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Cash Flow & Forecasting Finance Insolvency Rescue, Restructuring & Recovery Turnaround

Investing in a struggling business – is it ever worthwhile?

the uphill battle to save a struggling businessWhile many people are attracted by the low cost of buying a struggling business where they believe they can do better – and reap the rewards – there is always the risk they are deceiving themselves or being over-optimistic.
It may be that there is a demand for its product or service but if a business is struggling, it is struggling for a reason.
So, it is important for the potential buyer to look closely and with care at why the business is in trouble and to ask themselves whether they honestly have the knowledge, skills, stamina and enough finances to be able to bear the loss if a turnaround should prove unsuccessful.
While a degree of self-confidence is important, confronting the reality of the situation is even more so.

Are there issues the struggling business is hiding?

When reviewing the circumstances of a struggling business a degree of scepticism is likely to be needed.
There may have been problems that can be remedied, such as poor management, poor organisation, a lack of funding or lack of financial control.
On the other hand, there may no longer be a market for the product or service, such as when technology has changed as has been the case with the transition from cameras using film to digital photography, or it may be too competitive such as the van delivery market, or the company’s reputation is severely damaged. Often the mountain is too steep to climb and it may be better to walk away.
Are the directors being honest about what has been happening? Are the suppliers who may also be angry creditors likely to be supportive of a restructure attempt? How many employees will have to be retained by the new owner under the TUPE rules and will this place an excessive burden on costs going forward? Will clients stay with you or even come back?
The answers to these questions, and many more, are crucial when considering buying a struggling business.

Are there better options?

If they would be useful to your existing business it may be better to buy the assets of a struggling business, which will be handled by valuers and surveyors.
In this way buying the database of a struggling business may be a more cost-effective way of increasing the customer base of an existing business than marketing to entirely new customers.
It may be safer to pay more for a profitable business with growth potential where the reason for sale is clear such as someone wanting to retire.
There is always a case of “caveat emptor” (buyer beware) so this route isn’t for the feint hearted and you can afford to make costly mistakes.
Get it right and the spoils can be huge, but you are warned.

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Business Development & Marketing Finance General Turnaround

Experiences, not “stuff” – the High Street is not dead

High Street experienceThe death of the High Street as simply a shopping destination has long been predicted, first due to the rise of the out of town retail parks, then to the growth of online shopping.
While it is true that consumer buying habits and focus have been shifting, the fact is that humans are social animals and will always seek places where they can gather and interact.
However, with each generation, interests, tastes and behaviours change to reflect identity and priorities. These are influenced by social change and new developments such as those offered by new technologies, new ways for social interaction, allocation of time, travel, the way homes are designed, and even the changing weather patterns.

Misread signals and lack of agility

As early as 2013, in one of its regular assessments of consumer behaviour and the role of the high street, Deloitte found that while undeniably consumers were changing “the high street will continue to be an important place where innovative, consumer-focused businesses will grow and thrive,” despite the undoubted challenges.
Other studies have since sought to define more clearly what has been going on and why retailers have been struggling.
Kantar Worldwide identified two specific aspects in the UK, a decline in seasonal shopping and shoppers “waiting for the sales and buying things out of season”.
Some retailers, say analysts, have been far too rigid, in sticking to their seasonal buying cycles then having to constantly discount to shed surplus stock.  Essentially, they failed to get to know their customers well enough. Not only that, but there have been no significant changes in “must have” fashion so that people can keep on wearing and recycling what they already own – an example being skinny jeans, still ubiquitous in clothing stores a decade since they were first launched.
Arguably, a second factor has been the merging of the seasons in recent years, certainly in the UK, where there have been several years of only moderate temperature and weather changes over the yearly cycle.
There are other, generational factors at work. Millennials, who are IT savvy and habitually online shoppers, have been shown to value experiences, and showing them off on social media, more than shopping. Millennials also don’t want to be ‘marketed to’. Despite this they buy food, clothes and household products, the subtlety for the High Street is that they don’t want to feel they are being manipulated by powerful corporations, they want to discover rather than be discovered.
The desire for shopping as an experience rather than simply shopping to buy goods is not confined to millennials and offers a real future for the High Street, one that can compete with shopping complexes that are clearly aimed at ‘marketing to’ visitors.

