshop is recorded on an iPad so when the owner goes home for the night, he carries his entire business with him, including monitoring the site security cameras 24 hrs a day.
(Image courtesy of Pixomar at FreeDigitalPhotos.net)

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Business Development & Marketing Cash Flow & Forecasting Finance General

Manufacturing – Onshore or Offshore?

Business processes word cloudNot so long ago manufacturers in the developed world were off shoring, that is shifting production of their goods to places like India and China.
This was largely because labour and factory costs were so much cheaper there. But as the Chinese economy has matured Chinese labour costs have increased and this cost advantage is eroding.
The main considerations that influence the decision about where to base production are primarily costs, capacity, quality and delivery time with viable quantities being a key part of the cost factor.
Costs include labour, factory, energy, materials and equipment. Of these there are unlikely to be significant differences in the costs of materials and equipment wherever the goods are made.  Materials and equipment supply operates in a global market and therefore location is not going to affect costs.
While there is still likely to be a differential between labour and factory costs in different countries the labour portion in particular is gradually eroding and there is another factor to consider. This is the availability of the relevant skills in the workforce at home and elsewhere.
Germany and France, for example, have preserved their manufacturing bases, while the UK has not, making it more difficult for UK manufacturers to find enough skilled workers in some sectors to be able to manufacture goods onshore. Essentially this relates to the quality consideration.

What other factors affect manufacturing location?

Viable quantities, capacity and delivery time are likely to be significant issues in considering the costs and location of manufacturing.
The questions to ask are whether the offshore manufacturer is able to produce enough of the goods and how long it will take to both complete the manufacture and then to get the goods to where they are needed.
While the offshore manufacturer may have the capacity to produce bulk orders to the stated deadlines, and the length of time it takes to transport them and detailed stages of the supply chain may be significant in extending the delivery times and may adversely affect profit margins.
In this context there has been some reversal to the trend for off shoring, for example in the car industry, and moving to a model of smaller assembly units located closer to their eventual points of sale.
However, it is the interplay between all the above components that will eventually determine the best business model to use.
It may turn out to be more cost effective for a business to focus solely on the design and marketing of its products and to outsource the actual manufacture elsewhere, or focus on becoming a high quality factory knowing there is little competition and having a clear route to market.
(Image courtesy of Stuart Miles at FreeDigitalPhotos.net)

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Business Development & Marketing General Interim Management & Executive Support Rescue, Restructuring & Recovery Turnaround

Business websites and Google analytics – time for a trusted expert?

Google analytics overviewBusiness owners need accurate and detailed information about their website’s performance and one of the most comprehensive tools for finding out is Google Analytics.
Businesses are now operating in a world where potential customers not only expect even the smallest of them to have a website but also have high expectations about what it delivers.
In its most recent annual survey US-based marketing analyst BrightLocal found that 40% of those aged 18-34 and 40% of those aged 35-54 would be more likely to contact a local business if it had a website and overall that 87% of customers would not consider using a business whose website had low ratings.
They increasingly expect a website to be attractive as well as informative and to be responsive, which means that it should work as well on a mobile phone or tablet as it does on a computer screen. The majority of those surveyed expected to see customer reviews and used them to assess the quality of a local business.
This demonstrates how important a business website is both for professional credibility and to attract and communicate with potential clients and customers.
It means that even the owners of the smallest local businesses need to be willing to invest as much as they can manage in a professionally built website and should beware of D.I.Y. options.
They will also need to know how well the website is performing and this means they will need at least some understanding of what the statistics in Google Analytics are telling them.
The information available on Google Analytics is in fact extremely detailed and comprehensive, but for an overview a good indicator is to look at the “audience” section of the menu.  This breaks down information on who’s been visiting a site into a wealth of details, including age, interests, location, language, how long they stay on the site, the pages they visit.  The list is endless and the amount of data is daunting.

Time to call in the experts

No business owner can expect to be able lead a business, maintain an oversight of all that entails and then also to have the time or the expertise to frequently check on all the analytical information available about the business website.
Knowing what information is important to a specific business, being able to draw conclusions from the data and then using it to plan, develop and carry out a marketing strategy is becoming more and more specialised.
However, the business owner/manager needs to have enough information to be able to first select the right marketing support and to then be able to ask the right questions of those responsible and to work with them to set the right marketing goals.
It is up to the marketing team to devise the activity needed and to carry them out but the business owner needs to have the confidence that they can do the job well.

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Banks, Lenders & Investors Cash Flow & Forecasting Finance General Insolvency Rescue, Restructuring & Recovery

Proposed EU taxation and the UK Financial Sector

worried businessmanOver the coming weeks we will be looking at some of the issues that could influence whether the UK remains in, or leaves, the EU.
The first of these is a proposal to tax financial transactions.

What is the FTT’s purpose?

Following the 2008 financial crash the EU proposed a Financial Transaction Tax (FTT) also known as the Tobin tax as a means of reducing excessive risk taking by banks and other financial institutions and restricting income levels within the financial sector. It was argued that it would also help to increase stability and cushion domestic economies from excessive currency speculation.
Arguably it is intended to regulate both risky financial behaviour and, by introducing greater harmonisation of tax within the EU, to create an economically level playing field among members.
However, the idea has been opposed by the City of London on the grounds that it would result in job losses in financial centres, a decline in the level and flow of foreign direct investment and ultimately would slow global economic growth and development.

