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

As businesses resume operations it’s a good time to take stock with a strategic review

a strategic review helps your business move forwardI would normally be recommending a strategic review of your business at this time of year, when activity slows down for the holiday season.
This year, of course, things are very different because of the pandemic lockdown but as you resume business activity my advice remains the same because a strategic review will help you to identify the resources, costs, opportunities and capabilities that will help your business move forward.
It may be that carrying out a review will help you identify new products or directions in which you can take your business as in a changed economic landscape innovation is likely to be a key to future success.
A business needs to be sustainable and profitable so firstly you need to identify the resources that are already available to you and these can be divided into physical resources, human resources, intellectual resources and financial resources.
To use the example of a manufacturing business, physical resources would include equipment and inventory and manufacturing plant, but also the premises, if the business owns them. However, over time for all their longevity such assets as manufacturing plant can become obsolete or inefficient and it is important to plan for when their lifespan will run out and for updating them perhaps with automation to improve efficiency.
Human resources will include existing employees and their skills, perhaps suppliers with whom you have a long-standing relationship, the board of directors and shareholders if any. Do you have the right skills and capabilities in the organisation to help it move forward, perhaps even in a new direction?
Intellectual resources include any processes or products that are already protected by patents, anything emerging from research and development or perhaps potential demand for a new but related product identified via marketing activities or customer research. The talent within your business could also be potentially an intellectual resource.
If you have identified a new product or direction for the business it is important to establish as far as possible how much it is likely to cost and where you may need to invest to turn it into a reality so current costs are an essential element in the equation.
If reflections during lockdown or insights following a strategic review give you ideas for a new direction you will need to know your business’ financial position to fund working capital and afford any investment so forecasting your cash flow is imperative as your reserves may be have been depleted by the lockdown and you may need further finance.
Doing your homework now while business activity is still quiet could make all the difference to a successful business development.

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

Directors should be mindful of future investment and changing values post pandemic

future investment and changing valuesBusinesses planning their post-pandemic strategy are likely to be seeking future investment to shore up their balance sheets but directors will need to be mindful of the changing values of stakeholders and in particular those of their customers who in turn are influencing investors.
Before the immense disruption caused globally by the onset of the pandemic, climate change, global warming and the need for a more sustainable form of economics were a major preoccupation.
That preoccupation has not gone away.
While physical attendance at a second summit on ethical finance by international delegates from Government officials, financial institutions, consumer goods corporations, supply chain intermediaries and conservation organisations planned for Edinburgh this month has had to be cancelled, it has now been replaced by a virtual summit.
And this month, the UK’s Investors Association published a paper on the future of investment in which it, too, identified the importance going forward of ethical investment highlighting:
…“Increasing importance of sustainable investment. There is growing customer emphasis on the material impact of sustainability issues on financial returns, notably among institutional clients, as well as a more prominent focus on setting non-financial objectives (for example, to invest in companies and projects that have specific social or environmental benefit).”.
The focus and emphasis among investors is very much on CSR (corporate social responsibility), or its replacement ESG (environmental, social and governance) which is becoming the criteria for oversight of behaviour and values and holding companies to account.
Changing consumer values have been highlighted by others, including the retail “guru” Mary Portas, who has been promoting what she calls the “kindness economy” where, she argues, that shoppers may now be more alert to how businesses treat them, their workers and the planet.
Former BoE (Bank of England) governor Mark Carney also referred to this growing awareness in an article in the Economist last April, where he said that “fundamentally, the traditional drivers of value have been shaken, new ones will gain prominence” and where “public values help shape private value”.
These are issues that company directors will need to be mindful of when formulating their post-pandemic business plans, especially if the plans involve securing future investment.
Returning to pre-pandemic “normal” is not likely to be enough for business survival as the desire among both investors and consumers is for more ethical values and this has not been eroded by the pandemic.

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Business Development & Marketing Finance General Turnaround

Tech offers growth opportunities post lockdown

groth opportunities post pandemicIt is likely that there will be many growth opportunities for companies to embrace the use of technology after the Coronavirus lockdown.
Many organisations and businesses have had to switch to a remote way of continuing to provide their goods and services and this has affected everything from medical consultations to teaching, even more online shopping and whole offices now remote working.
Having discovered that it is possible to function in this way it is likely that many will carry on doing so when restrictions are eased and this will provide growth opportunities for tech companies.
Among the beneficiaries already have been providers of online tools including conferencing facilities, such as Zoom, Microsoft Teams and Skype, productivity and project management tools like Asana and Trello and online collaborative and co-creation tools like Miro and MURAL.
But for all their benefits there are also caveats in terms of speed and reliability of broadband, security and protection from intrusion or hacking.
Particularly in the area of providing public services such as health care or education there are also concerns about democracy and the uses to which authorities could put all the data that is gathered, as the writer and activist Naomi Klein has pointed out in a recent article
Security is also likely to be an issue for businesses, not only regarding online financial transactions but also in building resilience into their supply chains.
Ernst and Young has identified growth opportunities in a recent report that also advises directors on how to address some of the potential concerns.
It identifies opportunities for companies to embrace technology:

  • New and more efficient ways of working and living means growth opportunities for companies including the tech companies that provide improved and more secure infrastructure for customers;
  • Retrofitting by design for those organisations that have adapted during the pandemic but plan to continue using their new working processes in the future;
  • Reimagining the seemingly impossible, such as the provision of robotic support to the healthcare sector.

But for the most innovative companies there are likely to be growth opportunities for updating business processes in some instances in products using technology, some of which have yet to be imagined.
The EY advice to directors of all businesses when planning the way ahead is:

  • Challenge all legacy technology, frameworks, infrastructure and how things have been done in the past;
  • Encourage new ways of technology-driven work to drive flexibility, efficiency and productivity;
  • Invest in both personal and business research and development, innovation and learning about technology;
  • Hire people with technology skills, including software engineers, developers and data scientists;
  • Grow the organization’s ecosystem and establish alliances with innovative companies, entrepreneurs and start-ups;
  • Innovate and automate now for the future.

All of the above should provide growth opportunities for imaginative companies in the years ahead.
 

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Business Development & Marketing Cash Flow & Forecasting Finance General Insolvency

Using the Pareto 80/20 Rule as a guide in your business

Pareto 80?20 RuleMany people in business are familiar with the Pareto 80/20 Rule, particularly the idea that 80% of their business comes from just 20% of customers or clients, or that 80% of their profits comes from 20% of orders, or that 80% of their profits come from 20% of products, or even that 80% of their sales are generated by 20% of their sales staff.
Understanding this can influence behaviour such as protecting the 20% that contribute the most or looking at how to improve the lower performing 80%.
Essentially the Pareto 80/20 Rule is simply a way of demonstrating that most things in life are not distributed evenly.
This can apply to everything but focuses on considering productivity as an output of time spent or as a return on investment. It looks at resources, in terms of people, time and cost with a view to optimising the output. Analysis of turnover and profits by customer, market segment and products to produce a pie chart is likely to highlight aspects of the Rule.
The 80/20 Rule is a guide that can be misused, While 20% workers may be measured as doing 80% of the work this rarely means that the work of remaining 80% is irrelevant. Indeed, it may be that 20% contribute to profitable work while 80% are necessary for the 20% to be productive. It does however show where to focus on improvements.
So how can businesses use the Pareto 80/20 Rule to improve their businesses?
To a large extent this is about identifying the processes, systems or activities on which to focus because they have the best potential for a return on the effort.
You might focus attention on customers perhaps with view to selling more to your best customers or to improving sales to the 80% with view to generating the same level of return as the 20%. This might be putting prices up or selling different products or even turning away unprofitable business or customers who are hard work.
You might focus on staff perhaps with a view to measuring and improving their working practices that in turn improve productivity. Can one person be trained to do several jobs? Or should teams be reorganised or shift patterns altered? Sales and delivery may benefit from reorganising those geographical or market segments for which they are responsible.
You might focus on your products and production. Do you reduce the number of suppliers or the stock held or number of products sold. Can one product replace several existing products? Should you outsource the manufacture of components?
The Pareto 80/20 Rule is, in short, a handy guide to where you might focus your attention for improvement, it should not be regarded as a fixed and immutable rule.

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Business Development & Marketing Cash Flow & Forecasting General

Retrain to do what? The jobs of the future

the jobs of the futureA national government retraining scheme was proposed in July last year to help those workers whose jobs will become obsolete because of Artificial Intelligence (AI) and automation.
Whether it will materialise following the Brexit mayhem and subsequent election remains to be seen.
Research by Oxford Economics has found that 1.7 million manufacturing jobs have been lost to robots worldwide since 2000, including 400,000 in Europe, 260,000 in the US, and 550,000 in China and that a further 20 million manufacturing jobs will be obsolete by 2030 although most of these will be abroad.
There is no doubt that the future world of work, especially, but not only, in the manufacturing sector will look very different.
The drive towards aver more automation may conflict with concerns for the future of the planet and the environment but both will doubtless mean a radical rethink of economies, especially those that are dependent on consumer activity.
Demographics too will play their part as many of the populations of the developed world age and live longer and birth rates decline.
All this has led to an apocalyptic vision of the future by some, such as Aaron Benanav, a researcher in the social sciences at the University of Chicago, who argues that economies have, since the 1970s, been based largely on industrial production, expansion and exporting as their major economic growth engine and that such opportunities for growth are dwindling as more economies mature.
He argues that no other sector than manufacturing has been identified that can replace this out of date growth engine and that “restoring previously prevailing rates of economic growth will prove difficult if not impossible. Unless we find some way to share the work that remains, beggar-thy-neighbour politics really will tear our societies apart”.
Others, however, are more optimistic arguing that we have not even begun to imagine the jobs of the future.
Business Insider is one publication that has had a stab at imagining the jobs that will be needed in the future. Their list includes GPs, Dentists, Plumbers pipefitters & steamfitters, vocational nurses, construction managers, physician assistants, sales reps, secondary school teachers, tractor-trailer truck drivers, computer systems analysts, construction trades supervisors, service sales reps, software developers, and physical therapists to name just a few.
But these are all existing jobs in the world as it currently is. A global digital company, Cognizant, has gone even further and imagined jobs of the future that may be needed. A small sample from their suggestions includes:
Ethical Sourcing Officers for when corporations want to root their decisions on what is ethical and not what is profitable. The ESO will be in charge of production to ensure that every step of the process is in accordance with the ethical values of the shareholders.
Personal Data Brokers, who will make sure their customers are paid by those companies who use their data. This assumes that consumers will have full control over their personal data
Virtual Store Sherpas, will be the online equivalent of the in-store personal shopper, who will guide consumers through the process of selecting the most appropriate and affordable items and organise delivery.
Man-Machine Teaming Managers, whose job will be to “figure out and combine the strengths of man (cognition, judgment, empathy, versatility, etc.) and machine (accuracy, endurance, computation, speed, etc.) to create the most productive worker team possible”.
A brave new world or an apocalypse? Who knows? But there is no doubt that the future is out there!
 

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Business Development & Marketing Finance General

Addressing the UK skills shortage must be high on the new Government’s to do list

skills shortageBusinesses’ difficulties due to the UK’s skills shortage were high on their list for prompt Government action in the run-up to last week’s General Election.
The skills shortage was said to be inhibiting SMEs’ efforts to compete in global markets, particularly in areas related to digital and new technology.
A quarterly study by the BCC (British Chambers of Commerce) published in November found that 73% of firms that attempted to take on extra workers faced recruitment difficulties in Q3, up from the 64% recorded in Q2.
The skills shortage was compounded, according to Grant Thornton, by a low take-up of the cash available to businesses from the apprenticeship levy with almost half of eligible businesses having not yet spent the money available to them for workplace training.
This week, the Evening Standard carried a letter from Andrew Harding, chief executive – management accounting, at the Chartered Institute of Management Accountants, urging the new Government to review national education and skills policies, in particular the apprenticeships programme in order to address the skills shortage.
Added to all this is the rate at which EU workers have been leaving the UK, with Labour Market figures published in early November revealing that there had been a 132,000 drop in the number of citizens from other European Union countries working in Britain. Later in the month, the BBC reported that EU net migration to the UK had fallen to its lowest level for 16 years.
Yesterday, the latest ONS (Office for National Statistics) report revealed that in the three months to October UK unemployment fell to its lowest level since January 1975.
So, the numbers of people available for work are rapidly shrinking due to a combination of factors, including the uncertainties over immigration policy following the UK departure from the EU, the much-publicised failure of the apprenticeship scheme and the shrinking pool of available UK citizens with the right skills available for employment.
Yesterday’s employment statistics prompted Tej Parikh, chief economist at the Institute of Directors, to argue “”With some strains now appearing in the labour market, the new Government must push ahead with its plans to revamp the UK’s skills system, while initiatives to drive up business productivity should also support stronger wage growth.
“Businesses are eager for the details behind flagship policies like the National Skills Fund and reform to the Apprenticeship Levy.”
For almost three years the Government has been so wholly focused on the Brexit issue, while pressing domestic concerns have been ignored.
Now that the General Election is over with a resulting clear Government majority, it is urgent that the skills shortage is given a high priority among the many pressing concerns of businesses.

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Banks, Lenders & Investors Business Development & Marketing Finance General

Post Brexit boom sectors – business opportunities

brexit boom for smaller ports?It is often said that there are winners and losers for every significant event, so which are the post Brexit boom sectors likely to be?
Perhaps the most obvious ones are likely to come from the increase in regulation and compliance requirements for businesses, particularly those in the export sectors.
It is in this area, according to IW Capital, there are opportunities for companies that can devise technology to reduce the amount of time businesses will have to spend on complying with the inevitably more complex requirements that will be imposed by other countries within the EU, but also more widely as businesses explore markets they have perhaps not previously considered.
The exchange rate is likely to have the greatest impact on winners and losers.  Therefore, firms that supply essential goods and services with UK supply chains whose costs are not affected by exchange rates and who do not rely on foreign labour ought to be huge beneficiaries, especially when their competitors rely on imports.
But there are other sectors where there will be lots of opportunities.  News.co.uk also identifies tech start-ups where there are potential post Brexit boom opportunities, but it also suggests that there will be greater opportunities for exporters to non-EU countries thanks to the declining value of £Sterling compared to other currencies.
Another sector it highlights is medical technology, where the UK is a leading contributor, particularly among SMEs, which make up 85% of the sector and had a turnover of £70 billion in 2017.
The Spectator in a piece last autumn predicted that there will be opportunities for the UK’s smaller ports as logistics companies seek out and prioritise alternative, less congested routes.
Another example is the growing interest in CBD (cannabidiol). The Adam Smith Institute in July predicted that this medicinal product derived from cannabis has potential for sustained development in the UK after the Medicines & Healthcare Products Regulatory Authority (MHRA) re-classified CBD in the UK as a medicinal ingredient. No doubt the export market beckons.
Like the somewhat frivolous example above, there are opportunities for nimble SMEs to develop a strategy that takes advantage of Brexit.
There has been so much “doom and gloom” about the post-Brexit economy and supply chains in the last three years, and admittedly there will be some immediate disruption until new systems are in place.
In due course and only once the dust settles we will find out if Brexit benefits the country as a whole but in the disruption lie opportunities for SMEs to seize and create a Brexit advantage.

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Banks, Lenders & Investors Business Development & Marketing General

Dream Big – Summer is time for considering a start-up

Summer holiday start-up dreamAs many as half of all workers seriously consider setting up their own business during the summer holiday according to research.
Emma Jones, founder of small business support network Enterprise Nation, said: “The combination of sun, sand, sea and downtime means we’re more relaxed and have time to contemplate what we want.”
Relaxing on a beach with time for reflection can make us aware of any dissatisfactions with our current status or job.  It is also an opportunity to think what else you might do if stuck in a rut and you want to “take back control” of your life.
But what is involved when starting up a new business?
The key is to identify a clear purpose and define the product/market mix for your business, essentially to be able to answer “why” questions. This may require research but you cannot start planning until you have a clear purpose. Turning dreams into reality is more than simply having a good idea!
To help you find your purpose, here is the link to a TED Talk, ‘Finding your Why’ by Simon Sinek.

Find your Why before you go any further with your start-up

The core of Sinek’s argument is that all successful businesses have a belief in the core proposition which in turn inspires others.
In essence, he says, people buy into a product or service out of self-interest, and this is why the self-belief of the business’ founder is crucial to its success. This explains why sometimes even the best capitalised business with the most innovative products can fail, because they fail to convey a fundamental belief, or enthusiasm, for what they are doing.
This is not about money or fame and the most successful companies, such as Apple succeeded because their founders not only believed in what they were doing but were able to persuade others that buying into that belief would in some way enhance their own lives.
So, when you are thinking of starting up a new business this is central to whether it will succeed or fail.

When is the right time to launch?

It does not really matter when but you shouldn’t do so until you have identified your “Why”.
Of course, in preparing to launch you should do research such as trialling the idea most likely with test marketing slightly different products/services with slightly different markets/customers before settling on your core proposition. Once you know what will sell you can develop a plan that might be used to raise finance or simply be used as a discipline for following so you don’t get hijacked by others who come along with other ideas such as where to spend money on promotion initiatives.
Another key decision is what type of business, you should trade as, whether as a self-employed sole trader, as a limited liability company or as a partnership with others. Each has advantages and disadvantages which will inform your decision.
Other factors might be the state of the economy, industry or annual cycles, availability of finance, people and other resources or opportunity.
It might be counter intuitive but during a recession can be a good time to set up a business since established businesses often take their eye of their customers when they switch their focus to one of survival. This is particularly true for larger businesses since they are also less agile and often unable to cope with a changing market.
In summary there is no right or wrong time to turn your start-up dream into reality providing you are prepared.

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Banks, Lenders & Investors Business Development & Marketing Finance

Why the current model of free market capitalism is failing SMEs

synbol of capitalism for the richIn the late 1970s the then UK Prime Minister Margaret Thatcher and US President Ronald Reagan both espoused the idea of minimal state regulation and of allowing free market capitalism to reign relatively unchecked in line with the theories of the Nobel prize-winning US economist Milton Friedman and The Chicago School, as it was called.
The assumption was that the weakest businesses should be allowed to fail and only the strongest would survive, which would benefit businesses, consumers and result in strong economies. It also assumed that the private sector would provide everything from energy to transport infrastructure to education at a lower cost than if they were state-funded.
Since then we have seen the 2008 global financial crisis, the introduction of a programme of austerity in the UK, central banks reducing and keeping interest rates artificially low, productivity in decline and a widening of the income inequality gap with increasing wealth concentrated in the hands of approximately 1% of the population while wages have barely risen for the majority.
In March the former governor of the Indian Central Bank warned, in an interview on the Radio 4 Today programme, that capitalism is “under serious threat” as it has stopped providing for the masses.
“It’s not providing equal opportunity and in fact the people who are falling off are in a much worse situation,” he said.
It should be no surprise, therefore, that so-called populist and nationalist movements, largely seen as extreme right or extreme left, have been on the rise across Europe as much reported in Italy, France, Germany and UK and also in the “Make America Great Again” USA.
Indeed, as the columnist Bagehot had reported in the Economist the previous June, that something is wrong with the current model has begun to be recognised in Conservative circles, notably by Michael Gove, who, he said, was lamenting: “the failure of our current model of capitalism to deliver the progress we all aspire to”.
The implication is that there is both “good” and “bad” capitalism and that the current situation is far from good.

What are the implications of “bad capitalism” for SMEs?

Top investor, influencer and author of Principles, Ray Dalio, Co-Chief Investment Officer & Co-Chairman of Bridgewater Associates, L.P. in New York, has produced a detailed analysis of the effects of what has gone wrong and how capitalism should be reformed.
He says: “Over these many years I have .. seen capitalism evolve in a way that it is not working well for the majority of Americans because it’s producing self-reinforcing spirals up for the haves and down for the have-nots.”
Dalio also argues that while necessary in 2008 the results of the Central banks’ actions have been to drive up the prices of financial assets focusing investors on financial returns in the short term at the expense of investing for the longer term.
While his focus is on the USA, much of his argument applies to the UK also, in the outcomes being a rise in rent-seeking investment, which puts nothing back into businesses, the economy and society, a race for higher and higher CEO pay, short-termism and a marked lack of highly-educated and skilled young people coming into the workforce.
All of these make it increasingly difficult for SMEs to thrive and grow.
What is needed, he says, is a re-engineering of the capitalist system, to better and more fairly divide the economic pie and to have a system of accountability that makes clear whether individuals are net contributors or net detractors to society. It also needs income redistribution by taxing the richest and using the money to invest in the middle and the bottom primarily in ways that also improve the economy’s overall level of productivity.