Offering experiences – an opportunity for the Service sector

Walk around any provincial High Street and you will find a plethora of places to snack and chat (coffee shops, bistros, wine bars), estate agents and travel agents, interspersed with the remaining clothes and department stores.  The latter have arguably survived by becoming more agile in offering not only physical goods, but also click and collect destinations and the opportunity to order online in-store if a product is not available.
But you will also find significant numbers of independent small, specialist shops for cheese, coffee, craft ware, home ware, nail bars, tattooists and, above all books. Then there are the pop-up shops where new enterprises can showcase their ideas or merchandise for a limited time and get a feel for their potential market.
That there is still confidence in the High Street shows in Amazon’s move into physical retail space with the opening of its book store in New York and several more planned. Google, too, has opened pop-up stores and is said to be increasingly focused on physical stores.
So, the High Street is evolving, not dying, but those in the service sector who can see a thriving future there will also need to see more agility in support from civic planners and regulators, who will need to move away from their rigid structures of what is permissible in urban High Street buildings and from charging high business rates and rents for those spaces.
 

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Business Development & Marketing General

Proof that, taught properly, cold calling really is child’s play!

child making a business callVery few of us actually like cold calling.
The idea of phoning a total stranger can strike fear and dread into the most competent SME owner. Who has not at some time been roused to rage by those ubiquitous call centre sales calls, where the caller is plainly working to a script, plainly not listening and not interacting with you?
Yet it is a crucial part of the sales and marketing activity and can be immensely effective if done correctly.
Working to a script is not the answer but there has to be a plan and a goal as this video on Linked In demonstrates. The video https://www.youtube.com/watch?v=nL5Iab45fSo was posted by my good friend Marcus Cauchi, an expert in sales management training. You can subscribe to get more.
It is worth watching it right to the end not only for the technique it demonstrates but also for the “surprise” revelation at its conclusion.
It shows that the key to effective cold calling is to listen and to interact with people, with a clear goal in mind. The goal does not have to be to make a sale.  It may be to plant a seed so that when a prospect is at the right point in their buying journey they remember the business’ name.
It may be, as in this video, to get people to think about the illogical excuses they make and commit to a meeting or appointment.
Cold calling is about creating trust and empathy so get permission to speak to your prospect, as you are effectively stealing their time.
The aim is to get them to engage in a conversation, leading them, with their acquiescence to your defined end point, in this case an appointment. So on this cold call focus only on arranging the appointment.
The call should last between 3-8 minutes. Any less and you have probably missed the mark with your 30-second commercial or blown the call with your tonality. Any longer and you are in grave danger of trying to make the full sale.

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Business Development & Marketing General

Employee training and development benefits business

an employee training sessionBusiness leaders are not the only people in an organisation who should pay attention to increasing their knowledge and expertise.
Everybody who works for the business is important to its continued success and growth, so a programme of ongoing training and continuous development for employees would be a worthwhile investment for the ambitious business.
It is no secret that the UK is suffering from a skills shortage that is already impacting on the ability of companies to recruit the people they need, especially at a time when employment is at its highest level.
While employers might be worried about the cost of investing in their staff who subsequently leave, they should be more worried about not investing in staff who stay.

What are the benefits of employee training and development?

Recruiting to fill a vacancy can be a costly and lengthy process, assuming that there is even someone out there with the desired skills.
There may be someone in the company already who has the potential do the job with some additional training. It may be that this would not take much longer than the recruitment process, and it would have the added advantage of money spent within the business rather than to an outside service. And it can save on expensive and time-consuming recruitment.
It may less risky training up a known person than gambling on whether a new recruit turns out to have the right qualities and soft skills, in addition to their qualifications, to fit into the organisation’s culture.
Training also brings flexibility through staff being able to do other jobs when colleagues are on holiday or off sick. Having several members of staff who can operate plant and machinery or work in different departments can be highly valuable. It can also bring in house work that might be subcontracted such as equipment maintenance, accounts or marketing.
A training programme brings other benefits, in that it ensures staff can see a way of developing their potential and their careers. At the same time, it will ensure that the capabilities of both organisation and people keep pace with new developments in their sector.
Training can help build employees’ confidence, so that they feel able to tackle unexpected developments, such as a customer complaint, professionally and constructively in a way that enhances the company’s reputation.
Confidence in knowledge and skills means employees can make a greater contribution to the benefit of all as does inviting suggestions for new ideas, products or ways of doing things.
The business that invests in its employees gives them self-respect and shows they are valued.  It is more likely to keep them and to be able to benefit from their motivation and contribution.