The arguments against

Further discussion about the introduction of a proposed EU (FTT) has been delayed until mid 2016 and so far only 10 countries within the EU are supporting some form of FTT.
All 28 EU member countries must vote in favour of the FTT for it to be introduced and indeed such a tax would be unlikely to achieve its stated aims within the EU while there was still the opportunity to carry out transactions outside of those countries that had adopted it.
The City also argues that harmonising tax across the EU would limit its powers to attract the best talent to London.
The question is whether it is in fact the case that light touch regulation in the UK and the arguably high level of expertise among corporate financial advisers that makes London the perfect place to do business.
If so, were the UK to leave the EU, would the financial centre of power shift away from London or is the concentration of financial expertise that exists there enough to avoid this?
(Image courtesy of Vlado at FreeDigitalPhotos.net)

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Business Development & Marketing General Rescue, Restructuring & Recovery Turnaround

Are businessmen missing out by not engaging with Facebook?

facebook demographic insightsThere is no doubt that digital marketing, marketing online, social media marketing, whatever name you give it, is now firmly established as an essential ingredient in a business’ marketing mix.
Among the well-known social media platforms Facebook continues to dominate both globally and nationally with over 1.6 billion active monthly users.
The relative stats report Twitter having 320 million active users and LinkedIn having 420 million users.
But while regular surveys, from Pew Research, Statista.com and even the UK’s Ofcom have over the years consistently shown that more women than men use and interact with Facebook regularly, the platform has successfully moved itself from being primarily about social interaction to being increasingly a place that businesses ignore at their peril.
The age group most active on Facebook is 25-34 year olds (26% of users) yet, again, women by far outnumber men when it comes to interactions, not only with friends and family but also on business pages.
In its most recent analysis of reasons for interacting with companies on Facebook rosemcgrory.co.uk cites the two top reasons from a chart compiled by Statistica as “to receive offers/competitions” (69%)and “to keep up to date with the latest news about them” (68%).

So why do so few men in the most active demographic interact?

While there is no hard evidence, there could be a number of explanations.  They could range from “no time” to a misperception that Facebook is primarily for social use.
Yet for the CEO or senior management of a SME, especially one whose primary sphere of operation is local or regional, Facebook can be a rich source of information about potential customers and clients.
Among the standard features on a business page are the opportunities for customers to post reviews as well as comments, both providing valuable sources of information for the business as well as helping to promote the brand.
Page Insights enable a business to find information about their customers’ profiles such as when they are most active, what posts they have been most attracted to engage with either by liking or commenting.
This information will enable a business’ marketing team with the knowledge to interpret the statistics to refine its digital marketing to better target its ideal customers.
But if a business is not primarily aimed at women in preference to men, all the statistical information available is likely to be somewhat skewed if there is a gender imbalance in viewers’ interaction.
Of course, that might imply that marketing should be adjusted to include information that will appeal to both genders, but it also suggests that perhaps men visiting a page should be more prepared to get involved and give feedback.

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Banks, Lenders & Investors Business Development & Marketing Cash Flow & Forecasting Finance General Rescue, Restructuring & Recovery Turnaround

UK Steel – how can business operate in a global market?

word cloud on global tradeLast week’s decision by Tata to sell off or close its UK steel operations graphically illustrates the challenges for UK businesses in competing in a global market.
Among the explanations for the decision have been a sluggish world economy, falling commodity prices, and a glut in steel production.
Specifically, there is the huge imbalance created by China’s subsidy of its own steel industry enabling it to corner more than 50% of the world’s steel market and to sell at prices with which other producers cannot hope to compete.
Arguably UK steel’s problems have been compounded by high energy costs and by Government unwillingness to subsidise the industry, or to introduce measures to encourage UK industries to “buy local” or to impose tariffs on imported steel. The other factor is high business rates which for Port Talbot are set by the labour leadership in Wales so this is not a party political issue.
Ironically, skill shortages and the mobility of labour are perhaps the only issues that the industry does not have to face. Instead its skilled workforce may be facing extinction.
While there are signs of potentially interested buyers for parts of the industry the whole saga does illustrate some of the problems businesses face in trying to compete in an increasingly global market.
These are well rehearsed. They include disparate labour and energy costs, high business rates and clean energy tariffs, different conventions in different countries about how business is regulated and conducted, and the volatile behaviour of investors, commodity markets and global demand; all difficult to harmonise and all particularly affecting industries with long lead times between order and fulfilment.
There is no such thing as a level playing field despite the existence of the World Trade Organisation (WTO), which attempts to investigate and regulate complaints of unfair trading via the General Agreement on Trades and Tariffs (GATT).
Resolving disputes is a lengthy process as exemplified by  the time it took for the WTO resolve a complaint raised by the USA, supported by the EU and Japan, in March 2012 about China’s rationing of supplies of Rare Earth Metals by imposing export tariffs and physical export limits. China has the majority of the world’s deposits of Rare Earths that are essential to the manufacture of electronic goods from mobile phones to car batteries. It took until March 2015 before the situation was resolved and China agreed to remove its restrictions.
The process of negotiating inter-state or inter-continental free trade deals is equally lengthy.
What business can wait that long for an inequitable situation to be resolved?

Innovation, agility and collaboration

However, there are ways in which a business can be more innovative and agile. In an article in the Daily Telegraph on April 3, 2016, Chris McDonald argues that steel production does not need to disappear from the UK manufacturing landscape: “Two-thirds of the steels in use today were not even invented 15 years ago……….” he says. “Automotive, aerospace, defence, nuclear and rail constantly require the innovation and manufacture of new steels, which form the core of improving productivity.”
He argues that if domestic producers and end users partner with research and production moves to smaller, more specialised mini operations using electric arc furnaces  the result will be a more responsive, innovative and flexible UK steel industry.
Perhaps there are lessons here for other businesses and industries. Off shoring on cost grounds may not be the only competitive answer to survival if it slows down development and production times.