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Banks, Lenders & Investors Business Development & Marketing Finance HR, Redundancy & Trade Unions

What kinds of jobs will be taken over by automation?

automation of unskilled jobsIn late March, the ONS (Office for National Statistics) published its latest findings on the effects of automation on the jobs market.
It found that some 1.5 million jobs were at high risk from automation, but, tellingly, 70% of these roles were currently held by women. The next most at risk groups were part timers and young people.
The ONS calculates that around 710,000 jobs in the City may be taken over by automated technology, with around 39% of jobs in the accounting, legal and financial services sectors most likely to be automated and that 34% of roles in tax advice could be affected..
Waiters and waitresses, shelf fillers and elementary sales occupations, are most likely to go, all roles defined as low-skilled or routine. Increasing numbers of factory workers are also at risk of being replaced by machines.
Least endangered are medical practitioners, higher education teaching professionals, and senior professionals in education although many of their support functions such as data capture and preliminary assessments are already being done by computers.
Deeper analysis suggests that automation has already dispensed with some lower-skilled work because although the overall number of available jobs has increased, according to the ONS, these are in low or medium risk occupations.
According to Maja Korica, associate professor of organisation at Warwick Business School, 20% of the Amazon workforce, for example, may already be made up of robots.

Are the economy, employers and businesses prepared for the risk from automation?

While it seems that manufacturing is already moving ahead with automation, the question is whether there will be enough higher-skilled people available for the future.
The take-up of apprenticeships by business has repeatedly failed to hit targets set by the Government.
While the future for the economy is still so uncertain, many employers will continue to delay investment in the long term productivity benefits that automation offers.
In the short term, therefore, there continues to be a need for lower-skilled workers with demographic groups being overlooked by employers, according to Pawel Adrjan, a former Goldman Sachs economist who now works at the jobs group, Indeed.
He argues that employers will need to search across underemployed demographic groups (young people, single parents, ethnic minorities, people with disabilities) at least in the short term as more and more EU workers either leave the UK or decide not to come and work here.
Clearly, the economy and various sectors are still in a state of transition, so it may be that relatively low-skilled work will be around for a while yet. But when automation ramps up there will be a need for more skilled workers as operators. Despite the loss of some jobs, automation offers scope for everyone involved to benefit.

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Banks, Lenders & Investors Business Development & Marketing General

March sector focus on UK food production, imports and exports

UK food export and importTea, the UK’s favourite beverage, could become a luxury if analysis by HSBC of a no-deal Brexit is to be believed.
The analysis, published by Business Insider in January, puts the amount of food imported into the UK at 80% if ingredients for processing products are included. Tea, for example, may be processed in the UK but is not grown here.
The prospect of no easily-available cuppas should really concentrate the mind!
Joking aside, an examination of UK food imports and exports indicates just how closely-integrated the food and food processing supply chain really is, and how much relies on the EU.
An analysis of the food industry must cover trade in both ingredients and processed foods. It is complicated by the fact that some ingredients, such as beef, pork and lamb, are often produced in UK but exported for processing and then re-imported as finished products such as cuts of meat ready-packaged for sale or as ingredients in ready-meals. This is the result of us in UK having so few processing facilities.
A further complication for UK food producers/farmers is the shortage of labour, from overseas workers for picking and packing to HGV (Heavy Goods Vehicles) drivers for transport.
This all suggests the likelihood that the cost of food imported into the UK is likely to rise sharply.

What food and drink does the UK export and to where?

According to the most recent statistics from the FDF (Food and Drink Federation) the top ten UK exports by value, in order, for 2018 were:

  1. Whisky
  2. Chocolate
  3. Cheese
  4. Salmon
  5. Wine
  6. Gin
  7. Beef
  8. Beer
  9. Breakfast cereals
  10. Soft drinks

At the moment it calculates that some 75% of this trade is to countries within the EU and as such may mean that new trade agreements, tariffs and so on may have to be developed with both EU and non-EU countries. Some UK food products have EU Protected Food Name status.
Non-EU target markets are likely to include New Zealand, Canada and/or the USA, China and other Asian countries but again all will need trade agreements to be put in place.
ADAS, the UK’s largest independent provider of agricultural and environmental consultancy, rural development services and policy advice, has analysed some of the potential opportunities for the UK to pursue in developing food exporting outside the EU.
For beef and veal, it suggests China, rest of Asia and Africa for offal and the USA for premium cuts but lists among the UK’s weaknesses its limited market access, uncompetitive pricing and the lack of processing facilities.
It is a similar story with sheep products, with the additional factor of already-established competition from Australia and New Zealand. Pork exports could be targeted at South Korea, Vietnam, China and the rest of S Asia but this will take time to put in place.
For dairy products ADAS sees opportunities in countries where there is a growing and affluent middle class, such as China, the Middle East and North Africa.
The UK already has an established global trade for its cereals and oilseeds with Algeria, Tunisia and Japan and here, too there may be potential for further market development.
The AHDB, (Agriculture and Horticulture Development Board, Stoneleigh, Warwickshire), too, sees potential for expanding UK food exporting particularly in dairy products.
Its analysis says: “The main trade-related opportunities of Brexit for the UK dairy industry will focus on displacing imports or growing new export markets. If the UK manages to negotiate a trade deal with the EU allowing tariff-free access, then the likelihood is for business as usual with the EU.
“However, if not, any import tariffs imposed by the UK could provide an opportunity to substitute a number of imports with British milk. Experience from the EU suggests that tariffs may limit the scale of imports of commodity-type products, although speciality products will probably still reach the UK.
“Combined with increased supply chain investment, this could see the UK progress as an industry.”
While opportunities for export are identified in all the analyses, they are contingent on the ability to negotiate Free Trade or Low Tariff agreements with potential customers as well as fending off already-existing arrangements that have been established by the EU.
The other glaring UK deficiency is in the scarcity of in-country facilities for processing foods for export.
It also remains to be seen how UK farmers and growers will be affected by the loss of various agricultural subsidies that have protected EU farmers for many years.

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Business Development & Marketing Cash Flow & Forecasting Finance General

Is outsourcing a blessing or a curse for SMEs?

outsourcing can reduce office chaosAccording to the GMB union the Government’s use of outsourcing has increased since the collapse into insolvency of the firm Carillion at the start of 2018, pushing the value of contracts up by 53%.
Whether the increasing use of outsourcing is a good or a bad thing depends on many factors.
For those sub-contractors and suppliers to Carillion who either lost contracts, money or work, it clearly was not a good thing as they await the outcome of investigations by Insolvency Practitioners to see whether there will ever be any recompense.
Pertinently for those owed money when a company enters an insolvency process, its employees are paid in priority or by the government if there aren’t sufficient funds, whereas its sub-contractors are treated as unsecured creditors and rarely paid anything like the amount they are owed.
But many SMEs depend for at least some, if not all, of their revenue on providing various outsourced services to their clients, from IT support and website building, to supplying parts or labour as part of a supply chain in construction, engineering and elsewhere.
Many self-employed people also provide services, from book keeping to marketing services.
The problems come when the buyer of the services is less than prompt about paying, often much later than in the terms and conditions, or perhaps they put pressure on suppliers to do work either for free or at extremely low cost, offering the “carrot” of more work or exposure that will be good for their business and result in further work.
Many self-employed people report, however, that the “carrot” fails to materialise and that in fact it puts a downward pressure on people and businesses offering services in their sector.
There is no doubt, though, that for those SMEs with the right skills and offering, and especially where there is a skill shortage, outsourcing can benefit both parties.

How to maximise the outsourcing benefits and minimise the risks

While using outsourced skills can improve a business’ output and reputation while minimising costs or at least avoiding employee liabilities, there are some pitfalls to be wary of.
The main ones involve not having the skills and owning intellectual property in-house which can expose you to supply and demand costs when business is growing. This is common in the construction and IT industries.
There is also the potential for the leak of sensitive information by people who are likely to have less loyalty to the business than those who are directly employed.
Another common problem is a lack of clarity about roles and contractual obligations.
Consistent quality of the work being provided and also adherence to deadlines may also be a problem.
At the initial stages of choosing a business to which to outsource a function or task, therefore, there needs to be very clear and detailed discussion of all the above issues with clear contractual obligations underpinned by deadlines with processes laid down for quality control and confidentiality together with penalty clauses should the provider fail to meet them.
By the same token, there should be a clear agreement on payment amounts and dates.
All of these should be included in a written agreement and signed by both parties as a contract which most likely will only ever be referred to when disagreements arise.
Both parties, those offering outsourced services and those buying them, can benefit from the transaction, but only if there is transparency with safeguards in place as well as honesty and integrity.

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

What’s ahead for the retail sector in 2019? – February sector focus

retail vanishing from high streets?It has been obvious for some time that the High Street is undergoing massive changes as online shopping gains a growing share of the retail pie.
Not a week goes by without another announcement of a “big name” closure or restructure and the New Year has been no different after mediocre Christmas sales with Hardy Amies and HMV falling into administration for a second time, Patisserie Valerie and Odd Bins filing for insolvency and Marks & Spencer announcing further store closures as part of its ongoing restructuring.
The figures make gloomy reading.
Deloitte says it has been instructed by more than 20 struggling high street chains in the past two months to assess whether they are eligible for restructuring their debts and lease obligations, according to the Sunday Times.
Towards the end of January the Guardian carried out a survey of the decimation that has beset High Streets in 88 major town centres in England and Wales and found that they have lost 8% of their shops on average since 2013.
Some have fared worse than others with Stoke on Trent topping the list with a loss of 23% of its 415 stores in five years.
Clothing and restaurant chains have fared worst, according to the research, but, surprisingly perhaps, charity shops have also been hit.
By contrast it also revealed that “a thousand extra hair and beauty salons have sprung up in our town centres”. Also, convenience stores and independent supermarkets have also grown in almost all town centres.

The stresses and strains on the retail sector

In common with other businesses, but arguably having more impact on SMEs, retail has had to contend with rising minimum wages and pension contributions for staff.
But added pressure has come from the high cost of rent and of town centre business rates, both of which the online retailers escape. Online retail now accounts for 20% of consumer retail spending, which adds to the pressure on High Street retailers as consumer buying habits change. This 20% figure when compared with 8% of shop closures would suggest there are many more closures to come.
At the moment, there are signs that worry about the future of jobs and the unknown impact of Brexit is currently putting a dampener on consumer spending and confidence.

Is there any light in 2019 at the end of the High Street retail tunnel?

Certainly, the Sports Direct owner Mike Ashley seems to think so, as do some others.
HMV has just been purchased by a Canadian business, Sunrise Records, although 27 stores will be closed as part of the deal.
Mike Ashley has purchased a share in House of Fraser stores and Evans Cycles to add to his growing portfolio and has recently had some success in renegotiating rents with landlords in some shopping centres, saving some House of Fraser stores that had been under threat. He is also laying siege on Debenhams hoping to pick up another High Street trophy.
Ashley has been vocal in calling for a complete rethink on business rates and for a 20% sales tax to be imposed on online retailers which would help justify his acquisition strategy.
Sir John Timpson has also called for business rates to be replaced with a sales tax operating in a similar way to VAT.
The MP Grant Shapps has also called for radical action to save the High Street, including a reduction in business rates with which he claims the government has so far only “tinkered” with.
These calls have also been backed by Mike Cherry, chairman of the FSB (Federation of Small Businesses), adding “A healthy high street should be diverse – not just featuring retail but also hospitality, services like hairdressers as well as gyms and shared workspaces for the self-employed. High parking charges and a lack of spaces often put off shoppers from visiting town centres, instead favouring out-of-town retail parks with free parking.”.
To add weight to their argument the OECD (Organisation for Economic Co-operation and Development) has said Britain has the second-highest property taxes in the world with business rates, council taxes and stamp duty making up £1 of every £8 collected by the Treasury.
In a sign of some movement in December it was announced that Nicky Morgan MP, chair of the Commons Treasury Select Committee, will hold a joint evidence session with the Housing, Communities and Local Government Committee to agree the terms of a new inquiry into the business rates system.
The death of the High Street has been predicted for some years but there are signs that some people feel there is life there yet, subject to some radical rethinking and tax reform.

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Business Development & Marketing General Interim Management & Executive Support

How do businesses develop managers to become good leaders?

good leaders helping othersAmbitious people often aspire to becoming senior managers in their organisations and some achieve their goal, but how much thought is given to whether they will be good leaders?
Training is essential for many professions but in many businesses, it is often the case that people are promoted into management jobs because they were good at something else.
While the individual may have been a top performer in their role, it is rarely asked whether that makes them capable of managing other people performing those roles.
Unfortunately, the skills required to manage people well are often a completely different to the skills needed to get on the job ladder and show promise early in a career.
Good leaders need both people skills and strategic sense. They need to be well-organised, know how to prioritise without micro-managing, know how to recruit and motivate the right people and how to handle difficult conversations and decisions.

A two-day management training course is not enough

Business profitability is dependent on management for setting goals, planning and implementation. Getting support for achieving the goals and implementing the plans involves people skills, to engage and communicate with others and motivate them in pursuit of the productivity they assume.
Such people skills are rare and not innate to even the most skilled operator in their chosen field.  They have to be learned, developed and practiced, ideally without causing too much damage although mistakes will be inevitable.
Often, managers are thrown in at the deep end with little support and even where there is some acknowledgement that training is needed two-day management training courses are not enough.
Business culture is also a major factor when developing leaders. Given that mistakes will be made, a blame culture will discourage initiative or even decision making so embracing mistakes as an opportunity for learning is imperative. It might however be right not to tolerate making the same mistake more than once.
Therefore, if a business wants good leaders it needs to create the right culture and invest time and effort into helping develop leadership skills.
There are any number of leaders who have published details of their daily schedule, which invariably includes everything from getting up before dawn, fitting in some exercise or yoga, a healthy, energising breakfast drink, to detailing precisely the time it should take for every activity in the diary for that working day as well as extra-curricular time spent on worthy activities “giving something back”.
What is often missing is how they developed their people skills and allocate time for ongoing personal leadership development, for reflection on their own performance, for learning and crucially time spent learning from others whether role models, senior managers, colleagues or subordinates,
Good leaders, in my opinion, need training and practice with ongoing support and mentoring long after taking up their first role as a leader. This will be painful as it involves acknowledging mistakes and feedback on how effectively they have managed situations.
Like most rewarding achievements, effort and pain will reap the benefits of success so long as achieving goals, self-awareness and awareness of others are incorporated into the skill set. This is not for everyone.

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Business Development & Marketing Cash Flow & Forecasting General

Have you reviewed your marketing strategy?

time for a marketing strategy reviewConditions and circumstances in business constantly change so it is necessary to regularly review all your various activities and certainly do so at least once a year.
The New Year is an ideal time to do this, and in particular to revisit your marketing strategy, especially in the light of the confusion and uncertainty that has surrounded the business climate during the ongoing indecision about the way forward on leaving the EU.
There is some evidence that SMEs have been holding off on investment decisions and in searching for new business in the light of this and there is also the temptation to hold back on marketing expenditure.
However, the general advice is that you should not scale back on marketing during an economic downturn or when there is uncertainty. The argument is that even if your business is a well-known name if it disappears from view existing and potential customers may conclude that you have gone out of business.
If anything, this might be a good time to beef up your marketing strategy, thus sending out the signal that you have confidence in your business and its future.

One size does not fit all in marketing strategy

Marketers are always keen to encourage clients into engaging activities in whatever the newest tactic is but this can be a waste of money as well as diluting your message if all your competitors are jumping on the same bandwagon.
Retaining existing customers should be a key component of any strategy, not just finding new ones especially when there is a lot of change in your market. Indeed a downturn can be a huge opportunity if your competitors are not focussed on retaining their customers.
Marketing is not just about promotion and selling but also involves having products and services that customers want, distributing them in a way that makes it easy for them to find and buy, and setting a price they are happy to pay that leaves you with sufficient profit to justify the effort.
If you set up your marketing strategy having first identified your ideal customers and created profiles for them as well as identifying where they are most likely to be active, you will already have a key element of your marketing strategy in place.
You should also have a clear idea, if you regularly check the metrics, (results of activity) where your efforts have gained the most traction, whether this is visits to your website and how long visitors stay there, or whether it is the interaction you have gained on social media platforms, or the viewings and engagement of email marketing.
Equally, you should have an idea of what promotion activity works best, such as adverts, articles, leaflets, blogs, videos, or emails as examples.
Often businesses believe that they must take up the latest promotion idea, whether it is appropriate to them or not, as was the case with videos, resulting in a plethora of frankly dull “talking heads” that eventually turn off viewers.
The best marketing strategy has clear goals, whether to get your business name recognised, to sell products and services, build a trustworthy reputation or to position yourself as an expert in your field.
How you achieve this will depend on your type of business, whether B2B or B2C, the platforms you engage on and how well-produced your promotion materials are.
Most importantly all marketing should put the customer and their concerns first and create a rapport that convinces them that you do truly understand their needs.

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Banks, Lenders & Investors Business Development & Marketing General Turnaround

New Year, new start – a good time for some SME forward planning

SME forward planning problem solverThe end of last year was a time that most businesses would prefer to forget given the continuing uncertainty after the Government postponed a parliamentary vote on the Brexit withdrawal bill.
Members of both the BCC (British Chamber of Commerce) and FSB (Federation of Small Businesses) were reportedly “horrified” by this development and it is unlikely that many will have been impressed by subsequent reported Government contingency planning for the UK leaving the EU with no deal.
The eventual outcome is so difficult to predict that much business planning is on hold. This is supported by research by the BoE (Bank of England) who canvassed 369 companies about their pre-Brexit planning and found that the majority had made no changes to their business plans for the coming year.
However, this is a new year and hopefully the December shambles may have a positive side if it stimulates more SMEs to realise the need for planning.
The New Year is in any case a time when it is traditional for SMEs to refresh their business and marketing plans and while the uncertainty over the future has to be acknowledged, especially for those SMEs involved in Europe-wide, just in time supply chains, I would argue that this is a perfect time to accentuate the positive and focus on innovative thinking in SME forward planning. I would also argue that the world won’t collapse whatever the outcome and while most SMEs will be affected by Brexit, there will still be business to do.

Accentuate the positive in SME forward planning

It is often said that there are opportunities in the most negative of situations if only you look for them.
In December, the BCC issued a Brexit Business Checklist, which local Chambers have issued to their members as a downloadable PDF.
The checklist covers all the aspects that a business needs to consider in preparation for March 2019, but while it is prompted by the current uncertain situation it is also a comprehensive guide to all those aspects of a business that should be a part of SME forward planning at the start of the year.
It includes future staffing needs, issues with cross-border trade, including potential border delays and tariffs, taxation (particularly VAT), intellectual property, reviewing existing contracts, regulatory issues (such as GDPR) and competition.
So, for example, if business growth is part of your business plan and you know you may need more staff, perhaps rather than put off plans because you are uncertain about whether suitable people will be available when you need them, think about whether you can introduce systems such as automation or AI to work smarter rather than relying on finding more people.
Alternatively, how about taking on apprentices and training them for your needs.  While reliance on short-term labour can provide flexibility and help deliver short-term profits, well trained and reliable employees are valuable when building a business that has a future.
Similarly, when reviewing contracts can you find suppliers of locally-sourced components or raw materials that do not depend on cross-border supply chains?  Could you source supplies from outside the EU? Could you modify essential ingredients in your products that make you less reliant on overseas supplies?
UK businesses have historically been some of the most inventive in the world. Perhaps the ongoing political shambles will provide the stimulus for them to return to the forefront of innovation.