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Business Development & Marketing General Rescue, Restructuring & Recovery Turnaround

Why would a business leader need a business mentor or a consultant ?

Successful businesses need leaders who can make decisions. Input from others makes it easier to make the right decisions first time, instead of wasting time on rectifying the wrong decisions.
All the most successful business leaders, including Mark Zuckerberg, Elon Musk, Bill Gates and Warren Buffet reputedly practice what is called the five-hour rule, according to various articles on inc.com.
It was a practice started by Benjamin Franklin, one of the USA’s founding fathers and authors of its Declaration of Independence and its Constitution.
It involves spending an hour a day either reading, reflecting or experimenting in order to stay well-informed as a business leader.
While it is clearly a good habit for a business leader to follow, whether they are the head of a SME or a large corporation, it can be lonely at the top and there are times when it can be important to have another person with whom to explore ideas and perhaps refine them into something workable before making a key decision.

Which to choose – business mentor or a consultant

businessman with business mentorA successful business is never static so there will always be new problems or opportunities confronting the CEO and, no matter how much attention she or he pays to learning and developing their skills, knowledge and ideas, there will be times when it will help to get specialist expertise as well.
The business consultant is likely to be more focused on the business and its success. Their approach is likely to be more formal and structured so it is important to choose someone who understands or has worked in a similar business environment as well as someone you can be open with.
This means asking some pertinent questions before choosing a consultant who is right for you and your business, such as their experience in business, their experience of the issues you want to deal with, qualifications, and asking for examples of their work.
It is helpful to have a written agreement with a consultant that includes frequency of meetings, objectives, milestones with dates, confidentiality agreement, charges and payments and how either party can terminate the agreement.
Mentors tend to focus on the individual leader, on their wellbeing and personal development. An arrangement with a mentor can be less structured, although it is still wise to define the frequency of meetings and expectations of the relationship on both sides.  It could be someone you already know, whose expertise and judgement you respect and who is willing to act as a sounding board for ideas, or it could be a more professional business mentoring service. The good mentor asks questions and invites reflections.
Having a mentor can reduce risk when considering options and making decisions. Mentors tend to explore the rationale for any decision rather than giving advice in relation to the options or the decision.
Both mentors and consultants help focus a leader on the main issues to be addressed and bring clarity and process to decision making. Do you have one?

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Business Development & Marketing Cash Flow & Forecasting General HR, Redundancy & Trade Unions Rescue, Restructuring & Recovery

Uncertainty and change may be a feature of the business future for a while

managers hiding after announcing changeIn so-called “normal” times no business can afford to stand still and hope to survive.
In the current economic climate following the UK’s general election, a precariously-balanced parliament with no party having a majority, and with the negotiations on leaving the EU yet to start, business will be facing additional pressures and uncertainties.
However, regardless the prevailing circumstances, change is likely to be a constant feature in business survival.
Change can be unsettling, especially for employees and therefore has to be managed effectively if it is not to cause disruption, lack of focus, worry and a consequent drop in productivity.

The key actions for helping employees cope with uncertainty and change

It is surprising how often employees pick up on potential changes in their workplace, especially tension among managers, even if they have not yet been informed.  Watching and listening is important to gauging how unsettled they might be.
Managers demonstrating concern and understanding about people’s feelings can reduce the feeling of powerlessness and that things are going to be imposed on them.
Anxiety among staff can become a source of worry, so a key ingredient in calming employee fears is to give them as much information as possible as soon as possible about any proposed changes the business may be planning.
In fact, it may prove even more productive to consult with and involve employees in what is being proposed.  They are the people who will have to implement and live with the changes and they may well have innovative ideas about how to make them work.
If the changes are going to involve either some redundancies, changes to working conditions or re-deployment consulting with staff representatives or a union may be crucial in ensuring that they are accepted.
Be aware also of the procedures necessary to comply with employment legislation especially as it relates to redundancies or changes to terms of employment. An up to date staff handbook with detailed redundancy and grievance procedures can be a useful source of reference for both staff and managers.
Once the plan for modernisation, restructure, or modification of working conditions has been settled managers can help employees to adapt quickly by arranging briefings.  People are more accepting of change if they understand what is being proposed, why it is necessary, and when it will be implemented.
Finally, training and support will enable employees to feel both involved, valued and competent to handle the new situation.

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Banks, Lenders & Investors Cash Flow & Forecasting Finance General

The post-election Government must start listening to business

confusing signpostAs if the post-EU referendum uncertainty wasn’t enough, businesses now must contend with a Government that is far less “strong and stable” than it was before the General Election.
Portcullis Public Affairs, of which I am a shareholder and chairman, is a specialist consultancy advising businesses on government and strategic communications.  It has an excellent perspective on the election outcome for business which can be viewed in the News section of its website at www.portcullispublicaffairs.com/oh-what-a-night-and-what-it-means/
It is almost a cliché that businesses hate uncertainty, so the implications for businesses, especially for SMEs, are not good. This has been made worse by a Prime Minister who appears to be anti-business and a manifesto that offered no reassurance to business.
Companies were already holding back on investment decisions and, in some cases, struggling to keep afloat in the face of rising costs on imported raw materials and oil thanks to the post referendum devaluation in £Sterling.
Trading conditions have gradually become more difficult since the start of 2017 as inflation and wage stagnation have fed through into the economy and dented consumer confidence – not helpful where so many small businesses in the service sector rely so heavily on consumer spending.
Many have felt that the government was not listening to or considering their concerns. Among the issues and proposals they have highlighted have been:

  • The lack of provision of growth funding after 2020 when current EU Funding ends (FSB chairman Mike Cherry).  This particularly affects SMEs in poorer parts of the country.
  • Abandoning the customs union, which allows UK firms to trade in the EU without paperwork, tariffs or barriers.
  • Requiring businesses to disclose the numbers of foreign workers they employ and failing to provide any assurances that those already working in the UK will be able to remain.  This affects all businesses where there is a skills shortage, such as construction, engineering and seasonal work on farms.
  • Being prepared to walk away without an agreement if the EU does not agree to UK’s terms.

With barely a week to go before formal negotiations are due to begin businesses have been signalling plummeting confidence and urgently demanding more engagement, flexibility and pragmatism on their needs.
Immediately after the election the Institute of Directors (IoD) reported a significant drop in confidence among the 700 members it has asked. IoD Director General Stephen Martin said the current uncertainty could have disastrous consequences for UK businesses.
“The needs of business and discussion of the economy were largely absent from the campaign,” he said. “but this crash in confidence shows how urgently that must change in the new government.”
Portcullis’ briefing ends with the view that without specialist advice businesses face making strategic errors that could be costly, or even fatal, in the current uncertain political climate.

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Business Development & Marketing General

A leader’s lack of confidence can inhibit business growth

business leader standing on hilltop contemplating horizonWe recently explored the toxic effects on a business that can result where people in influential positions exhibit one or more extreme versions of the psychologists’ Dark Triad of psychotic behaviours.
All three, Machiavellianism, Narcissism and Corporate Psychopathy, could be described as selfish, arrogant and demonstrations of supreme confidence.
But what about the effects on a business of their opposite, a leader who lacks conviction and confidence?
Recently, venture capital company Highland Europe, carried out research among 173 European company leaders, of whom two-thirds were their companies’ founders. The respondents were from a mix of start-ups and companies that might be regarded as scale ups.
Highland Europe, founded in 2012, invests in growing European internet, mobile and software companies but their findings have wider implications than this sector only. They wanted to find out more about how these people saw themselves and their ability to adapt to the transition from founder to CEO of their growing business.
The research found that almost half of the respondents saw the founder’s ability to effectively manage growth and their ability to implement new strategy quickly as key risks.
Interestingly, among the start-ups UK respondents were consistently less confident than those in similar European companies.
Among the challenges mentioned by the start-up group were doubts about building sales, about finding the right senior talent, about establishing the right organisational structure and about access to capital.  For the scale-up group that were already on the growth track the same key issues cropped up but in a different order, with senior talent first, followed by organisational structure.

The components of lack of confidence

Lack of confidence can be the result of external factors, such as the uncertain economic conditions that have prevailed in the UK since the 2008 Financial Crash and, more recently, following the June 2016 decision for the UK to leave the EU.
As we have pointed out many times, an excess of caution has deterred businesses and investors from taking risks and investing capital in growth for some years.  In other words, lack of confidence can inhibit innovation and arguably business growth.
But lack of confidence can also manifest more personally in doubts about one’s own abilities and the research found that it was considered crucial for founders to be able to adapt and change as their business grew. Many cited this as their biggest challenge along with having difficulty in staying focused on the bigger picture rather than operational detail and in delegating effectively.
Plainly, while the extreme behaviour characterised by the Dark Triad can be toxic for a business, as we found, the same is true for its opposite.
A growing business needs a confident leader who has conviction in the business, who is able to take risks, to think strategically and to manage people.
It would be unrealistic to assume the founder of a small start-up automatically has all these qualities, even where they had the entrepreneurial vision to take the first step.
There is no shame in looking around for advice and guidance, whether from a mentor or a business coach, to develop the qualities – and therefore the self-confidence – to take their business to the next level or hand over to others who can.