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Business Development & Marketing General Turnaround

Corporate boardrooms – a hostile environment for female executives?

Rani Lakshibai - a woman taking on a hostile environmentDespite the depressing picture of a decline in the number of women holding senior executive positions in FTSE companies, there have in the past been many impressive female leaders such as Rani Lakshmibai, the Queen of Jhansi in India, who led her troops in battle (with her baby son strapped to her back) during the Indian Mutiny/First War of Independence in 1857.
In July this year the UK’s Cranfield Institute published the results of its 20th FTSE Women on Boards Report which reported a marked drop in the numbers of female CEOs (chief executive officers) and CFOs (chief financial officers) and other executives on the boards of FTSE 250 companies and that the numbers had remained static for FTSE 100 companies.
It found that there were 30 women in full-time executive roles at FTSE 250 firms, down from 38 last year, equating to just 6.4% of the total, and of these there were just six female CEOs and 19 CFOs.
Although the numbers of female executives in FTSE 100 companies had risen from 27.7% in October 2017 to 29% by July 2018, the women recruited were largely in non-executive director roles.
All this is despite a drive to reach a target of 33% of female executives on FTSE 100 boards by 2020, set by the government-backed Alexander-Hampton review.
At the moment just four FTSE 100 companies – the retailer Next, the online estate agent Rightmove, the financial services provider Hargreaves Lansdown and the builder Taylor Wimpey – have 50% or more women on their boards. The CBI (Confederation of British Industry) director general is also a woman, Carolyn Fairbairn.
Among the USA’s Fortune 500 companies, analysed by the Pew Research Centre, it is much the same story. Just 10% of 5,700 CEOs and CFOs in Standard & Poor’s Composite 1500 stock index companies are women.
There have been some high-profile female CEO resignations too, including Indra Nooyi, from PepsiCo, Denise Morrison, from Campbell Soup, and Meg Whitman, from Hewlett Packard.

Changing the boardroom culture to a less hostile environment for female executives

There is some evidence that the way female executives are treated is different from the way male executives are.
In an article in the Evening Standard recently the writer Anthony Hilton cited the treatment of top 10 accountancy firm Grant Thornton’s female CEO Sacha Romanowich, who he said was “effectively forced to resign” after three years.
An anonymous memo was sent to the press, he says, raising concerns about Romanowich’s alleged “socialist agenda”.  She had talked about social mobility, capped her own remuneration to well below that of other Partners in Grant Thornton and introduced a scheme to give all the staff a share of the company’s profits. Some of the company’s rivals spoke out about the brutal treatment she had been subjected to.
It was a similar story of rumour, innuendo and gossip, he says, that led to the eviction of Barbara Judge last year as chair of the IoD (Institute of Directors).
The question is whether such tactics would have been used against male executives.
On Tuesday this week, the Guardian reported on a call from Sir Philip Hampton, chair of the Hampton-Alexander Review referred to earlier, for consumers to boycott the firms that are “so clearly out of touch”.
This was after it was found that Five British companies have failed to appoint a single woman to their boards two years after the target set by the Review.
Sir Philip, who is the CEO of pharmaceuticals company GlaxoSmithKline, said: “it would be good to see pressure from the media, politicians, ourselves [as business leaders] and consumers” put on companies that are clearly out of touch with the 21st Century.
There is a theory, called the Glass Cliff, that says that women (along with other “minorities”) are more likely than white men to be promoted to CEO of weakly performing firms or during times of economic decline. Arguably, therefore, they are being set up to fail. If true this is appalling.
Historically, we are not short of examples of able female leaders, from the Rani of Jhansi mentioned above to Boudica or Boudicca, a queen of the British Celtic Iceni tribe who led an uprising against the occupying forces of the Roman Empire in AD 60, to Queen Victoria, who ruled over the vast British Empire, to two female leaders of the Tories, Margaret Thatcher and Theresa May.
It is true that female politicians are subject to some appalling bullying, insult and harassment particularly on social media.
It is also not unusual for male executives to explain the lack of female executives with excuses such as a shortage of suitably able female candidates, or that women are temperamentally unsuited to the cut and thrust of the boardroom.
Is it any wonder that in such a hostile environment for women the 19th and 20th Century attitudes of the male dinosaurs in many boardrooms are so hard to change despite the fact that they are limiting their businesses to a narrower pool of available talent than they otherwise might have?

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

Autumn 2018 Budget offered some cheer for SMEs and the High Street

Budget - pulling rabbits out of hatsThere were few surprises in yesterday’s budget given that much of it had been leaked in advance although it did allow the Chancellor to make a joke about no new rabbits being pulled from hats.
Much of the budget was aimed at addressing the concerns of SMEs on the High Street with a promise to cut business rates by a third for those retailers in England with a rateable value of £51,000 or less. This offers an annual saving of “up to £8,000 for up to 90% of all independent shops, pubs, restaurants and cafes”, which should please the FSB (Federation of Small Businesses), which had asked that any relief be applied to “hospitality and service businesses, not just retailers”.
However, the Chancellor also stressed that the High Street had changed forever and that therefore there would be £675m of co-funding to create a “Future High Streets Fund” to support councils to draw up plans for the transformation of their High Streets, such as perhaps including converting empty shops into homes to increase town centre footfall.
SMEs and especially those in rural areas will also welcome the confirmation of a 30% growth in infrastructure spending (both on roads and IT) amounting to £30 billion, which included the £420 million already announced for pothole repairs.
Although the BCC (British Chambers of Commerce) wanted to abolish the apprenticeship scheme, SMEs did at least get some relief on their contributions which was reduced from 10% to 5%.
In a bid to stimulate stalled business investment in capital such as in plant & machinery, the Annual Investment Allowance is to be increased from £200,000 to £1m for two years from 1 January 2019.
The Chancellor announced that the UK would introduce its own tax on large digital companies, the likes of Amazon, with a global revenue of at least £500 Million a year.  He stressed that it would not be a tax on sales but on the in-country earnings of these companies expected to be at a rate of 2% and applied from April 2020.
The question is whether it will actually be introduced given that there will first be consultations and, given the time frame, how much help it will be to those SMEs already struggling because of the online competition?
Fuel duty rates were frozen for the 9th successive year, which will be welcomed by the Freight industry as well as others that rely heavily on vehicle use.
Entrepreneurs’ Relief was also tweaked with a number of measures including an increase in the minimum period throughout which the qualifying conditions for relief must be met to be extended from 12 months to 24 months.
While subject to further consultation before it is introduced on 1 April 2020, the maximum recoverable R&D tax credit in any tax year is to be restricted to three times the company’s total PAYE and NIC liabilities.
From April 2019, the PAYE tax-free personal allowance threshold increases quite significantly from £11,850 to £12,500 and the 40% higher rate tax threshold from £46,350 to £50,000.
The VAT registration threshold was frozen for the next two years at £85,000.

The budget also covered insolvency & tax avoidance by directors

And, slipped in with virtually no reaction from anyone so far is a change to the status of HMRC, which will now become a preferred creditor in insolvencies. Given that I have already reported on HMRC’s use of increasingly aggressive tactics including an increase in asset seizure from small businesses it will be interesting to see what difference this makes to HMRC tactics. This would overturn the 2002 Enterprise Act which removed HMRC as a preferred creditor but we have yet to see the detail.
Directors and others involved in tax avoidance, evasion or ‘phoenixism’ are to be made jointly and separately liable for company tax liabilities where there is a risk that the company may deliberately enter insolvency

And some fallout from Carillion

In the wake of the Carillion and other high profile business failures involving PFIs (Private Finance Initiatives) there will be no more such arrangements. PFIs will be abolished.
Finally, the national living wage is to increase by 4.9%, from £7.83 to £8.21, something that will bring little comfort to SMEs.
Of course, all of the above comes with the large caveat, that depending on the outcome of the Brexit negotiations there may have to be a second budget in the spring.
 

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Business Development & Marketing General Uncategorized

What are the benefits to SMEs of collaboration with corporates?

skydiving collaborationThe 2018 Global CEO Outlook by KPMG found that 70% of the 150 UK CEOs involved were in favour of collaboration with start-ups and SMEs.
Many cited the benefits to them of collaboration helping them to drive innovation to remain competitive and support their growth objectives, particularly where new businesses in the tech sector can help their larger partners to become more agile.

Collaboration is not a one-way street

One of the difficulties cited with collaboration, however, is achieving the right fit in terms of shared aspirations and culture. So, it is important that potential misunderstandings are ironed out before working together.
Both sides should want to establish a relationship based on trust which includes understanding others’ as well as their own needs and agreeing how any shared knowledge will be used. Equally, both sides need to be prepared to learn and this may be more difficult for those involved in a large corporation, where there are often clear and bureaucratic lines of communication and decision-making.
There is an argument that to be sustainable the corporate can learn much from the SME/start-up and how to think like a smaller business.
However, the benefits should not be one way.  While it is clear how large corporations can benefit, it is less clear what is in it for SMEs or start-ups unless they are agreed in advance such as access to contacts, finance, resources, technology and distribution channels.
A mistake that corporates make is thinking SMEs want advice when they generally want help to grow. Indeed, all too often the executives of large firms have little understanding of the problems facing small firms. They do however have access to resources that can benefit the SME.
A small business is unlikely to have the spare capital to be able to invest significantly in marketing or R&D. When resourced are limited and there is a prospect of running out of money, the issue for SMEs is the uncertainty of spending time and money while they search for sales that can be replicated. This can take longer and use more resources than the SME can fund hence the benefit to them is a leg up from a larger partner.
Once the SME finds its formula for growth, a larger partner can be particularly useful by helping with the planning and implementation. SMEs can learn how the “big guys” operate, how they establish supply chains and install systems and processes.
Working with others can be frustrating and is often a choppy ride, according to Stefan Tan writing in a blog for dashmote.com.
He describes it as being a bit like white water rafting, with all its thrills and spills but “the experience can be truly rewarding if you are able to endure the ride”.
He says it can take time to build a solid relationship and depends on both partners working to understand the benefits and limitations of each one’s corporate culture. Often this can be achieved by running a pilot project to iron out the differences and once that phase has been completed to then scale up activity, being mindful of KPIs and costs.
Above all, he says, they should be mindful that there will always be some cultural differences and that it is important to recognise that neither’s business model is better than the other’s.

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Business Development & Marketing Finance General

Skills shortages and recruitment problems for SMEs amid ongoing Brexit uncertainty

skills shortages and recruitment problems not just for fruit pickersI try to avoid the dreaded “B” word in my blogs but on this occasion, I can’t avoid it as the chorus of business voices highlighting skills shortages and recruitment problems grows larger and louder.
It is no good for Government to assert that it will all be fine once negotiations on the UK’s leaving the EU are concluded when the situation is no clearer now than it was when all this started almost two years ago.
Somehow, businesses need to carry on in the interim as well as planning for the future.  Some things just cannot wait and high on the list is where and how they are going to source the people they need at all skill levels, whether or not they trade abroad.

Some facts about skills shortages and recruitment problems

Firstly, the most recent complete set of immigration figures, published by the ONS (Office for National Statistics) showed that, in 2017, more EU citizens, 139,000, left the UK than came here to work, 101,000. This was the lowest level for five years.
The independent “think tank” Global Futures calculated that the fall in immigration since the decision to leave the EU was already costing the UK public finances more than £1 billion per year and research by Scott-Moncrieff found that 51% of SMEs put Brexit at the forefront of their worries, with even those not trading abroad linking it to a decline in spending and to skills shortages.
This translates on the ground to data from the West Midlands Chambers of Commerce revealing in their quarterly report that 53% of their members were reporting recruiting difficulties and YouGov figures reporting that 23% could not retain EU nationals.
In East Anglia, the business section of one regional paper highlighted interviews with SMEs, one of them with a small local electrical contractor who had been searching fruitlessly for qualified new recruits for five months.
Equally, there are regular reports of a shortage of nurses, doctors and other health care professionals in the NHS and care homes too are finding it hard to get staff.
I have noted in past blogs the sectors where qualified people have been in short supply for many months, including in construction, the Tech sector and in engineering. The Daily Telegraph has calculated that half of all postgraduates skilled in AI had migrated overseas, 33% to leading US tech firms, 11% to North American universities and 9% to smaller US businesses – a new “brain drain” in the making?
As far back as July the Independent was reporting that six in 10 businesses have had to spend money on extra incentives, pay rises and bonuses ranging in value between £5,000 and £100,000 to persuade skilled EU workers to work for them.

What action has there been to address skills shortages and recruitment problems?

Doubtless the Government, if challenged, would say that it is listening to businesses although the message does not seem to be getting through or is being treated with some scepticism.
Given that the UK has near-full employment, even unskilled workers may be able to command a premium and there have already been warnings from farmers that recruiting enough seasonal fruit and veg pickers is a serious problem.
In late August the Home Office announced that it had developed an online “toolkit” to help UK employers to register EU citizens with a new immigration status following Brexit and to help those citizens to get their new immigration status. This has yet to be tested and given the government’s less than stellar track record on commissioning new IT solutions it remains to be seen whether it will be user friendly.
Then there is the apprenticeship levy and the Government’s target of having 3 million new apprenticeships in place by 2020. This has hardly been a resounding success with the numbers of places having slumped over the nine months of the 2017-18 academic year by 34% compared to the previous nine months. Last week the FSB (Federation of Small Businesses) revealed that there had been a further slump in new apprenticeships in the year to June, down by 28%.
Not surprisingly, the FSB, the CBI (Confederation of British Industry), the IoD (Institute of Directors) and the BCC (British Chambers of Commerce) have all called for the scheme’s urgent reform.
The question is whether the Government will do more than “listen” to business concerns and actually do something practical that works.

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Banks, Lenders & Investors Business Development & Marketing Finance

Could proposed new rules on foreign investment in UK damage SME prospects?

foreign investment in businessThe Government recently proposed expanding its powers to review and intervene on foreign investment in UK businesses.
Under the proposals, which are subject to consultation, the Government’s remit would cover all UK businesses including SMEs, where previously it could only review proposed deals where there were national security implications. It would include powers to block takeover deals across all sectors of the economy.
The UK’s plans are reportedly in line with efforts in the United States, Germany, France and Australia and relate to concerns that China and other rivals are gaining access to key technologies.

How does foreign investment affect the UK economy?

The UK’s current account is a measure of the economy’s health.
It is calculated by adding up the goods and services of our exports and the income earned by the UK from overseas investments and subtracting those goods and services we import, income paid overseas for investments in the UK and the payment of things like international aid.
If this figure is negative it means that the economy has a deficit which can act as a disincentive to foreign investment in the UK, especially now, while business is beset by uncertainty and the prospect of exports being stifled by Brexit.
The most recent Office for National Statistics (ONS) figures, for January to March 2018, show that the current account was a deficit of £17.7 billion (3.4% of gross domestic product (GDP)) albeit this is a reduction of the gap for the third successive quarter.

How does foreign investment affect UK productivity?

According to ONS figures published in July this year British businesses, including SMEs, with foreign owners are up to three-times as productive as those with only UK investors.
It is not clear whether this is because overseas investors choose to put their money in the most productive UK businesses, or those which are already intensively involved in export, but there is also an argument that foreign investment comes from businesses that are already expert in the latest and most productive techniques of management, the organisation of work and the application of new ideas.
Readers might like to see a guide I recently produced on this topic: Guide to Productivity Improvement.

Why does a change in foreign investment scrutiny matter to SMEs?

The proposals have already raised concerns among MPs and notably the Institute of Directors (IoD) whose policy director Edwin Morgan said: “…the wide scope for intervention set out in the white paper could have a chilling effect on foreign investment in growing sectors of the economy”.
Oliver Welch, of the manufacturers’ trade body EEF also warned that even those companies not seen as a security risk “could end up caught in red tape”.
As many as 4 million UK workers are employed by companies with foreign investors, so a reduction in foreign investment could also have a significant impact on jobs.
More significantly, for SMEs hoping to grow and expand into overseas markets, many of whom are in the tech sector, access to investment is essential. Equally, as mentioned by the EEF, the last thing SMEs need is to have to engage with yet more Government red tape which is already a burden.
If the Government is proposing to widen its scrutiny of foreign investment to include key technologies on national security grounds, how does this square with its exhortations to SMEs to step up their efforts to seek more export opportunities?
Joined up thinking is not much in evidence here. We need policies that promote us abroad, not ones that isolate us from the rest of the world.

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Business Development & Marketing Cash Flow & Forecasting Finance Turnaround Uncategorized

SMEs, cash flow forecasting and resilience

cash flow forecasting in stormy weatherThe CEO of a business finance provider, Richard Pepler, of Optimum Finance Ltd was recently reported by the publication Business Matters Magazine to have suggested that entrepreneurs should take a business competency test similar to the driving test before being allowed to set up and run a company.
In fairness this was in the context of his stressing that cash flow forecasting and up to date management accounts were essential documents for a business to produce and monitor regularly.
This makes sense given that a recent survey of SMEs by American Express revealed that 46% of “senior decision makers” had reported that cash flow issues were distracting them from focusing on elements of business growth such as product development and marketing.
As my regular readers will know, I, too, emphasise that regular preparation and scrutiny of management accounts and cash management schedules are fundamental to business survival, resilience and business growth.

Why cash flow forecasting and control are more crucial than ever now

The latest Markit/CIPS service purchasing managers’ index for the services sector showed a reading of 53.5 in July, down from 55.1 in June – the slowest rate in three months.  It has reportedly also slowed down in the Eurozone services sector.
This should sound a warning note given that despite the UK decision in June 2016 to leave the EU, the services sector has remained resilient so far when compared to manufacturing, which has been much more volatile.
This year, at a time traditionally called the “silly season” by the media when politicians are on holiday, there appears to have been no let-up in the flood of Brexit-related noise from both sides of the divide.
In just the last few days we have had Mark Carney, Governor of the Bank of England warning that the chances of a “no deal” Brexit are uncomfortably high and Overseas Trade Minister Liam Fox putting the odds of this happening at 60:40.
The pro Brexit side seeks to play down the fears of lorry parks outside Dover, food and medicine shortages etc as absurd, with Sir Bernard Jenkins this week comparing such warnings to the fears over the Millennium Bug that turned out to have been fruitless and Jacob Rees Mogg asserting that the UK would thrive by trading under World Trade Organisation (WTO) rules while the EU would lose out.
With a global trade war in the background as well, is it any wonder that organisations like the FSB (Federation of Small Businesses) and the IoD (Institute of Directors) are complaining about an “information void” that is making contingency planning near-impossible. An IoD survey of 800 business leaders showed fewer than a third had made any Brexit contingency planning because of the uncertainty.
In my view it is precisely at times of extreme uncertainty that SMEs most need to be building their cash reserves and closely monitoring their Management Accounts.  I recommend that holding a surplus of cash offers a safeguard against any unexpected and unwelcome surprises as well as having the resources for what may be some stunning opportunities.
Now, more than ever, businesses need to build resilience into their finances and protect themselves from potential economic storms if they hope to thrive and eventually grow sustainably.

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Business Development & Marketing Finance General Turnaround

Leaders: Can you imagine turning off your phone when on holiday?

enjoy this tropical sunset more by turning off your phoneIt is well-known that a third of SME business owners take fewer than 10 days off per year and on average work at least 50-plus hours per week compared with the average of 37 hours for employees.
Even those who do manage to take a holiday often keep in touch with their offices and would not dream of turning off the phone.
This is hardly likely to please your family or whomever you are holidaying with, but have you thought about the damage it may be doing to you and your business?
 

Why you should consider turning off your phone on holiday

The most obvious reason is that you need time to relax and recharge your mental batteries. You are hardly likely to be able to do this if you are constantly attuned to the possibility that you need to be available to answer questions by phone or email.
Many business owners also suffer from a need to be constantly in control of every aspect of their operation and find it hard to delegate to others in their organisation. This means that too many are working in their business rather than on it and may be missing out on opportunities and ideas for growing and developing the business.
This focus on maintenance instead of strategy can lead to stagnation instead of growth.
This relates to the main reason why you should consider turning off your phone. You can relax properly. An uncluttered brain thinks subconsciously and can bring a perspective to problems. It affords you the time to reflect and through the process of reflecting on past successes and failures you come up with new ideas for the future.
You really ought to have the systems in place and sufficient back up to allow yourself to switch your phone off without anxiety. You should be able to reassure yourself that the business will continue without you, albeit only for a few weeks.
If however it really is impossible to be completely cut off from your business while on holiday, there are several things you can do to better manage that contact and carve out time to relax, refresh and reflect.
You can engage a call handling service that you can brief properly so that they can handle your calls in a way that only critical ones are passed on. Another option is for you to receive a daily report with details of anything that needs your urgent attention. You might schedule a daily 15-30 minute time slot to deal with anything that emerges knowing you can switch you phone off outside here calls.
If using a virtual assistant/ call handling service is not right for your circumstances you can identify someone to whom you can delegate to operate a similar system.  It may be that this will also help to identify areas that can be perfectly well handled by another member of your team in the longer term and free you from the need to control everything as well as from the fear of letting go of at least some control.
If you are planning a holiday and are willing to risk turning off your phone for most of the time it is wise to make some simple preparations such as informing all clients that you will be away and giving them the name of a person to contact with anything urgent in your absence. You will also need to explain to that person what they need to know about any current issues clients are facing.
Consider such preparations as business continuity planning just in case you need to take time off. What happens if you are ill?
If you really want to, you can resolve to take your break and relax reassured that it will be in the best interests of your business to do so.

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Banks, Lenders & Investors Business Development & Marketing General Turnaround

What is business anthropology and how useful is it?

business anthropology and the evolution of human behaviourAnthropology is the study of humans and human behaviour and societies in the past and present and business anthropology applies the same methodology to the business world.
It can therefore focus on a wide range of business behaviours, including management, operations, marketing, consumer behaviour, organizational culture, human resources management and international business.
If you read my blogs regularly you will know I am a firm advocate of knowing, understanding and monitoring every part of your business, from operations and processes to cash flow and profitability and of regularly reviewing your management accounts.
These are all very practical and crucial aspects of a business’ performance, but I would argue that no business can hope to sustain its success and profitability without also understanding the human beings with whom it engages.

So how and where is business anthropology most useful?

Understanding the interactions and likely behaviour of the human beings with whom your business is involved is important to many aspects of a business if you want to increase profitability and grow.
It can be especially important if you have identified a problem that needs to be addressed.
Employee engagement is crucial to sustaining and improving productivity, whether it is in developing new and more efficient processes or simply increasing sales. Issuing instructions is not enough.  Productivity initiatives are unlikely to yield results unless people are well-motivated and feel valued and it is therefore important to understand what matters to them and what is likely to motivate them. This is where business anthropology can be a useful tool.
Another aspect of business anthropology that can add to your insights is how the workforce communicates with each other and with external stakeholders such as customers; essentially this is its corporate culture.
Crucially, your behaviour as a leader and that of your managers defines the workplace environment and over time embeds the business culture. But if you want everyone to buy in to the business’ vision and culture you need to understand how to “press the right buttons” and again business anthropology can bring insights into this.
Knowing the causes of and how to manage performance and stress alongside profiling staff and customers to understand how they are likely to react can be helped by using business anthropology’s insights to improve the success of growth and productivity plans.
And finally, in an increasingly global culture where it is likely that once the UK has left the EU businesses will have to redouble their efforts to build trading relationships with many other countries the insights found in business anthropology can help to understand and apply the conventions found in other cultures and countries.

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Banks, Lenders & Investors Business Development & Marketing General

The pros and cons of setting up business in the countryside

business in the countrysideThere are undoubtedly challenges to setting up business in the countryside but in this blog, I will argue that there are also benefits.
Obviously, for some businesses, such as those related to agriculture, leisure and tourism, a rural location is essential for access to customers, but it is taking a somewhat narrow view in an ever-more connected world to discount the possibility of moving out or setting up away from an urban location.
There are plenty of examples of all types of business, from digital media companies to engineering, already to be found in rural areas.

The drawbacks to setting up business in the countryside

High on the list of drawbacks are the adequacy or otherwise of the IT and transport infrastructures and the availability of employees.
For a business that relies heavily on IT and a decent broadband speed with uninterrupted access can be a problem. In theory, however, this is a problem that is already being addressed by the Government’s Broadband Delivery UK scheme albeit not quickly enough to suit some businesses.
The transport infrastructure may be more of an issue if your business needs access to a decent road system for the delivery of either goods or services, especially if you need access for HGVs, or to be sure that employees can get to work on time.
It is worth investigating the likelihood of planned work on roads with the local authority when considering a rural location.
Employees are also key, especially if you are moving location. While some people might be happy to move most are likely to need cars to get to work. The other issue is recruitment which can be a critical factor if you need skilled staff since they may not be locally available.
Amenities may be another issue, as rural areas experience a diminishing supply of local bank branches, post offices and village shops.

The benefits to setting up business in the countryside

A rural location does not have to be somewhere deep in the heart of a green landscape, although there are plenty of farms that have converted redundant barns into small business centres, if that appeals.
Scattered throughout the UK are plenty of small towns, many of which have industrial estates on their outskirts. It is quite possible that setting up your business on one of these will mean that in addition to a potentially more reliable IT and transport service, there will also be opportunities for collaboration with other, neighbouring businesses.
Equally, the cost savings may be considerable, not least on business rates, and it is often easier to access business support grants and other funding specifically directed at business in the countryside.
Recruitment and staff retention may also be easier as more and more housing estates are developed in smaller towns and those living on them may appreciate the opportunity to use their professional qualifications and skills to work locally rather than face a lengthy daily commute to an urban centre.
If you are thinking of setting up a business in the countryside it is also worth investigating the local crime figures. On the whole, it is still the case that the figures are lower outside of the urban areas but check with the local police for any schemes that that focus on protecting businesses.
There may be challenges to setting up a business in the countryside, but it is a mistake to discount the option without proper investigation.

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Business Development & Marketing General

How should SMEs approach their marketing post-GDPR?

guerilla marketing post-GDPRMany SMEs issued emails to the contacts on their lists asking them whether they still wished to receive their marketing post-GDPR.
It has been suggested that many of these businesses were already GDPR compliant and such action may not have been necessary. The estimated the opt-in rate in response to requests has been approximately 10%, drastically cutting business contact lists if those who haven’t opted-in are removed.
However, rather than see this outcome as a disaster or as signalling the death of e-mail and digital marketing, it could be argued that it is a timely reminder that your marketing activity needs to be reviewed. I would argue that it should be regularly monitored, scrutinised and refreshed.
After all, as one small business recently told me, having a lengthy list of customers going back ten years or more is not in itself valuable if a proportion of them have neither communicated nor bought anything for years!
The beefing up of privacy regulations, therefore, can be seen as a prompt to review your marketing goals, tactics and strategies post-GDPR and there are a number of things you should do in response.
Obviously, you should have clear policies on privacy and these should be easily available for your customers to read on websites or as hard copy, as well as being mentioned on website contact forms and pages.
You should also review which of your staff have access to online platforms, such as Facebook, Twitter, Instagram and so on, that the business uses, ensure that they know exactly what they can and can’t say in line with both GDPR and company policy. They should also be aware that they may face disciplinary proceedings if they do anything that could damage the company’s reputation and most importantly they should be given adequate training to do it correctly.

Innovative and targeted marketing post-GDPR

But the change also means you may need to be more detailed and specific about the post-GDPR marketing in several other ways.
Firstly, you should look again at and refine the data you hold for your customers.  To effectively target the right potential customers or clients, data is key to the effective and economical use of marketing initiatives, but you should not hold inappropriate or unnecessary personal information.
If you monitor customer behaviour as a means of identifying key characteristics, as many e-commerce businesses do, you should ensure it is done in a way that is compliant with privacy regulations and does not constitute “spying” such as profiling or analysing without permission.
Secondly, as ever, the marketing goals post-GDPR need to be tightly defined and their effectiveness monitored whether they are about raising the business’ profile, encouraging trust or name recognition or for a specific initiative.
This means that any marketing activity, from emails to social media messages needs to be carefully and perhaps more tightly written.
It may also be worth exploring new marketing forms such as nudge marketing and guerrilla marketing.
Nudge marketing, first defined by Richard Thaler, is a technique for encouraging people to make decisions that are in their interests (as well as those of your business). A good example was the UK Government drive to encourage people to save for a pension. It introduced auto enrolment, which was compulsory on employers.
Employees had to actively opt-out and make their own provision if they did not want to be in the employer’s scheme.  The result was that the numbers of those saving for pensions increased significantly.
Guerrilla marketing uses low-cost and unconventional tactics, such as a flash mob, using stencil graffiti, stickers, or, as in one successful mobile phone campaign 2002, using actors who appeared to be just part of the general crowd and asked strangers to take a photo of them. During the interaction, the actors would rave about their cool new phone.  The point is to create a buzz, to be memorable and to get people talking in a way that spreads organically.
It may be that in the process of refreshing or redefining your marketing plan post-GDPR you will also find that some traditional forms of marketing, such as an actual letter to named customers advising them of a new initiative or offer that is time-limited, will also see a revival.
You should be mindful that marketing strategy and techniques never stand still and are constantly evolving and are only limited by the imagination.
As for how to deal with those who haven’t opted-in, it may be worth going through the list in detail to see if you have a ‘legitimate reason’ for keeping certain contacts. There is a huge difference between those on your database who made enquiries or were customers and those who were ‘scraped’ from a list. For B2B businesses you might consider that business emails are OK while personal ones should be removed. You might also send a more tailored email before simply deleting them.
Lawyers most likely will advise you to remove everyone who hasn’t opted in but this is understandable given that the new regulations haven’t been tested in court and they are right to be cautious. Whatever you do, you should log your decision and the reasoning behind it.
Happy marketing

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Business Development & Marketing General Turnaround

Is the UK freight infrastructure fit for the future?

UK Freight infrastructure for the futureIt is fair to say that the UK’s economic future as a trading nation post-Brexit will depend heavily on the efficiency of its ports, road haulage and rail freight transport, but the big question is whether the existing freight infrastructure is in a fit state to cope.
According to the Road Haulage Association 80% of all goods transported by land in Gt Britain are moved directly by road and the remainder will often need road haulage to complete the journey.
Road Haulage transports 98% of food and agricultural products and 98% of all consumer products and machinery and the industry employs 2.54 million people. It is the UK’s fifth largest employer and contributes £124 Billion in GVA (Gross Added Value) to the economy.
While the ports are investing heavily in their processes’ efficiency to attract trade, they are not responsible for the road and rail network on which they need to rely to move goods onwards.
A recent BPA (British Ports Association) report, Port Futures, highlighted some of the issues. These included a cumbersome planning process and lack of Government commitment to invest in improvements.
The RHA, too, has criticised the state of UK roads, 20% of which, it says, are five years away from being unusable and the Asphalt Industry Alliance has highlighted a sharp increase in pothole-related breakdowns resulting in expensive damage and delays to HGVs and citing Government neglect.
The FHA (Freight Haulage Association) points out that funding for rail improvement has been falling and added its voice to calls for infrastructure improvement.
Plainly the verdict of those within the freight transport industry is “could do better”.

Investigations on freight infrastructure – but will meaningful action follow?

In November last year the Government’s National Infrastructure Commission was tasked with carrying out an investigation into the issues facing the freight industry and the actions needed to solve them.
Led by Lord Adonis it is tasked with exploring options to improve the infrastructure, as well as looking at ways to use new technology to improve freight movement, covering congestion, capacity and carbon reduction.
It will produce an interim report in the Autumn.
The FHA is also holding a one-day conference in London on June 20 called Keep Britain Trading.
Topics will include the UK’s readiness for Brexit, specific issues affecting critical supply chains, border readiness at the ports and the vexed issue of managing Customs arrangements.
Will any significant action towards a new integrated national freight infrastructure result or will the outcome be yet more hot air?

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Business Development & Marketing Finance General

Is the rise of the Sharing Economy an opportunity for SMEs?

Sharing economy ideasFrom renting a city-centre bicycle, a place to stay overnight to a taxi ride, there are plenty of examples of the sharing economy, also called the “access economy” or the “demand economy”.
The big, established names in the sector include Airbnb, Uber and Etsy and what they all have in common is that they have been made possible by developments in IT and its widespread use, coupled with the idea that consumers may want access to goods or services for only a short time rather than buying them long-term.
But there is no reason why this type of business should only be the preserve of big businesses.  It is less about economies of scale because the overheads are relatively small, and more about being able to provide something that customers want.
One example is an Essex-based business, Borrowaboat.com, that allows boat owners to rent out their vessels. Within 18 months of launching they had 17,000 boats registered on their platform as available for hire all over the world, from Thailand to Suffolk’s River Orwell.
Arguably, therefore, there is no reason why SMEs cannot be successful in this sector. Suppose someone wants to an hour of a handyman’s time for help with a small household job, or for help with assembling a flat pack. Both are examples of potential services that could be small, shared economy businesses.
While there is clearly potential for consumer-oriented services that does not mean there are no opportunities in Business to Business, such as having people do research or handle business calls for short periods such as when you are on holiday.

What do SMEs need to do to build a successful Sharing Economy business?

The first and most obvious is to thoroughly research the mechanics of a Sharing Economy business model. There is plenty of information both online and in book form about the concept.
There are several online platforms like Kajabi, QE Bot, Simplero, Kartra that make it easy to set up and go.
Knowing your target customers and identifying their needs is crucial to launching a successful Sharing Economy business as is finding the resources to satisfy them.
What possessions or skills do people have that they are most likely to want to share and need to advertise, and are they things for which there is likely to be a demand from sufficient customers?
It doesn’t matter from which end you approach the market since you are finding suppliers looking for customers and customers for them, so essentially you are making it easier for both parties.
Marketing is key and often relies on paid-for promotion and Social Media to create awareness of the service.
One of the benefits of the Sharing Economy is the opportunity to differentiate your proposition for example by emphasising a commitment to minimising waste, to sustainable growth or to corporate social responsibility. It is surely more ethical to share goods or services than it is to own them but use them only rarely. Equally, demonstrating an awareness of the financial constraints many people experience and offering a solution through sharing can be a sign of a responsible, civic-minded business.
Creating a successful Sharing Economy business is about identifying a need and offering a solution that works well both for the business and for the individuals using its services.

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Banks, Lenders & Investors Cash Flow & Forecasting Finance General

How can UK manufacturers plan ahead given the current pre-Brexit uncertainty?

UK manuafacturer Port Talbot Steel worksIt has become fashionable in some quarters to downplay the importance of the UK’s manufacturing sector to our economy.
Yet the UK is the world’s eighth largest industrial nation, our manufacturing industry employs 2.6 million people and it contributes 11% of GVA (Gross Value Added as the measure of the value of goods and services produced in an area, industry or sector of an economy).
It accounts for 44% of total exports with SMEs doing particularly well representing 70% of business research and development (R&D) and providing 13% of business investment.
But no matter how innovative or agile, manufacturers still need a reasonable length of time to plan ahead as well as at least some degree of certainty.
Both of these seem to be in short supply at the moment.

What are the key challenges for UK manufacturers?

Manufacturing covers a wide range of products, from food to vehicles to machinery.
To keep their businesses healthy all manufacturers need to be aware of their competition, both at home and overseas.
A major concern is the control of cash flow, particularly costs, both payroll and raw materials or, if they are part of a supply chain, the costs of the components or ingredients manufacturers need to complete their part of the process.
In the run-up to leaving the EU, however, these issues have been far from straightforward.  Imported materials prices have risen because of the reduction in the value of £Sterling against other currencies, causing problems for the steel industry, for example.
Then there is the long-standing skills shortage, particularly for trained engineers, construction workers and even for low-skilled workers needed to pick and pack produce from farms, most of which have relied on EU workers. Already, we have seen the numbers of EU migrants reduced substantially over the uncertainty about their status post-Brexit. This has already threatened levels of manufacturing output.
While the Government would doubtless argue that this is in part being addressed by its Apprenticeship levy, the BCC (British Chambers of Commerce) has recently criticised the scheme’s implementation as unfit for purpose, noting that there has been a 24% drop in the numbers starting apprenticeships. In any case, it will take time before people are sufficiently well-skilled to be introduced into the workforce.
Equally, with the UK at near-full employment there is a question mark over whether there are even enough unskilled workers available.
It has been argued that adopting the latest technology and automation is the answer.  However, in some sectors, for a manufacturer to re-equip a factory needs considerable time for planning and to raise the finance, and again, the need for skilled people competent to run and maintain an automated production line. It is a big investment decision and one that understandably manufacturers are likely to be wary of in the current uncertainty.
Which brings us to the other dominant and vexed question of the moment and that is the as-yet undecided situation on tariffs, the customs union and the single market or completely free trade.
While remaining in the customs union with the EU after Brexit would protect exporters from tariffs it would also prevent them from reaching agreements with countries outside the EU. Completely free trade brings its own risks as to whether there is sufficient demand for UK products outside the EU. And then there is the potential loss of EU trade and most likely higher costs from tariffs.
Despite all these concerns, we are told that SMEs have been particularly successful in export markets over the last year or so. It is not, however, clear what impact this has had on overall volume.
Whether this will continue will depend heavily on the outcome of the negotiations over Brexit and the eventual agreements that are made.

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Business Development & Marketing General HR, Redundancy & Trade Unions Uncategorized

Are you undermining your business by ignoring equal pay?

equal pay how far have we progressed since this old suffragette posterDespite years of campaigning and even legislation it seems that many businesses are still ignoring the rights of women to have equal pay for work of equal value.
Tomorrow, April 4, marks the deadline for the UK Government’s legal requirement for businesses and public sector organisations employing more than 250 people to publish their gender pay rates.
As of April 1, approximately 7,000 of the estimated 9,000 businesses and organisations required to do so had complied and the results so far have made depressing reading.
According to the ONS, the median pay gap between men and women revealed so far is 18.4% in favour of men and the mean (average) gap is 17.4%.  The median gap, based on the difference between those employees in the middle of the range, is thought to be more accurate because the mean can be skewed by a small proportion of very highly paid employees.
The Equal Pay Act 1970 prohibited any less favourable treatment between men and women in terms of pay and conditions of employment and was replaced in 2010 by the Equality Act.
Yet it seems that many employers have continued to consistently ignore the law or found ways to circumvent it.
According to the ONS top of the list for ignoring equal pay are in businesses in the Finance and Insurance, Power, Education, Professional and Academic, Manufacturing and Communications sectors.
Perhaps given greater impetus by the #MeToo movement following the revelations of the Harvey Weinstein and other similar scandals, this may be a moment where the situation can no longer be ignored. High profile voices, such as the resignation of the BBC’s China correspondent Carrie Gracie in protest against her own pay disparity compared with male colleagues, have also put the situation under the spotlight.

Equal pay is about respect and valuing employees

Any number of excuses will be put forward for the disparity, such as the effect on career progression of women taking time out for pregnancy or the preponderance of women in relatively low-skilled or part time work.
However, as I have argued many times, crucial to a successful business is showing respect for employees.
There is plenty of evidence that those who feel valued, who are consulted about business developments or who are given opportunities for further training to improve their skills and progress their careers can make all the difference to productivity and to a business achieving its goals.
It makes no sense at all, especially in times of near-full employment, for a business to ignore or undervalue half the potential pool of recruits, i.e. women, who could be available.
Perhaps, 100 years after the birth of the suffragist movement began, we have finally reached a tipping point where there will be some real action on equal pay for work of equal value.