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Banks, Lenders & Investors Business Development & Marketing Cash Flow & Forecasting Finance

How will SMEs finance their future growth plans?

It has been estimated that UK SMEs account for more than half of employment and national income, so their importance to the economy is significant.
They have advantages over larger businesses in their ability to be agile, flexible and quicker to innovate and, of course, successful SMEs have the potential to develop into the larger businesses of the future.
However, there is one area where SMEs have struggled and that is in obtaining finance for growth.
There are various views on why SMEs struggle to obtain finance, including a very conservative attitude by banks with little appetite for risk, lack of a sufficient track record, being too small to attract investors and lack of sufficient tangible assets to offer as security.

A future growth finance “black hole” after Brexit?

funding black hole in £SterlingAccording to research carried out on behalf of the FSB (Federation of Small Businesses) and published in early May 2017 this is a situation that may get worse after 2020.
The EU has earmarked approximately £3.6 billion for UK regional development funds until 2020.  The money is designed “to help correct regional imbalances” according to an article in uk.businessinsider.com.
Another key area of SME funding is R&D Tax Credits, these have become a huge source of finance for those businesses that are investing in the future but this money comes from the EU, not UK.
So what will happen once the process of the UK’s leaving the EU is complete? Will a cash strapped UK replace the EU funds?
The independent research company Verve surveyed 1,659 FSB members between 5 – 16 December 2016. FSB also carried out a series of interviews and focus groups with members across the UK.
According to the results: “eight in ten (78%) small firms have sought business support services over the last 12 months. Those in Yorkshire (25%), the North East (22%) and North West (18%) were most likely to submit applications for EU-funded schemes.
Of those that have applied for such schemes, the majority believe EU funding has had a positive impact on their business (68%) and local area (64%).”
These findings prompted FSB National Chairman Mike Cherry to warn that “Small businesses across the country are staring into a business support black hole from 2021.”
He called for the setting up of a single Growth Fund for England to be in place before the negotiations are completed plus funding to support future growth hubs.
K2 Partners has produced a guide to sources of finance, which can be downloaded here

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Business Development & Marketing Finance General Insolvency Turnaround

We can learn a lot from China’s global business strategy

China and world mapThe business world has become a very uncertain place since UK voted to leave the EU, the election of Donald Trump as US President and now the UK’s impending General Election.
Yet, rather than actively seeking more widely for opportunities there seems to be a level of inertia, whether from complacency or frozen panic, among UK businesses.
We can learn a lot from the way China is pursuing its growth strategy across the world and creating links on multiple fronts with other countries.
These have included investing in massive infrastructure projects in Africa and central Asia including a rail link between China and London. The first return train from Yiwu on China’s East coast completed the 15,000-mile round trip two weeks ago.

The importance of having a vision

Only time will tell what the outcome of the Brexit negotiations will be but already the repercussions of the decision to leave are beginning to show in the UK economy.
Some companies have already announced plans to move some of their operations to other places, such as Ireland, France or Germany and the £Sterling devaluation has begun to feed through into food and other prices in the shops and into UK inflation.
This will add to the trading pressures on UK businesses.
It is well established that a business that stands still is one that will ultimately stagnate and is unlikely to survive.
So, adopting a “wait and see” approach will not do. UK business leaders need to be planning ahead and widening their horizons, at the very least by exploring options and making connections as a prelude to defining plans for the future.

Turning the vision into a global business strategy

Given the size of China and their increasing involvement and influence in the global economy, it might seem daunting to make approaches but they offer scope for developing a strategy that reaches out to the rest of the world.
A first step could be to establish links with Chinese people in London and work out opportunities for forging relationships and doing business with them. Not just buying from them but there are opportunities for collaborating with them, for providing the technology, skills, experience and even products to them as part of a strategy that might help UK reverse the decline of its global business interests.