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Cash Flow & Forecasting Finance Rescue, Restructuring & Recovery

An interesting insight into the psychology of accepting too much work

too much work and a heavy loadI have warned in previous blogs about the dangers of over-trading and the effects it can have on an otherwise profitable business.
Over-trading is when a company is growing its sales faster than it can finance or fulfil them, in other words, taking on additional orders when it can’t afford to service or fulfil them.
The impact on cash flow is often concealed by the growing profits from growing sales.
The assumption that you cannot turn down business and must accept all orders is normally based on a rational fear of either leaner times in the future or that your customers will go elsewhere.
However, the American author and trader psychologist Rande Howell has an interesting perspective on the causes of and motivation for over-trading.
He outlines this in his book, Mindful Trading: Mastering your emotions and the inner game, and on his website mystateofmind.com.
While acknowledging that there is a fear element, the decision-maker’s fear of missing out, he attributes this to their mindset as a hunter.
The business leader, or trader as he refers to them, has a bias to act and therefore to chase after sales.
This can lead to taking action out of boredom because the mindset is about making things happen. Inaction, and the suspicion that opportunities are passing by, is therefore uncomfortable but it can also lead to acting on impulse rather than reason.
Howell also points out that there is a biological imperative in this behaviour in that the brain rewards success by releasing dopamine, the “feel good” chemical. Add to this Testosterone, which is associated with risk-taking and you have the elements of a behavioural pattern that can lead to over-confidence and unconsidered behaviour.

The danger of acting on impulse rather sticking to the business plan

As I have said before a well-organised business ought to schedule work and know when an order can be easily fulfilled.
When planning for growth, the business should look carefully at its finances and have a clear idea of its capacity.
I have also advocated in the past my view that those businesses with more demand than capacity should, instead of building more factories or taking on more staff, consider selling their existing capacity instead of selling more services or products.
This can be done in two ways, either by pricing to manage demand or fixing prices but managing expectations. No one minds waiting if the quality justifies the wait, at least until a competitor offers a similar quality at a similar price but quicker. This sale of capacity allows you to focus on quality of both product and service and avoids taking on more fixed costs in a febrile market.
Honesty and self-awareness, what Howell calls mindful trading, can help to combat the psychological components that lead to risk-taking and can strengthen the confidence in sticking patiently to the growth plan.

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Banks, Lenders & Investors Business Development & Marketing Finance General

Short termism still dominates shareholder and investor behaviour

short termism is rational when there's no light at the end of the tunnelThose who follow my blogs will know that I have criticised investors and shareholders for the short termism that has dominated their behaviour and thinking for many years.
It is a mindset that was highlighted in 2015 by Bank of England economists Andrew Haldane and Richard Davies, who argued that corporate and investor impatience was on the increase. Little has changed since then.
The emphasis has been on maximum return for investors’ money as soon as possible, and has also dictated high levels of CEO remuneration, but, as I have previously argued, these are not helpful for businesses that want to be around in the medium and longer term, after non-shareholding executives have moved on.
This particularly affects businesses’ ability to invest in R & D and in planning for growth and forces them to focus on immediate profits to pay dividends, which may not necessarily be in the best interests of their sustainability in the future.
As Haldane said in a BBC interview “companies risk “eating themselves” as shareholders and management were gripped by a form of short-termism.

Is short termism a reasonable position because of Brexit uncertainty?

Since the UK decision in 2016 to leave the EU, the ongoing Brexit negotiations have added an extra layer of uncertainty to business forward planning.
According to the CBI, in the year or so since the Brexit decision, businesses have been seen higher import costs, falling financial markets, weakening consumer spending and ongoing uncertainty. Its January 2018 economic review reported: “This is clearly hitting plans for capital spending in the year ahead, with around 40 per cent of businesses citing a negative impact from Brexit on their investment plans.”
In December last year the Daily Mail’s online publication This is Money, also told a similar story: “Investors have pulled nearly £4.3 billion from UK funds over the past 18 months.”
Immediately after last year’s election, the IoD (Institute of Directors) also reported a 34% reduction in confidence in the economy among its members.
“It is hard to overstate what a dramatic impact the current political uncertainty is having on business leaders, and the consequences could – if not addressed immediately – be disastrous for the UK economy,” said Stephen Martin, director general of the IoD said at the time.
In the face of rising political volatility and uncertainty about growth, both globally and nationally, it is difficult for institutional investors to know what to do for the best.
It pains me to say it, but in the light of all this, short termism among shareholders and investors may be a rational strategy, despite the longer-term consequences for businesses. At least until we can see light at the end of the tunnel.

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Cash Flow & Forecasting Finance General Turnaround

Why do you need regular Management Accounts?

regular management accounts reviews are your business map and compassWhen setting out on a car journey you need a destination, map, and ought to check the traffic and weather reports, so you can choose the optimal route. You also need to have enough fuel and money to buy more if needed. Indeed, there are many aspects of the planning that are taken for granted for regular trips that you will think about for a holiday or long journey.
Along the way, you will check where you are on the map, monitor traffic and weather conditions and make changes accordingly. You will also monitor your fuel and refuel as necessary. You might even monitor fuel efficiency and adjust your speed to reduce consumption.
This analogy can be applied to running a business. It can be difficult enough to keep a business on track to meet its goals and forecasts, even without the external effects of ups and downs in the economy and, currently, the uncertainty being caused by the ongoing Brexit negotiations.
Therefore, a business needs to be able to assess at regular intervals how it is performing as well as being able to spot early warning signs that something may be going wrong or veering off track. This is where monthly Management Accounts are so useful.
The components of monthly Management Accounts, as outlined in our blog of February 13, 2018, would ideally include an up to date Balance Sheet, a detailed Profit and Loss statement, a Trial Balance and summaries of Aged Debtors and Creditors.
These are the business equivalents that allow you to check where you are on your route map. They provide an indication of the state of your business, its continued health and its ability to reach its destination as defined by the goals you set and forecasts you prepared as part of your planning.
The Balance Sheet, for example, shows the company’s assets and liabilities and more importantly how much money is has in the bank, how much is due and how much is owed to suppliers and others such as HMRC. These are key to monitoring short-term cashflow, which needs to be well-managed if the company is to avoid running out of funds.

Regular Management Accounts are your early warning system

Ideally Management Accounts should be reviewed monthly, or at the very least quarterly.
They will tell you how well sales and margins are doing and how they compare with forecasts and targets. Organising them to provide detail can allow you to see performance by product line or by market segment, even by customer if you have some large accounts. You can also monitor costs which can also be reported in detail so in turn margins and profit contribution by product line or market segment can be monitored.
The information will allow you to adjust the business goals and forecasts as appropriate. If costs are rising, it may be time to review which suppliers you use, perhaps also staff overheads.
You might also monitor the cost of repairing and maintaining machinery or equipment and use this to assess when it should be replaced,
If there are financial anomalies, they may indicate fraud or other malpractices that need to be investigated and dealt with.
Above all, a regular review of Management Accounts will allow you to stay in control of your business and provide you with the information to make early decisions that move it forward in the best way possible.

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Business Development & Marketing Finance General Turnaround

How do we fix the UK’s IT skills shortage?

women and IT skills shortageThe shortage of people in the UK with IT skills is hardly news. For several years now, the sector has been relying on international workers to fill the gap.
However, the continuing uncertainty over the outcome of the Brexit negotiations has been compounding the recruitment problem as some overseas workers leave the UK and fewer are willing to come to the country.
Surveys in the tech sector have found that 50% of respondents have reported the skills shortage as a serious problem, of whom 25% said recruitment was a major challenge.
It has been calculated that UK digital sector will need nearly 300,000 new recruits by 2020 if it is to reach its full potential.

Are there any short-term fixes for the IT skills shortage?

Given the implications for business growth and development, the problem is becoming urgent.
However, increasing the numbers of well-qualified UK IT professionals is likely to take some time.
The most immediate actions businesses can take may be to look at some of their current processes and the skills profile of their existing employees.
There may be processes, particularly in manufacturing, that can be automated or others that could be outsourced. This would free some of the existing workforce for re-training and re-deployment. Of course, the results would not be immediate, but it could yield hitherto unsuspected benefits.
There may also be people in the existing workforce not currently employed for their IT skills but with some knowledge already that can be built on. Equally, offering employees further training has other benefits and not least their feeling valued and more secure in their employment.

Long-term solutions

Research has shown that women are under-represented in the IT sector. By challenging stereotypes businesses can encourage more girls to consider this as a future career. This should therefore start in schools.
Employers can help with this by getting more involved with universities, training colleges and local schools, perhaps simply at the level of encouraging school visits, holding in-school workshops and activities and by publicising the range of their activities in the workplace that need IT skills.
Inviting promising students into their businesses for work experience and to help with projects to give them a wider range of IT experiences may also help.
Sponsoring graduates or technical courses is another initiative worth considering.
Developing an apprenticeship scheme is something that more businesses need to do. This need not be limited to school leavers but can be offered to graduates, people looking to change career and indeed those who have retired but want to return to work.
Businesses may argue that they do not have the time or capacity to get involved in these initiatives, but there is a balance to be struck between the present and the future and if the shortage is impeding on their plans for development and growth then it makes sense to invest time, money and effort now rather than watch competitors take over.

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Business Development & Marketing General HR, Redundancy & Trade Unions

What is the purpose of a staff appraisal?

appraisal?For many businesses the usually-annual staff appraisal is seen as an opportunity for managers to review an employee’s performance, provide feedback on areas for improvement, agree trading needs, set targets for the coming year and address any problems that may have arisen in their behaviour.
As a result, too often employees view the annual appraisal with dread.  It depends heavily on their relationship with their manager and his or her ability to be objective.
Yet the appraisal can be of benefit to both employee and business if structured and handled in the right way.
Ideally, it will be seen as a constructive opportunity for an exchange their views, not simply as a tool for management to assess and, if necessary, improve the employee’s performance.

The constituents of a constructive appraisal

There needs to be a culture of trust and openness in the business and ideally, managers who are appropriately skilled, for example in asking good questions and active listening.
Ideally employees should be receptive, prepared to align with business objectives, learn and take responsibility for their performance.
The appraisal is an opportunity to recognise achievements and find out about an individual’s career objectives. It should recognise their achievements and be a genuine two-way conversation.
It should cover the whole period under review not just recent or isolated events and the result should be an agreed set of actions.
By the same token, it should also offer the employee an opportunity to feed back suggestions for improvement in company processes, ideas for the future development of the business and to highlight any processes that are clearly not working.

Set out and document clear appraisal objectives and purpose

The appraisal purpose, structure and process should be clearly defined and written down so that all parties are clear about what to expect. The aims, frequency and process should be clearly and simply outlined in the staff handbook.
It is helpful for both parties to have done some preparation for the meeting, ideally both should attend having completed the same questionnaire but from their own perspective. The completed documents can be compared and provide a framework for the meeting and its outcomes.
An appraisal is hardly likely to be seen as a constructive opportunity to all involved unless it is seen as a fair process. This could include appraisals always being carried out in the presence of a neutral third party, usually someone from the HR department or from the company to which HR is outsourced, whichever is applicable.
It should be clear that the business has made every effort to eliminate the danger of bias in an appraisal, perhaps because there is a clash of personalities between a manager and an employee.
Far too often the structure of an appraisal is seen as an occasion to be dreaded when properly defined and constructed it can be an opportunity for both individuals and the business to move forward.
I believe that appraisals should always be carried out by the employee’s line manager since their role is normally one of pastoral leadership. While there are many types of leadership, managers should consciously develop their own skills and style with the aim of getting the best out of their team. The appraisal is an opportunity to reinforce the relationship and improve everyone’s performance.

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Business Development & Marketing Finance General

Could there be a retail “bricks and mortar” fightback?

Happy "bricks and mortar" shopperThe inexorable growth in shopping online continues to put pressure on “bricks and mortar” retailers as is illustrated by the clothing and homeware retailer Next, which last week reported its third quarter full price sales up by 1.3% on the same time last year.
But Its High Street sales for the quarter were down by 7.7% compared with the same time last year while Next Directory sales rose by 13.2% compared with 2016 and 9.4% in the year to date.
Multi-channel competition from the likes of Amazon is forcing retailers to revisit their business models and the cost of retaining a High Street presence is causing them to struggle to keep prices competitive. Another problem is the time and cost of delivery, again under pressure from Amazon and its Prime next day delivery service.
Nevertheless, many people still like to go to physical shops for the social interaction and the opportunity to touch and see the products.
One solution retailers have chosen is to reduce the size of their estates but retain a presence on the High Street with smaller stores, marrying the display of a smaller selection of products with the Argos Style online ordering and delivery system, or moving into concessions in department stores.
Marrying “bricks and mortar” space with innovative technology
As the BBC programme The Disrupters, suggests, there may be more innovative shopping models to come.
One it describes is the Moby Mart, tested in Shanghai, where a marriage of self-drive technology and a mobile “store” can be summoned to the customer’s neighbourhood.  They then enter the “shop” by swiping their mobile phone at the door, select products then swipe their way out again.  The idea is still at beta stage so there is some way to go before it becomes a reality.
That the physical retail space still has its attractions is illustrated by the fact that the likes of Amazon have ventured into real-world bookstores as well as buying a US grocery chain, Wholefoods, with more than 400 High Street outlets.
Alibaba, too, has been experimenting with ways to keep a physical presence while keeping costs to a minimum.
One idea is their pop-up café, under the Taobao brand, using facial recognition software to identify customers who are than able to enter to pick the food they eat and pay using their mobile phone rather than to cashiers.
Finally, the rise of discounters, like Aldi and Lidl, has been inexorable.  They continue to flourish and grow in physical retail spaces by offering own-brand, cheap but quality basic foods to undercut their rivals.
While ‘bricks and mortar’ retailers need to have a distinct proposition and provide a great service, convenience is a factor, but the battleground remains price vs perceived value. Getting it right will be a challenge and is one that Mary ‘Queen of Shops’ Portas still advocates despite recent claims that her “Save the High Street” campaign has failed following new figures showing that a thousand shops have closed over the past five years.

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

Short term thinking in business amid Brexit uncertainty

in the midst of uncertainty don't panicIt seems that hardly a day goes by without a new and negative headline about the UK’s decision to leave the EU and the prospect of an adverse outcome from the negotiations.
Here’s a selection from the Independent at the time of writing: “David Davis has conceded that Britain’s Brexit withdrawal agreement will probably favour the EU”, “UK financial watchdog warns bank moves likely to be irreversible”, and “20% of UK restaurants at risk of going bust due to Brexit”.
It is hardly scientific, but gives some flavour of the atmosphere currently dominating the headlines on the issue.
Whether business owners follow the news or not, it is hardly possible to be completely immune to the climate of uncertainty that is surrounding the process, not least because reportedly some 58 studies have been carried out on the likely impact of leaving the EU on various sectors of the UK economy, details of which the Government has so far declined to publish, allegedly for fear of jeopardising negotiations, but may now be forced to after a vote in the House of Commons.
What further pressure last week’s interest rate rise to 0.5% will put on businesses remains to be seen, but the prospect of further rate rises is unlikely to help any business struggling with debt repayments.
No wonder, then, that many businesses are putting growth and investment plans on hold and concentrating on short term survival.
But ultimately this is not a sustainable position to be in since the business that fails to innovate is unlikely to thrive or grow and stasis is generally seen as a forerunner to failure.

What can a business do in the face of continuing uncertainty?

The obvious is to say, “keep calm and carry on”.
But also, acknowledge that fear of the future can become a self-fulfilling prophecy that encourages short term thinking, caution and at worst frozen panic.  It is often the case that where some see only looming disaster others see opportunities.
So, we would urge businesses to do their best to look on the bright side, think and plan for at least medium term and do everything they can to keep their businesses in the best possible shape, from carefully managing cash flow and monitoring cost but at the same time actively looking for opportunities.
This may mean getting help from a restructuring advisor to thoroughly review all its operations and identify the strengths and weaknesses and suggest ways to transform, pivot, slim down or otherwise revise the business model and update processes in preparation for embracing the opportunities as they emerge.

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Business Development & Marketing General

How not to do email marketing

avoid email marketing being seen as spamTrying to catch people’s attention is not easy when their email inbox is flooded with emails they feel they have not asked for and have no time to read.
So, any business planning an email marketing campaign that wants to attract readers’ attention, whether it is passive to stay ‘top of mind’, or active and get them to sign up to offers, make further inquiries or buy an item, needs its communications to be engaging, relevant to the recipient and succinct.
Of course, an accurate profile of the ideal recipient, whether influencer or customer should have been researched and the goal of the piece of marketing clearly defined. So, writing the e-mail’s content should be relatively straightforward, shouldn’t it?
Indeed, irrespective of how great the content is, getting recipients to open emails to read great content is a challenge.
There are plenty of pitfalls to avoid if you don’t want your communication to be marked as spam or be listed as ‘unsubscribe’.

What to avoid when writing content for an email marketing campaign

A business’ credibility can be easily wrecked by an email containing spelling errors, typographical errors or broken links. The advice is to proof read thoroughly and preferably using someone who has not been involved in the writing.
Do not use deceptive subject lines that imply the sender and recipient have been in an ongoing conversation when they clearly have not been. Equally, do not send emails with no-reply to sender addresses. It is a disincentive to those who might be willing to engage further.
Whatever the purpose of the email, make sure it offers something of value in a way that interests the reader – hence the importance of a detailed customer profile.
This should be the first message before explaining how the sender business can satisfy that requirement, and even then, keep any information about the company as short as possible.
The subject header is key to getting the recipient to open the email. Once opened the recipient shouldn’t feel they have been duped into opening it, instead they should feel pleased they did.
Too many calls to action can feel like bullying or badgering and can be off-putting.
If the email is to contain images they should not take too long to load onscreen.  At the same time, do not rely solely on an image for the email.  Image-only emails are often seen as spam.
And finally, you have just eight seconds at most to get the reader engaged and interested so KISS (Keep it Simple and Short) is the way to go.

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Business Development & Marketing Finance General Turnaround

Don’t discount the awkward people in your business

awkward people are coolSocial misfit, loner or nerd. These are all words that are often used to describe awkward people.
In this context awkward does not mean deliberately difficult, disruptive or aggressive, but describes people who don’t quite fit in or interact socially with their group, peers or colleagues. Indeed, all too many amateur psychologists ascribe people with these character traits as being socially dysfunctional, or being ‘on the spectrum’, or worse, as having Autism or Aspergers.
But US psychologist, author and relationship expert Ty Tashiro argues that such people often have striking talents.
The author of AWKWARD: The Science of Why We’re Socially Awkward and Why That’s Awesome, argues that while such people are less likely to be socially skilled or good communicators they also have what he calls obsessive interests.
However, being socially awkward is not synonymous with being on the Autism spectrum.
Tashiro says socially awkward people are likely to have considerable focus and energy and to deliberately practice something that interests them repeatedly until they achieve mastery of it.
How can this benefit a business?
It is almost a cliché that to achieve mastery in an activity or discipline requires a single-minded focus and hours of practice.
So awkward people can often achieve a high level of expertise in what interests them.
The pace of technological change is being driven by innovation and advances in science so it is easy to see why having some awkward people in a business can be a huge benefit.
With the right level of understanding and support, an awkward person’s skill is a resource that can result in a ground-breaking innovation that could put the business ahead of its rivals.
So, it makes sense to recognise that an awkward member of your team may have hidden depths and to find ways of nurturing their interests and skills for the benefit of the business, its profitability and the security of everyone involved in it. Respecting, understanding and supporting them takes time and effort but the rewards can be stunning.
It is also called “leadership”.

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

The importance of a business review

carrying out a business reviewAt the very least a business review should be carried out once a year although sometimes it should be done more frequently, perhaps quarterly.
This is especially true when, as currently, the economic and business climates are so uncertain with a number of global and local situations in flux, especially in the current climate with inflation creeping up and the UK’s trading relationship with the EU being so uncertain.
At the same time caution should always be exercised in reading the signs and drawing conclusions from regular reviews, since the information gleaned may be subject to short term fluctuations rather than identifying the longer-term trends that might influence a change of strategy.
In addition to influencing strategy, a business review is a useful tool for assessing performance and making improvements to processes, systems or marketing as needed or identifying opportunities that may have been missed.

What should be covered in a business review?

The end goal of a review is to establish whether a business is performing satisfactorily or whether adjustments or something more radical is needed. Essentially, it is the business equivalent of the school student report for parents.
The review should bear in mind the current business plan and any previous reviews or analysis such as the last SWOT analysis (Strengths, Weaknesses, Opportunities and Threats).
It should review the goals that were set for the year and there should be some simple mechanism for scoring the results. It may be as simple as checking of goals have been achieved, exceeded or if there is a shortfall.
using a magnifying glass to look at detailA thorough review will look in detail at all aspects of the business, not just its financial position but also its systems and processes, employee performance, and sales and marketing performance in relation to defined goals that have been set for the year.
Indeed, surveying or simply speaking with customers to get their feedback and in particular their input on how any complaints were dealt with are also useful.
A review can also benefit from the input of staff. One useful way of achieving this is to carry out staff appraisals at the same time.
A key aspect of any review is to consider future opportunities and potential goals, in addition to those currently being pursued. This can influence research that might be carried out so it is available for incorporating into any future plans.
It is often said that no business can survive if it stands still, so a regular business review is an essential tool for setting goals and strategies for its future survival and growth

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Business Development & Marketing Cash Flow & Forecasting General Turnaround

Future business strategy – be as bold as you like

striking a mtachJuly and August can be a time for reflection and for mulling over the future business strategy ready for testing, refinement and implementation.
It is a time for a business owner or CEO to explore their vision for the company’s direction.  It is a time to unfetter the imagination.
The chief executive of Google’s parent company, Alphabet, has been quoted as saying: “If you’re not doing some things that are crazy, then you’re doing the wrong things.”
He coined the term Moonshots to describe possibly risky concepts like the self-driving car, that have the potential to be highly lucrative in the future.
At this stage exploring future strategy is about being as bold as possible, ruling out nothing.

Refining the vision into a workable future business strategy

The strategy can be an innovative way of doing things rather than a completely new product.
There are some important steps to turning a bold vision into a workable strategy and they involve testing the hypothesis.
The question to ask is whether it is a pragmatic concept that can be made to work and in conjunction with this is it something customers or clients would actually want.  Even the simplest ideas may never have been conceived in quite this way before.
At this stage, it may be helpful to involve employees, asking for their ideas both in terms of other potential new strategies or products and in terms of how they can be made a reality.  After all, they are closer to the actual process of making things work and hopefully to the likely customer reactions to the idea.
Involving employees from the start may throw up other, equally innovative ideas you may not have thought of.  It also gives them a meaningful stake in the business by making them feel valued and recognising their expertise.  Google, for example, is famous for allowing employees a day a week to play around with ideas rather than focusing on their usual tasks.
Many business leaders are reluctant to revel new concepts to a wider audience for fear they will be “stolen” by rivals, but there really is no substitute for the next step of getting out and talking to clients and customers to test the water.
If the feedback is positive, or even enthusiastic, the next step is to think like a designer and produce a prototype of the idea or new product then run a trial with selected end users.
With careful testing and planning even the wildest of bold ideas can be turned into a reality that can take a business in a new, but possibly related, direction as part of continued growth.
There is a story attributed to Swan Vesta, that after years of making boxes of matches with strike strips on both sides, they removed a strike strip from one side. This simple idea by one of their staff saved them a fortune.

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Business Development & Marketing General

The business summer party – a social occasion with a purpose

say thank you to customersBusiness activity can slow down in the run-up to the summer holiday season, which makes it a good time to host a summer party for clients and suppliers or maybe more importantly your staff.
There are some considerations when hosting a business party.
Obviously, the first is the budget.  It is not necessary to break the bank.  For example, are there local small businesses that specialise in catering and would welcome the opportunity and exposure that comes from supplying snacks, finger food, canapes and drinks for the event? Another advantage of this approach is that it frees the hosts to interact with guests.
Are your business premises able to cope with an influx of visitors?  One particularly well-known company with a large office in Suffolk is fortunate to have not only an award-winning building in Ipswich, but a roof garden there for hosting its summer party.  But with a bit of ingenuity smaller businesses may be able to create a welcoming space outdoors for catering around its entrance from which you can take guests on tours around the building or factory.

The business summer party – a chance to say thank you

Hosting a summer party at the business premises can be a great way to say thank you, but a business summer party has other benefits.
A successful event can raise your business profile. For example, the party can also be used as an occasion to raise money for a local charity via raffles, tombolas, or perhaps a chance to win a particular product or service.
If, for example, the business has added new services or products, or has upgraded its equipment, the summer party can be useful for informing guests of new possibilities that may benefit them.  It is an excellent way of marketing the business and demonstrating that it is both agile, innovative and more importantly has confidence in its future.
It is also an opportunity for people to network and make new connections. New clients or suppliers may not have met each other and the relaxed, but focused, setting of a business summer party is a great way for them to make connections and perhaps inspire synergies and collaborations that they might not otherwise have come across.
Despite any reservations about clients meeting other clients or them meeting suppliers, they will see you as key in any relationships they form.
If the business premises cannot accommodate a party, you might be more adventurous than a meal or buffet at a local venue, consider a barbecue in the park, drinks at a local beer or music festival, or perhaps an activity day such as a game of cricket or paintballing.
You are only limited by your imagination and your guests will appreciate the effort you put in.

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Business Development & Marketing Cash Flow & Forecasting Finance General

Big data, statistics and decision-making

big dataBusinesses should always be aware that statistics can be manipulated and that analysis of so-called big data sets is a complex process that produce highly variable results.
Big data is defined as enormous amounts of complex information that can only really be processed using extremely powerful software using multiple servers.
While it can, over time, reveal trends, it is also subject to variability as data flows can be highly inconsistent with periodic peaks and troughs.

Interpreting the data

Then, there is the problem, as with all statistics, of drawing useful conclusions that are not skewed by what is selected and what people want the data to show.
A good example is the acceptance that a majority of the UK, 52%, voted in favour of Brexit. Actually, 52% of those people who voted were pro Brexit equating to roughly a third of the population.
There is no doubt that the vast amount of information available from big data collection has the potential to offer businesses power full insights on behavioural trends that can help them to make decisions.
However, this is only helpful at a broad level, such as driving general policy.
Business decision-making also needs to be underpinned by a much more granular analysis and understanding of its sector and its customers’ behaviour and desires.
Here, such factors as location, average income in that location, attitudes, personal tastes and preferences, are likely to play a significant part and are crucially important in determining how to pitch the marketing or sales messages at a particular target audience.
For example, US consumers appear to have no problem with repetitive, lengthy and “shouted” messages from businesses trying to market their products or services. In the UK, however, such tactics are seen as intrusive or even bullying and likely to have a negative effect.
Successfully integrating the broad brush of big data trends with the more granular and specific data collection is the key to business success, particularly for SMEs.

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

Businesses should beware of knee-jerk reactions

knee jerk reactionsBeing agile and responsive may be good business practice, but there is a fine line between this and knee-jerk reactions.
While the former can be described as considered responses to relevant data, the latter are more likely to be immediate, unthinking and emotional.
While some instant reactions may turn out to have been productive, overall the chances of such a decision working out well are not high and probably not the best way to run a business.

Knowing when prompt action is needed and when it is better to hold your nerve

Monitoring data on business performance, invoice payments, sales, responses to marketing initiatives and a wealth of other relevant information is, or should be, and integral part of running a business.
However, understanding what that data implies can be much trickier.
The key is to be aware of both the time frames and implications in order to draw reliable conclusions.
A good example is statistical information such as the monthly trends like the PMI/Markit index that reports on activity in the service, manufacturing and other sectors of the economy, or the daily ebbs and flows of the stock market.
Not only can statistics be selective, highly dependent on sample size and on the information selected for measurement, it can take several months before a trend becomes clear.
While some investors trade stocks on almost a minute by minute basis depending on the rise and fall of share prices for a company or commodity, this sort of short term approach to events is unlikely to work well for a business. Indeed, it is not the strategy pursued by investment guru Warren Buffet.
Another difficulty with the knee-jerk reaction is that it may rely on emotional factors, such as confidence or lack of it, panic, self-interest or a desire to win at all costs. This is when investors can lose by following the herd instead of holding their nerve and following the data.

The tools to use to avoid knee-jerk reactions

Any business that has done a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats) to inform its business plan and goals will have some protection against unconsidered decisions. Although remember ‘SWOT SO WHAT’, the key to a SWOT analysis is use it as the basis for making decisions.
A second tool is the contingency plan that outlines possible actions and reactions for a variety of scenarios.
Using these in conjunction with analytical data gathered over a sufficient period, relevant to the nature of the business, will improve the chances of making decisions about change that will have the optimum outcome for the business.

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Business Development & Marketing Finance General

SMEs should register an interest in big local infrastructure projects

cranes on the skyline at an infrastructure projectLocal businesses often complain that they are ignored as suppliers when big local infrastructure projects are in the pipeline, and this may have been true in the past.
Certainly, it was a complaint when the second nuclear power station, Sizewell B, was being built in Suffolk between 1987 and 1995.
However, with two new projects in the pipeline, at Hinckley Point, Somerset, and at Sizewell, Suffolk, that situation appears to have changed.
In both cases, the respective Chambers of Commerce are already engaged with main contractors EDF Energy and partners asking local businesses to register their interest as supplies to the project.
Both projects already have dedicated websites specifically for interested businesses to find out more and register their interest and provide details of what they supply so they can be invited to tender for works and mini-projects. There is a wealth of guidance, support and information on how to become suppliers. The information on both is available on the EDF Energy website.

No business is too small to become a supplier

Many local businesses may think they are too small to be involved in such projects.  While this may have been the case in the past there has been a change of emphasis to offer opportunities to local businesses, particularly those that provide quick response to mini-projects as they arise and those who provide service support.
Inevitably, there will be local labour opportunities for project managers, engineers, surveyors and construction workers with many of these being sourced from afar.
There are many opportunities to provide support for the non-local labour, such as accommodation, whether Bed and Breakfast, short term lets or portable buildings on site. Given that most sites are in rural locations, transport and catering facilities will also be needed. One example of the new initiative working is the catering at Hinkley Point C where a number of local firms submitted and won the tender to provide the on-site catering. Each firm including local bakers and caterers did not feel they could lead the contract by themselves but with support from the Hinkley Supply Chain Enabling Team and leadership from Somerset Chamber of Commerce they succeeded. Another example was the need to build a bridge to help conserve local badgers, this £350k contract was awarded to a small firm of local builders.
In addition to on-site opportunities the influx of a large temporary population offers scope for opportunities in the surrounding area. These include local shops, sports and leisure facilities, entertainment, healthcare and transport.
So, it is a mistake for any local SME to think it is either too small or its business is not relevant to a big infrastructure project.  The possibilities are many, and they are only limited by the imagination.

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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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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.

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Banks, Lenders & Investors General Insolvency Turnaround

The corporate psychopath poses real dangers to a business

the executive hiding a knife behind his backMichael Douglas’ Gordon Gekko, Leonardo Di Caprio’s Wolf of Wall Street, or the late Mirror Group owner Robert Maxwell – what do these fictional and real characters have in common?
They are all examples of a corporate psychopath, the second category we are exploring in our look at  psychology’s Dark Triad (with narcissism and Machiavellianism) of personalities, and, say researchers, often over-represented at the top levels of the business world.
The US criminal psychologist Robert D. Hare called such people Snakes in Suits while both Oliver James, UK psychologist and author of Affluenza and Office Politics: How to Thrive in a World of Lying, Backstabbing and Dirty Tricks, and Clive Boddy, Professor of Leadership and Organizational Behaviour at Middlesex University, have suggested that the 2008 Global Financial Crisis was the result of a mass outbreak of corporate psychopathy.
So, what is it about such people that makes their behaviour potentially so toxic and ultimately damaging to business?

Corporate psychopaths, the good the bad and the ugly

As with the Dark Triad’s two other elements, narcissism and Machiavellianism, the propensity for damage both to colleagues, employees and to a business by a corporate psychopath is all a question of degree.
Typically, they are charming, intelligent, sincere and have powerful personalities, all of which arguably are needed to propel the individual to the top in their career. Often such people perform well at interview, appearing alert, friendly and easy to talk to. They seem to be able, emotionally well-adjusted and reasonable. All traits of a high functioning psychopath.
However, the negative qualities underlying these apparent positive qualities are callousness and insensitivity even if well hidden behind a smooth façade.
Clues to the corporate psychopath’s real persona emerge over time, however.  They may repeatedly humiliate colleagues or subordinates to get their way, perhaps regularly lose their tempers, take credit for others’ accomplishments and be “economical with the truth”, all forms of bullying and coercion with little or no regard for their victims.
They will typically set unrealistic goals for others to meet or come up with new ideas without properly assessing them or following through and this can be a problem when they are in positions of power, where they can issue directions for others to carry out, or try to, thereby setting their victims up to fail in a way that undermines them.
It is no surprise that the consequent working atmosphere for colleagues and its effects on business productivity can be dire.
Dealing with the toxic behaviour of the corporate psychopath means trying to anticipate their actions, documenting all instances of abuse, somehow not taking their behaviour personally and always having witnesses during confrontations; easier said than done but essential to prevent serious or even fatal damage to a business.
“Psychopaths loot corporations. They gamble with our money and then turn to the public to bail them out,” says Oliver James.

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Business Development & Marketing General Interim Management & Executive Support

Narcissists and their negative behaviours at work

There is a trio of negative behaviours that psychologists call the “Dark Triad”.
They are characterised as psychopathy (being callous and insensitive), Machiavellianism (manipulating others) and narcissism (tendency to seek admiration and special treatment).
Research by Belinda Board and Katarina Fritzon, of Surrey University, has found some evidence that such characteristics of behaviour, often described as psychotic behaviours, are more common in managers and leaders than they are among criminals.
While some would argue that at least a modicum of these behavioural characteristics may be necessary for professional success, there is a level at which they are downright dangerous for a business.
Starting with narcissism, we will be looking at each of the Dark Triad behaviours in our next three blogs.

How to identify narcissistic behaviour

narcissistic businessmanThe fictional David Brent, portrayed by Ricky Gervais in the TV series The Office, is perhaps the best-known example of a narcissistic manager.  In the real world, arguably US President Donald Trump is a classic example.
Narcissists can be described as seeking reputation and status, wanting to be admired, tending to expect special favours and wanting people to pay attention to them. Their behaviour is often referred to by others as being selfish, egotistical or single minded.
However, whether such behaviour is beneficial or toxic is all a matter of degree.  Clearly, at the moderate end of the scale narcissism can be helpful for someone who is ambitious in climbing their professional ladder or successfully starting up and growing a business. It also is characterised by a degree of self-belief and self-confidence which are important drivers of success.

How much narcissism is too much?

According to an article in Fortune.com extreme narcissists may be “know-it-alls” eager to give their opinion on everything and anything but therefore unable to listen, to be self-aware or collaborate.
They can be people with superiority complexes and manipulative in flattering colleagues in order to enhance their own reputation and career.
Or they can be outright bullies or vindictively determined to undermine anyone they see as challenging their status or position.
This more toxic end of the narcissistic spectrum can make life even harder for employees and colleagues dealing with such behaviour in the workplace when they need to focus on challenging jobs, targets and deadlines.
While the general advice for dealing with narcissists tends to be to ignore their behaviour and not to challenge them but this is easier said than done, especially if they are a boss or manager.
In the worst case, a colleague or employee who becomes the focus of relentless manipulation, bullying or efforts to undermine their reputation will be using up considerable mental energy in following this advice, making it more difficult to concentrate on the work they should be doing.
If the problem is more widespread and affecting several people on a board of directors or in a department, it may undermine the ability to co-operate effectively as well as being a distraction affecting their productivity.
It has been said that the acquisition of ABN Amro was down to Fred Goodwin’s ego, but a lack of awareness of how one person’s behaviour can influence a board was the real problem and the reason that led to the wrong collective decision being taken.
Ultimately, the potentially disruptive effects of an extreme narcissistic personality for the business as a whole could have the potential to destroy its ability to survive and grow.

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

Estate agency business model – High Street or Virtual?

depressed looking estate agentThe UK’s domestic property sales have traditionally relied on the services of an estate agency.
Any consumer-reliant business is susceptible to fluctuations in consumer confidence, consumer buying power and on the health and strength of the economy in which it is operating. This is particularly true for estate agencies.
Some are local branches of national chains, while others are locally owned or region-specific, but most have relied on a High-Street presence, knowledgeable sales agents and marketing for their business model. They make most of their money from the percentage fee, on average 1.5 to 2.5% of the property price, charged on completion of a sale. They also generate fees from services such as valuations, conveyancing, letting and management as well as commissions from introducing insurance and mortgages.
While most of these revenue streams have been under pressure from specialist providers, estate agencies have hung on to their most profitable activity, the sale of property.
This model is coming under increasing pressure now that most search for property is done online via consolidator websites, chiefly Rightmove and Zoopla. Given the change in search behaviour, estate agents are having to list property on these sites.

Will the rise of the virtual, online-only estate agency affect the traditional business model?

Since March, reports from mortgage lenders, surveyors and the Office for National Statistics (ONS) have been indicating that both property price growth and sales have been at best slowing and at worst stagnating.
The causes have been identified as rising food and fuel price inflation due to the fall in the value of £Sterling following the June 2016 EU referendum and now being passed onto consumers, stagnation in wage growth and most recently the June 2017 General Election. The recent tax hikes on property transfers have also played a major factor, in particular at the top end where the stamp duty land tax on the purchase of residential property is as high as 12%.
Despite this, many of the traditional agents to whom we have spoken argue that sales remain buoyant due to a shortage of available properties and to continuing demand from buyers.
But, alongside the change in behaviour that has seen buyers first searching on Rightmove and Zoopla before contacting an agent, there is another factor that could affect the viability of the traditional model and this is the rise of the online-only agency.
These agencies, such as Purplebricks, Yopa and Emoov, do not have the overheads that go with a High-Street presence and therefore can offer much lower fees and charges. However, fees vary substantially with some of these agencies charging vendors a fixed fee payable in advance.
They also offer varying levels of service, with additional charges for add-on extras such as accompanied viewing, providing Energy Performance Certificates, for sale boards and even for floor plans and photographs.
These services all form part of the normal service offered to vendors by the traditional agents, who argue that there is in any case no substitute for their sales teams’ local knowledge, active marketing using their databases of potential buyers and high quality marketing materials and photography. But will vendors want to pay an estate agent £15k to sell their home for £500k?
Given that High-Street estate agents are essentially marketing property on behalf of vendors via consolidator websites, their high cost and thereby their existence suggests the model is no longer viable. Most need to change their business model before they go bust.
 

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Banks, Lenders & Investors Cash Flow & Forecasting Finance General

Is another tech bubble looming?

tech bubble about to be burstRecently, I heard Sam Altman, president of the start-up incubator Y Combinator, who had come over to the UK from Silicon Valley to preach to the tech faithful about the sunny uplands of the world of tech.
According to an article in The New Yorker in October 2016, “Like everyone in Silicon Valley, Altman professes to want to save the world; unlike almost everyone there, he has a plan to do it”.
He is also the co-founder with Elon Musk of OpenAI, a non-profit that the same article describes as “a hedged bet on the end of human predominance—a kind of strategic-defence initiative to protect us from our own creations”
In London, Altman’s followers converged on Shoreditch Town Hall, all of them having pre-registered for tickets to hear him. Many of them could not get into the hall, even though they had tickets. The queue was hundreds of yards long. It was a sell-out that had been over-sold

The message and why I see another tech bubble

Altman’s message was all about how Silicon Valley is the only place to be because they have the vision to change the world and have the solutions to the world’s problems. He predicted that within 10 years, 70% of the world’s jobs will be done by AI. But he also argued that the cleaver people in Silicon Valley were going to ensure that everyone in the world would have food, income and fulfilling jobs to sustain them so no one should worry.
The audience loved it, but all I could see was a bubble close to bursting. It is like the later stage of a cult at the point when it isolates itself from the world.
There is a precedent in the dot-com bubble that collapsed in the late 1990s, when the valuations of companies in the tech sector increased very rapidly thanks to a cult-like belief in its infallibility. The focus was on user numbers instead of profit. Over the period 1999-2001 many companies failed completely while the value of others, such as Cisco, plunged by more than 80%. Some, such as Amazon, Microsoft, Apple, Cisco and Google survived and eventually became some of the largest US corporations.
The bubble involves two elements, the belief that all entrepreneurs can participate, and the investors to sustain them. Like in the late 1990s it is obvious that only a very few entrepreneurial companies will survive. And picking the winners is difficult, only hindsight makes it easy.
In March this year the Guardian was the latest in a number of news media, including Zerohedge.com and Bloomberg, in October 2016, asking whether there was another tech bubble looming. The evidence cited included that the rental housing market in San Francisco had plateaued and there were signs that Venture Capitalists were making fewer investments, start-up valuations were falling, and recruitment was slowing.
However, with the examples of Google and Amazon there will be no shortage of believers. And while investors are willing to fund entrepreneurs then the tech bubble will continue.
Plainly there is no shortage of believers but eventually reality will kick in and the bubble will deflate if not burst. Investors will seek safer places for their money and entrepreneurs will find jobs or at least pursue more immediate profits. Very few companies will become the next Google or Amazon.

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

There are still more questions than answers on Brexit for UK SMEs

More Questions K2 Partners Business Blog

The Supreme Court ruling against the Government that meant Parliament had to be allowed to vote on both triggering the process has at least moved things forward a little.
Last week saw a majority of MPs voting to support triggering Article 50, the formal start of the process of the UK’s leaving the EU. There are hundreds of amendments proposed at Committee stage but it is likely that the legislation will be passed by mid-February and the process begun by the end of March.
Thursday also saw the publication of a white paper outlining the main points of what the Government proposes to negotiate.
But negotiation will still be a lengthy process, an arguably optimistic minimum of two years, and that means considerable continued uncertainty for UK businesses of all sizes, from SMEs to the larger corporate sector.

What have we learned from the White Paper?

There will have to be several separate pieces of UK legislation in addition to the formally negotiated treaty detailing the relationship between the UK and EU for trading relations.
These will include a Great Repeal Bill to transfer current UK-adopted EU legislation on such things as workers’ protection and rights into UK law. So for UK SMEs no changes to current employment law, for the moment at least.
Similarly, there will have to be legislation on immigration and on customs arrangements.
The White paper also states that “there may be a phased process of implementation”, to give companies and individuals time to plan and prepare”.

In other developments

This can only be a snapshot in an unpredictable situation but in the last week the Bank of England has revised its prediction for UK growth in 2017 up slightly to 2% while the National Institute for Economic and Social Research (NIESR) puts its forecast figure at 1.7%.
Inflation has started to kick in. Manufacturing input costs as measured monthly by the Markit/CIPS Purchasing Managers’ Index showed the biggest increase in January to manufacturing input costs since records began in 1992 – up by 12% at 55.9, well above the 50 benchmark that separates growth from contraction. This has forced manufacturers to increase prices significantly and will impact on UK SME’s purchasing costs.
In the meantime, there have been a couple of encouraging developments that might help businesses to make their case more forcefully as the Brexit negotiations get under way.
Firstly, during the Article 50 Second Reading debate former Chancellor George Osborne criticised the Government for putting more emphasis on immigration than on the needs of business.
Secondly, it is a positive sign that, given the numbers of EU workers on whom UK SMEs depend in the face of a skills shortage, the All-Parliamentary Party Group (APPG) for Migration has launched an official inquiry to investigate immigration “with a focus on the concerns of small and medium-sized enterprises”.
And finally, a comment piece in the Independent by James Moore argued that “the only people who can take the Government to task over Brexit are the business lobby”. He argued that businesses need to make the case forcefully and repeatedly “that the Government’s current approach to it will destroy jobs, harm the UK’s economic prospects and make everyone poorer” and to push hard for the “least worst option” in the negotiations.
Clearly, there is a long way to go before there is clarity for UK SMEs but there are at least some voices pushing the business case to the Government.

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Business Development & Marketing Cash Flow & Forecasting General

Why is HS2 important to UK freight transport infrastructure?

rail transport for container freightAs legislation reaches the final hurdles for the new rail line HS2 to be approved we look more closely at the supposed benefits.
The Bill reached the Report stage in the House of Lords on Tuesday, January 24, with a number of concerns being raised about the effect on local roads and communities during its construction, among them the potential for increased road traffic because of the need to transport waste material away from the sites.
This raises the question of what might be the actual benefits for freight transport of the new line.
The economic arguments or the benefits for businesses in the West, and eventually East Midlands in being better connected to the South have been well rehearsed during the interminable consultation process.
Once the legislation is passed there will still be a long way to go, with phase 1 (Birmingham, West Midlands) expected to be completed in around 2026 and phase 2 (extension to Manchester and Leeds) expected to open in 2032-33.
The new high speed line may eventually reduce passenger journey times somewhat and increase the passenger transport capacity. The Department for Transport has argued that once complete there will be almost 15,000 seats an hour on trains between London and the cities of Birmingham, Manchester and Leeds – treble the current capacity.
However, crucially in our view, not much has been said about the importance of additional freight transport on the line. Arguably this is more important to the UK economy especially if we are to increase productivity and output.

Environmental and capacity benefits of UK freight transport

Moving goods and materials by road is less efficient and more costly than by rail.
UK roads are near capacity and choked with HGVs at some times of the day, particularly during peak commuting times. It only takes a couple of accidents or breakdowns for a region’s main road arteries to be brought to a slow crawl or even to a standstill.  This adds to the costs for businesses relying on deliveries within specified times, with knock-on effects if it delays orders to their customers.
Shifting container transportation to the rail network would allow far more goods to be efficiently shifted over long distances than can be managed by road, with the added benefits of a cleaner environment by reducing fuel emissions from lorries.
However, there are concerns about whether the plans for the new HS2 rail lines have additional freight capacity built into the equation.
Last November, Chris MacRae, the Freight Transport Association’s Head of Rail Policy, said: “There is no mechanism in place to guarantee additional capacity released by HS2 is available for freight.”
He argued that adding additional passenger services could be counter-productive and squeeze the capacity for freight transport on the lines. The FTA argues that freight will only benefit from rail capacity released by HS2 if the Government ensures it doesn’t have to compete with passenger operators through the existing train path bidding process.
UK Businesses will need every bit of help they can get if they are to compete effectively in a post-Brexit and increasingly protectionist global market and this should include a more efficient, more cost effective and faster freight transport system.

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Banks, Lenders & Investors Finance General Turnaround

How long will it take to achieve a properly skilled UK workforce?

Skilled Workers K2 Partners Business Blog

The UK’s skills shortages in key sectors like engineering, construction and technology are well known and becoming more pressing in the context of imminent Brexit with its likely impact on the ability to recruit skilled workers both from within and outside the EU.
This weekend it was announced that technology investor Sherry Coutu is launching a new app to link schoolchildren with local employers — in an effort to tackle the skills crisis that is holding growing companies back.
Around 15,000 fast-growing businesses and 500 students are believed to have already signed up to the free service, named Workfinder, which will help schoolchildren to find work experience and to apply for apprenticeships.
Sherry Coutu is the co-founder of the Scale-Up Institute, chair of the Financial Strategy Advisory Group for the University of Cambridge and Founders4Schools, and is a non-executive director for the London Stock Exchange Group and Zoopla.
To be fair, the UK Government has also produced initiatives, firstly setting a target of achieving three million new apprenticeships by 2020, to be paid for by a levy on businesses with a payroll of more than £3 million starting from April 2017.
On Monday, the Prime Minister also launched a consultation, in the form of a Green Paper, marking a proposed new industrial strategy of Government intervention to provide regionally-targeted support for innovation and skills development through high-quality practical skills training relevant to local business needs. Businesses will be consulted on the proposals and the deadline for responses is April 17.

For a properly skilled UK workforce businesses need to get involved

Upskilling to a properly skilled UK workforce will not happen overnight and it needs real, practical, positive contributions from businesses, as well as Government. This highlights a major reason for the lack of skills, businesses expecting to recruit fully trained employees, although they may have a point.
Take this example from London, where a survey from the London Chamber of Commerce and Industry (LCCI) revealed that more than a third of London businesses cited the cost, an estimated £15,000 to £24,000 per year, as a disincentive to taking on apprentices, nor had the HR capacity to handle them.
There is also plenty of anecdotal local evidence of the difficulties young people have each year in finding work experience placements.
As automation eliminates more and more blue collar jobs, increasing the need for more highly-skilled workers, we would argue that sitting back and waiting for “someone else” to do something is no longer good enough.
While it is undeniable that businesses cannot grow if they cannot find the skilled people they need, consultations take time the UK doesn’t have.  Businesses can speed things up by being pro-active in encouraging and enthusing young people via work experience and by offering good-quality training now.
And Government needs to play its part by providing appropriate incentives and support as well as understanding that their imposition of a minimum wage promotes automation. We voted for them.

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Business Development & Marketing General

Regularly reviewing and refreshing your business website

website refreshA business’ website is arguably one of its most important marketing tools for several reasons: most importantly, to reassure potential clients and customers that your goods and services will satisfy their needs and ideally to attract new customers who are searching for a solution.
Many SME owners, particularly those selling services rather than products, assume that because their offering does not often change then their website does not need much attention.
However, the online world changes more rapidly than any other sector, not only in terms of consumer behaviour but also in terms of the technical aspects and in particular the ranking of your website by search engines will be influenced by how active it is.

Website user experience and security

There cannot be many website owners who are unaware of the growing importance of the medium through which potential clients view their website.
The UK has one of the highest rates of browsing via a mobile phone and this means that a website cannot hope to keep site visitors unless it is responsive – i.e. easy to view and to navigate on a smartphone as well as a PC or laptop.
This applies equally whether a business is selling products or services and is an aspect of websites that is assessed by search engines such as Google.
If pictures take too long to load, if it is difficult to move between pages, if there is too much text to be easily readable on the screen the likelihood is that the visitor will go elsewhere.
This means that visual and other elements of design need to be as clear and simple as possible and, especially, that the information shown on a mobile phone needs to be pared down and easily digestible on a small screen.
An annual website appraisal will ensure that it is still performing to the maximum standard, wherever it is being viewed.
An audit should also look at the behind the scenes technical aspects such as Search Engine Optimisation (SEO), whether the key words being used are still relevant, and whether the design is still the best it can be. Don’t forget that every web page should be optimised, which also allows for more focused targeting of messages to help search engines direct potential clients to the relevant page.
You might consider making your website more integral to the running of your business where some firms do everything through their website from database management, to integrated marketing campaigns that trial messages and optimise results, to booking orders, managing work flow and processing payments.
Last but by no means least, given the frequency of news reports about website hacking, a crucial element to have checked is the site’s security.  This is especially important, not only for taking secure online payment, but also for any business that is encouraging visitors to sign up for offers, appointments, free information or any material that requires them to register their personal details.
A regular website audit should also check that it is protected with the most up-to-date security protection against invasion.
In short, if a business wants to protect and enhance its reputation a regular website review and update should be a key element in its operations

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Business Development & Marketing General Insolvency

2016 review – an uneasy year for businesses

2016 reviewIt seems like a very long time since the then Chancellor, George Osborne, warned in January 2016 of a dangerous “cocktail of risks” facing the UK economy.
The British Chambers of Commerce (BCC) echoed this, citing volatile stock markets, plummeting commodity prices, a potential slowdown in China, a poor 2015 Christmas for retailers and uncertainty about the outcome of the referendum on the UK remaining in Europe.
March brought news of Tata Steel’s decision to sell off or close its UK steel operations, prompting fears for hundreds of jobs particularly in Port Talbot, Wales.  While by November Tata had announced it had agreed a deal with the various trades unions over Port Talbot, possibly safeguarding an estimated 8,000 jobs, the outcome is not yet 100% certain.
In April came news of yet another large retail collapse, this time BHS.
In the run-up to the June EU referendum there were signs of a marked slowdown in investment decisions, coupled with worries about skills shortages if restrictions should be imposed on overseas recruitment.
In June, of course, the outcome of the referendum was a majority in favour of leaving the EU and the first monthly Markit Purchase Managers’ Index (PMI) immediately thereafter showed that the UK economy had been shrinking at its fastest rate since 2009 with confidence in both manufacturing and services falling below the benchmark of 50.
The decision also precipitated a massive devaluation of £Sterling by 15% against the $Dollar and by 10% against the €Euro, which benefited exporters but was predicted to eventually feed through into higher prices for imports and increased inflation. In response, the Bank of England further reduced interest rates.
Another indication of slowing global economic growth came in September with the collapse of the South Korean company Hanjin Shipping, the world’s seventh largest container company.
However, on the whole business activity post-Referendum showed no marked signs of contraction and by November the monthly Markit PMI index was showing upward trends in activity in Construction and Services. But just this week the BCC was warning that the “business as usual” approach that had so far prevailed since was unlikely to last and that business optimism was “continuing to fall”.
At the same time, quarterly reports on business insolvencies have remained steady, showing only statistically insignificant increases.
Also in November Donald Trump won the US presidential campaign, prompting yet more concern and uncertainty, particularly about the impact on other economies, including the UK’s given his notably “protectionist” views as stated during the campaign.

What was 2016 like for SMEs?

The measures introduced in the 2015 Small Business, Enterprise and Employment Act started to come into force with April deadlines for UK companies to compile PSC (Persons with Significant Control) registers.  There were also changes to the taxation of income received from share dividends with the introduction of a new tax-free dividend personal allowance.
Pension Auto-enrolment continued and there was another potential worry for SMEs with the government’s proposals for businesses to file quarterly tax returns.
There was one bit of potentially good news in the April budget, when the threshold for business rate tax relief was increased to £15,000, which may be good news for small High Street retailers, once the outcome of September’s rates revaluations become clearer.
A change of regime in Government produced some recognition of the difficulties for SMEs with the new Chancellor, Philip Hammond’s Autumn Statement, promising extra investment in local transport and digital infrastructure as well as Rural Rate Relief being increased to 100%. But business costs are also mounting with increases in the national living wage, insurance premium tax and changes to NI rates.
The 2016 picture will not be complete, however, until the Christmas retail trading figures and the next set of quarterly insolvencies are revealed sometime in January 2017.

Categories
Finance General Turnaround

Is there a UK shortage of heating and building maintenance engineers?

advert for skilled labourTrying to book a good heating engineer when the domestic heating system goes wrong is a challenge and invariably involves a lengthy wait for an appointment.
The majority of such services at local level are supplied by independent SME traders, who invariably seem to be mature workers. Even Pimlico Plumbers are self-employed.
This would suggest that fewer people are coming into the industry and may indicate that there is a skills shortage. On the other hand, it might be that younger, qualified engineers are looking for direct employment with larger companies.

A closer look at the situation

Heating system breakdowns invariably happen in the depths of winter, often when the system is first switched on when the weather turns colder. In a climate like UK effective and prompt heating and maintenance services are essential.
How many domestic users remember to have the heating checked and the boiler serviced ahead of the onset of cold weather?   Even if they did think ahead there are still likely to be peaks and troughs in the demand for heating engineers since breakdown will be more common when a system is in intensive use.
The age factor may give us better clues as to whether there is a skills shortage in this sector.
Certainly, the Construction Industry has for several years been warning of shortages for all types of skilled and qualified engineers, and this has been used to account for the numbers of qualified engineering workers being recruited from Eastern Europe.
But there is more evidence available to support this claim.  The Building Engineering Services Association (BESA) commissioned research into the industry’s labour market, which was carried out by a Dr Mike Hammond, Director of Education and Research at Hammonds Enterprises Ltd. His findings were published in a BESA report ‘Future manpower and skills availability’ for its conference in late 2015 on the issue of skills shortages.
Dr Hammond’s findings predicted “massive” under supply in every sector apart from plumbing up to 2018, particularly in the heating and ventilation professions. He also suggested that many new entrants into the sector during and in the aftermath of the 2008 financial crisis had missed out on formal training.
However, we would argue that the problem has been building for much longer than that and in part originates in Government emphasis on and efforts to increase university graduate numbers, which had the effect of devaluing the more practical skills and qualifications.
The combination of factors has led to a “generation gap” of suitably qualified and experienced people. While the Chancellor’s Autumn Statement of 2015 announced a levy on large companies to pay for its new three million new Trailblazer apprenticeships, the levy is not due to even start being collected until April 2017.
Even if suitable apprenticeships were immediately available from then, factor in the time it will take to recruit suitable candidates as well as the length of training and it is likely to be several years before there is any noticeable narrowing of the skills generation gap.

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Business Development & Marketing General Rescue, Restructuring & Recovery Turnaround

Have you got the basics of your social media marketing right?

Ready for Tomorrow?Social media marketing is an increasingly important element of business promotion and therefore should be on the list for review when a business is preparing to implement strategies for fundamental change.
As all businesses change and develop over time, so must its core support tools, which means everything including production, marketing, management and reporting.
So it is worth revisiting the key questions that should have been addressed when a social media campaign was first launched.

Questioning the social media marketing fundamentals

No marketing is likely to work if it is trying to sell the wrong product to the wrong people, worse still if a business has not researched whether there is actually a demand for whatever it is planning to offer.
No matter whether a product or service was well received when it was launched, it may be that it has outlived its usefulness or that there are now more competitors in the market.
It is worthwhile, therefore, to revisit the question of whether it is something people want before making any adjustments to the marketing plan.  The best way to find out is to actually ask real people what they want or need. Getting to know them as people is crucial.
The answers may not only give a business clues as to how better to refine its offering but will also give a more accurate picture of its target audience and where best to find them.
Armed with this information a business can make changes if necessary to its product or service so as to provide a solution to what its customers need NOW, not that they needed when it was first launched.
Providing the right products and services is key to growing a business. Marketing them is basically all about making sure customers know about them, where to buy them and making it easy and friendly for customers to deal with your business rather than a competitor. Social media can be used by itself or be integrated into a strategy that uses many different ways of communicating with customers.
Of course, developing and implementing a social media marketing plan may include creating message templates, ensuring any written content is to the point, sparkling and engaging to that specific market, and that images support the message. Testing alternative messages and posts is also necessary determine which works best.
Get it right and a business can use social media to support its growth plans, get it wrong and the best social media marketing plan will be a waste of time.

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Business Development & Marketing Cash Flow & Forecasting Finance General Turnaround

Factors to consider when setting prices

setting prices by valueBack in early May we published a blog on the trade-off between quality, production cost and speed of delivery when negotiating prices with customers.
Now businesses are in potentially more uncertain waters given exchange rate volatility and as yet unknown post-Referendum trading terms, we are looking at pricing from another perspective.
This is about considerations when setting prices that involve both the cost of production, the value of the product to the customer and most importantly making money.

Would you seriously consider selling at a loss?

Loss leaders are a well-known tactic among food retailers, such as selling milk at a loss in order to attract customers into a store, where they will be tempted to buy other items.  It works if a business offers a wide range of products, but why, otherwise would a business do it?
As a tactic for winning work it plainly is not a long term, viable option, and as a strategy for driving competition out of the market it is a very risky gamble.
Essentially setting, or increasing, prices depends firstly on how much the business’ customers value its product and secondly, on what it costs to produce.  If it is highly valued that presents an opportunity to price with a comfortable margin for profit after taking costs into account.
However, there is another factor in the equation and that is the length of time between order and fulfilment, especially when buying in supplies from abroad and when exchange rates are as volatile as they have been since the UK’s EU Referendum in June.
A good example is the recently-confirmed deal to build a new nuclear reactor at Hinckley Point. There, the question was how to set a price for future energy supply that allowed the reactor to be built and for the partners in the deal to be confident of getting a reasonable return from sales, given the lifespan of the project. In this case the uncertainty of cost and price inflation will have been major factors when fixing the minimum future cost of electricity that was highlighted in the media.
This brings up another point to consider and that is who carries the risk when delivery of a fixed price order is a long way ahead.  Should it be the client or the business as supplier?
If the uncertainty of costs is a concern, then forward fixing purchase prices and exchange rates is an option albeit it can be an expensive one. Another option is to include in the contract a variable element that adjusts the price by reference to costs. If this offers customers the prospect that the price may also go down, then it can be easier to sell.

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Business Development & Marketing General Rescue, Restructuring & Recovery Turnaround

Preparing people for change in your business

Ready for Tomorrow?Business survival and growth mean being prepared to change aspects of your business and sometimes change the business model including historical plans or processes when they are no longer yielding the best results.
However, before implementing change directors and business owners should think carefully about how they should be introduced.
Too often the approach is “top down”, where somebody senior, or the CEO, has an idea and decides it should be implemented. Unfortunately, with this approach the changes often do not take root and often this is due to a lack of planning and a failure to involve others, in particular those who are necessary to implement the change and those who are affected by its consequences.

Involve employees for successful change

If, however, a business has a culture of continuous improvements and involves employees in the process of identifying and determining changes that need to be made, the chances of successful implementation are considerably higher.
While time spent discussing change with others may take longer, generally it will mean that not only do people understand the need for a change but they are likely to be invested in making it work. Furthermore, consulting with those “at the sharp end” sends out the message that their competence and their views are trusted and valued.
It is a theme that underlies the arguments in the book “Being Human” by Steve Hilton, former adviser to David Cameron, which examines the structure and effectiveness of government, business, politics and various sectors such as education, the NHS and business. The book advocates that power and decision-making should, as far as possible, be delegated to a local level for people to feel that they are involved and have influence.
Equally, in a culture of continuous improvement, where as many people as possible in a business are engaged, it is possible to make smaller, incremental changes rather than one gigantic change that has the potential to cause massive disruption.
The process of engagement early on will identify any resistance and address it before actually effecting the envisaged change.
Indeed, a consultative approach is more likely to result in initiatives being successful than decisions that start off as a good idea by management being sabotaged because those who have to work with them have not been asked whether the change is actually workable let alone beneficial.
 

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

Achieving a positive Brexit outcome will need realism and patience

keep calm and stay positiveIf ever strategic planning for the longer term was needed, it is now as a consequence of the Brexit decision in June’s referendum.
Arguably the short term approach by directors, investors and lenders has been a feature of modern business life ever since the Thatcher era of the Big Bang computerisation of the stock market and the advent of free-floating currencies, as Andrew Marr suggests in his book A History of Modern Britain.
This short term approach is reinforced by the calls to “get on with it” that have been escalating both in the UK and from various parts of the EU.

Realism and patience

When the decision was made the world was never going to collapse nor was Britain going to enter into the darkest recession.
However, what we did do was communicate to all those who do business with Britain that the country will not be in the EU in the future regardless of the outcome of negotiations.
The adjustment of foreigner investor’s perceptions of Britain has already begun.
If Junker and the French have their way, we British will be taught a lesson that will translate into significant economic pain.  However, it is also true that all those who are current investors in Britain will not withdraw their investments. Well, not overnight.
But anyone considering new investments with the objective of unfettered trade with the EU cannot now choose Britain, at least not until the trading terms have been agreed.
Those who are saying “it’s all going to be all right” are deluded and ignoring the monumental task needed to restore stability.
While the focus has been on a post-Brexit trade agreement with the EU, all our current trade agreements with the rest of the world are EU ones. Until new ones have been agreed with each and every major country, uncertainty will persist and that will translate into a lack of decisions about investment. This is likely to take a very long time.
Despite the lack of agreement for post-Brexit trading, non-EU countries and businesses that have a productive and good working relationship with Britain will not risk jeopardising that regardless of EU politicians’ desire to teach us a lesson.
Patience and strategic relationships will be key to our success as a trading nation post Brexit.
We might remind ourselves of those courageous pioneers who built the British Empire 200 years ago. It was essentially a trading network built on relationships forged by foreign travel. Now is the time to get out of our comfort zone and make friends with the rest of the world.

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

The shipping industry crisis – is it simply a story of over-capacity?

a container shipThere is little cheer for the shipping industry in the OECD’s latest Interim Economic Outlook published this week, predicting that global GDP growth is likely to remain at around 3% in 2016 with only a modest improvement projected in 2017.
But is slowing global growth really at the heart of the shipping industry crisis that led to the recent collapse of the world’s seventh largest container shipping company, the South Korean Hanjin Shipping?
Not according to a ship broker who was quoted in the Daily Telegraph recently and asked not to be named. In his view it is a problem that has been brewing for some time.
“They’re building larger and larger ships to increase their capacity so they can cut costs, but with each larger vessel ordered they’re making the market worse,” he said.
It is a problem that has been brewing for several years and has been compounded by companies reducing freight rates to gain a competitive edge, which ultimately results in a race to the bottom and the accumulation of large financial losses.
Other factors, such as falling commodity prices and the 2008 global financial crash have also contributed to the problems and led to the current situation where an estimated 200 unused container ships lie idle around the world.

Is there a solution?

It would take a crystal ball to predict what is likely to happen in even a couple of years and shipping owners are caught between a number of imponderables.
Firstly, it takes at least two years between ordering a new vessel and delivery and once built that vessel is likely to last at least 20 years. While in the short term it might make sense to go for economies of scale it is going to be very hard to predict what will happen to global growth and trade over a 20-year period.
Then, there is the question of what to do about existing, smaller vessels. At the moment, scrap metal rates are so low that it almost makes no sense to get rid of them.
Hanjin may only be the first casualty. According to the Economist earlier this month “of the biggest 12 shipping companies that have published results for the past quarter 11 have announced large losses”.
Clearly, it is very difficult for an industry like shipping to be as agile as businesses may need to be in a rapidly-changing global marketplace.
While customers are the beneficiaries, another factor is emerging as globalisation and the free trade of goods are coming under pressure.

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Business Development & Marketing Cash Flow & Forecasting Finance General

The costs of investing in staff

invest in recruitment or outsource?Replacing an employee who is leaving, or adding additional staff as a business grows can be a costly endeavour.
This is not only at the point of recruitment but also it is important to consider the additional costs of employers’ duties, such as National Insurance contributions, auto-enrolment in a pension scheme and so on, and the investment required for induction to help a new employee to understand the corporate culture and the training necessary for them to learn how to do things the company way including systems, procedures, reports, using equipment or following the brand bible. And this is before investing in any staff development or changing their role.
If, however, you think this investment is expensive and are concerned they might leave once trained, consider the cost of not training staff and them staying.

Recruitment

If sourcing from an agency, especially for a senior level position, it is important to understand the agency’s fee structure. In a recent example one of our clients had recruited a manager using this route and paid the full fee of £16,000 which was refundable on a sliding scale if they left within three months.  Unfortunately, the new recruit left after four months leaving the employer with the cost of having to replace them.
Recruitment is not only a cost in terms of advertising the position and, in this case, the agency fee, but also in the time spent in selecting candidates for interview, conducting interviews and following up on references.
In addition, once in post, a business will have to factor in the time it will take for the newcomer to settle in and be able to function effectively.

Are there alternatives?

It can be difficult when a company’s order book is growing so that the volume of work is greater, reaching the point where existing staff can no longer manage the workload.
If this is starting to affect the relationship between business and clients this will add to the pressure.
While it can be tempting to save time by using an agency, online services or finding ways of using in-house resources to recruit key staff may avoid unnecessary costs such as that in the example above.
However, before embarking on recruitment, it may be worth a business having a look at its systems to see whether anything can be automated or improved in other ways.
Systems for processing and tracking orders through to final invoice may not have been automated when the business was smaller, but with increased volume it could be more cost effective to install a new system.
Another option may be contracting work out so that the business does not have to consider recruitment and payroll costs at all.
A third option may be to invest in training an existing employee and promoting them, then recruiting an apprentice or a lower-skilled addition to the team.
Innovative thinking is always necessary to business survival and to keeping costs under control, but never more so than when a business is growing.

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

App bubble 1 or Dot-com bubble 2 (Remember Dot-com bubble 1)?

headline "bubble burst"In January 2016, approximately 5,000 new apps and games per day were listed for download, according to the most recent research published by Statista. On the App Store alone 50,750 new apps and 19,130 new games were listed during the month.
There are currently over 2,200,000 Apps listed for download from Google’s Play Store and another 2,000,000 on Apple’s App Store and the growth continues to be exponential.
The question is whether it is possible for so many app developers to survive – remember the growth before an explosion of IT/web developers publishing new websites in the period 1997-2000. They were seen as having the potential to make a fortune.  In fact, very few were able to make a living although some raised a lot of money before spectacularly collapsing when the Dot-com bubble burst 1999-2001.
In our view something similar is looming with apps and the reason is also similar with lots of competition and very few apps finding a market.
Most of them will fail due to customers not being aware of them. Those that are found and installed are often only used once before being uninstalled since the trial found them either irrelevant or not capturing the user’s imagination.
Marketing an app requires a huge investment to draw it to people’s attention and get it installed and trialled. Equally important is ensuring it stays installed because it is either really useful or great fun or users simply want it.
Without those two things an app is never going to be commercially viable.

Expert marketing and significant investment

A clear strategy is vital for marketing an app and needs to capture people’s imaginations in the same way that a good movie does – and remember a movie is only a hit if it is seen and that means it has to be marketed expertly.
It is estimated that when budgeting for marketing an app the calculation is to spend £1 for every app install.  It is also important to remember that for every install there are likely to be a percentage of uninstalls.  Of course, that does not mean people have not shared the app with other people so there is always a chance it might go viral but this needs a level of critical mass.
However, to attract attention against a field of thousands of competitors means spending real money. On average it is estimated that people have about 35 apps on their mobile phones and actually use only about 25% of them regularly.
Google has launched a Universal App Campaign that works in the same way as Google Adwords. The advertiser of the app pays per install but there is still the possibility that apps are subsequently uninstalled. However, any other app marketing strategy is difficult to deliver unless the promoter already has critical mass.
Given the difficulties of marketing an app and getting it noticed it is a reasonable prediction that there is a bubble looming and that sooner or later it will burst.
That doesn’t mean there won’t be an app equivalent of Lastminute.com that closed its funding just before the Dot-com bubble burst and used the funds to effectively buy market share.
The alternative is to exploit an existing brand like the strategy pursued by Nintendo and its Pokémon GO app.
Please tell us how you plan to get your app noticed.

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Business Development & Marketing General Rescue, Restructuring & Recovery Turnaround

Website law and best practice – does your website comply?

responsive website designBusinesses’ credibility can be affected by the smallest things, especially online, and among them is whether they comply with the law.
Who has not visited a company’s website and to check out the company behind it? Often the contact details only list an email and a mobile phone number but no physical address. Many websites don’t have privacy statements, a cookies policy, terms & conditions or disclaimers and some of those that do don’t include the company name, its registered number or a registered address.
It is not the sort of thing that inspires confidence and, if yours is a Limited Company, it is actually breaking the law, which applies not only to printed materials but also to websites.  On both, the company name, its registered number and its registered address must be clearly displayed.
Another legal website must is that if you are gathering data from website visitors, either for Google Analytics or to build a contact list, you must display a notification that the website uses cookies to gather information, for what purpose and offer an opt-out option.

Website good practise

Government guidelines make no mention of telephone numbers, but it makes sense to give website visitors confidence by including a number of contact options, including a landline, email and a trading address.
Following on from the legal requirement on cookies it can also be good practice to include a statement on the company’s privacy policy.
Equally, if it is appropriate, for example for a business to consumer product site and particularly for an e-commerce site or where providing a service, consider including terms & conditions.  This may not be appropriate where contracts are negotiated individually, however having them on the website makes it easier if you ever end up in court arguing about terms & conditions.
Finally, a business can win itself bonus points by ensuring that its website is designed to be clear, readable and avoids annoying features like pop-up messages and videos that have no “off” button!
As more people have become used to checking company websites to see who is behind them, they have also come to expect conventional and easy navigation whether they are viewing on a PC, a tablet or a mobile phone. Indeed, Google now gives less prominence to websites that do not render on smaller and mobile devices.
Furthermore, there is a growing requirement to cater for people who may have sight or hearing issues. This is achieved by including descriptive text behind pictures and a textual version of what is being said in a video and removal of dazzling or flashing visual displays.
It is no surprise that the ‘bad guys’ have impressive looking websites but hide their identity, so being aware of the above can help distinguish between form and substance.

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Business Development & Marketing General Turnaround

Email marketing – getting it right

email marketingEmail marketing, that is communicating to potential clients/customers using regular e-newsletters, is one of the oldest-established methods of online marketing.
While recipients often complain about receiving too many of them, they remain one of the most effective components of the marketing mix, with an open rate of 20-30% according to Campaign monitor, a UK and US-based email marketing company.
So why would any business not consider using this method of marketing communication when the Direct Marketing Association has calculated that it has a ROI of up to 4,300%?

It’s not about the numbers and there are rules

This is where the law comes in – and yes there are rules about marketing that are online here. Basically, you MUST check if customers want to be contacted and equally you MUST make it easy for them to opt out, either by sending a STOP text to a short number or by including an “unsubscribe” link clearly shown in the newsletter.

What are the advantages if it’s so easy for people to stop receiving them?

Effective email marketing is about quality, not quantity. It is a mistake to think in terms of large numbers and we advise clients to not buy contact lists. It may be more work but it is far more effective to build your own contact list of people with whom the business has had some dealings and who may be willing to find out more.
A well-crafted communication targeting the right audience prompting interaction and responses from just a few people is worth more than one that is sent out to thousands who don’t open or read it and who then unsubscribe.
In many cases, this will not be about sales but about building an awareness of your business’ brand and personality and establishing a relationship.
Done well, you can talk to recipients as individuals, give them something interesting and new to read and build a loyal “fan” base.  Not only that but you can easily measure what has worked and what has not by how many recipients open the email, make comments and respond to any “call to action”.
But obviously it is important to define the purpose of your communication.
In the new and uncertain post-Brexit economic climate, it makes sense to revitalise your business marketing and to add e-newsletters to the mix, if you don’t already use them. It also makes sense to get professional help with the writing and design to ensure messages are both relevant and capture the readers’ imagination.

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Business Development & Marketing Finance General Turnaround

How do you inspire employee loyalty to your business?

respect employeesFar too many businesses rely on money to incentivise and reward employees, assuming they are motivated primarily by money.
However, there has been plenty of scientific evidence for at least 20 years that has shown that this is not the case, according to Daniel H. Pink the author of five books about business, work, and behaviour. (Washington).
The prolific contributor of articles on business and technology to publications, including the New York Times, Harvard Business Review, Fast Company, Wired, and The Sunday Telegraph, explains his argument in a popular TED talk.
Numerous tests over the years have shown that actually offering a money “prize” to groups who solve a defined problem more quickly than others is counter-productive and actually slows them down.
However, problem solving actually speeds up if there are no constraints and people are left free to think laterally.
Pink illustrates how this has been used to productive effect by a US software company that allowed employees to spend almost 50% of their time on anything they wanted, but they had to then present the outcomes to the rest of the company. Another example he cites is Google, which operates a system where engineers are free to spend 20% of their time working on anything they want. The results have accounted for up to 50% of Google’s new products.

Employee loyalty is about respect and recognition

While financial incentives might work for a clear set of simple, routine tasks with clearly defined objectives, the majority of business growth in the 21stCentury relies on innovation and conceptual ability. While obviously paying people adequately and fairly is important, what matters in the latter context is to give employees self-determination and control over their work.
It plays into their desire to do better, to use their imagination and to feel trusted.  The “reward” in this context may be the respect and recognition from management and from their peers.
Rewards or recognition do not need to be explicitly stated at the outset, but loyalty depends on being listened to, consulted, respected and recognised. The mechanisms can range from suggestion boxes to a post on a noticeboard for a particular achievement but the essential ingredient is acknowledging that people are responsible, able and adult and can be trusted to do their best without over-controlling management. Suggestions that are not acknowledged discredit management, and suggestions that are ignored or rejected without consideration make people feel undermined.
Get it right and a business will be able to rely on its employees’ loyalty, get it wrong and your staff will know you don’t really care about them.

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Business Development & Marketing Finance General

Why do so many SMEs fall short when taking on new employees?

man contemplatingIn the next in our series of August business ideas to ponder at leisure we’re looking at recruitment, induction and staff loyalty.
Generally, employers hope to recruit employees who are already trained, qualified or competent for a position on the grounds that they will become productive more quickly once they start.
However, for some time there has also been complaint from employers that they find new recruits, including graduates, to be weak in basic literacy and numeracy, or people skills, and over time that they are not as loyal or committed as expected.
While recruiting experienced staff is viewed as ideal, most companies want to pay as little as possible and end up employing inexperienced staff.

Training, induction and loyalty

In our view the inexperience of staff is linked to whether or not they are valued. There are however solutions.
Firstly, why not consider taking on people who are younger and less set in their attitudes and investing in training them, not only in skills but also in the business’ ethos and work culture?
Secondly, leaving aside the skills problem for a moment, how much of the loyalty problem is due to an inadequate and often far too short induction process?  Often SMEs pay little attention to these essential underpinnings.
Perhaps they do not really value their employees, nor do they value the time and investment needed to make employees feel truly valued.
This is often characterised by a failure to induct new recruits or even to provide proper support to existing employees. All too often staff feel they are competing with colleagues rather than collaborating with them for their collective benefit.
Arguably paying attention to welcoming, training and helping newcomers to the workforce to settle in will help to make them feel valued and encourage a level of loyalty to the company that has shown an interest in their development and given them a chance.
Lastly, on the subject of loyalty, employers often complain that after they have invested money in training staff who then leave for a better opportunity.  In our view seeing this as money wasted is a too narrow viewpoint, particularly post Brexit. The goodwill generally endures.
If, as seems likely, recruitment from overseas post Brexit becomes severely limited and bureaucratic it has already been said that for the UK to be competitive it needs to upskill its workforce. The lack of home grown skills has been an issue in the UK for some time and the situation will only become more urgent, so investing in the workforce is something every business and employer should consider contributing to for everyone’s eventual benefit sooner rather than later.

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

Blockchain – innovative technology that could cut business costs dramatically

man contemplatingThe holiday month is a time to ease back, refresh and perhaps explore new ways of doing business and this includes innovations in technology.
Many people will be aware of the virtual currency Bitcoin, but how many have heard about the underlying technology that made Bitcoin possible?
This is Blockchain, a secure digital and publicly accessible registry or ledger system, also known as Distributed Ledger Technology (DLT), that will allow sharing of everything from confidential documents to financial transactions to all those who are authorised by being given the access codes.
Its secret is in its decentralised nature, which means it operates without a central authority, such as a bank or a legal notary. A copy of the entire registry, updated in real time, can be saved to the computer of every authorised member of the Blockchain. Transactions are checked against previous activity and verified before being added.
How will Blockchain help businesses?
Most importantly it will provide the basic infrastructure on which businesses can build secure, trackable and verifiable records of everything from contracts and agreements to payments.
It is expected to reduce transaction costs as well as the time needed to verify details of interactions where multiple parties are involved.
Professional intermediaries, such as banks, lawyers or brokers, would not be needed to verify contracts, agreements or payments and this would reduce fees and transaction costs for businesses.
The Blockchain infrastructure can be used to create secure storage for public records and binding promises, something the UK Government has been exploring for use in the public sector potentially by the NHS and for recording such things as welfare payments.
Many banks have already started to experiment with using Blockchain technology and Santander analysts have estimated that the new technology could save banks more than $20 billion per year in transaction and other costs.
In the coming years it may well prove to be as great a revolution as the internet has been in the way businesses operate.

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Business Development & Marketing General Rescue, Restructuring & Recovery Turnaround

When and why do you communicate with your customers?

communicating with customersRegular communication with customers and clients is something that businesses often do without having any clear strategy or purpose.
This is short-sighted when you consider that 80% of a company’s profits comes from just 20% of their customers.
This does not mean that a business should bombard its customers with a barrage of sales messages using every means at its disposal from emails to telephone calls to social media.
There is plenty of data available about customer contact and their pet hates including unhelpful service agents, inability to get help when problems arise, too frequent emails, making unsubscribing difficult, and many others.
Building effective relationships with customers should be much more nuanced and not always about selling them something.
It depends on having an effective Customer Relationship Management (CRM) system that is frequently updated and provides more than just a record of orders placed, but also of follow-up communication, and some personal information.

The art of nuanced customer communication

Here is where that old cliché “people buy from people” applies. It means knowing a bit about customers as individuals: what’s their current business challenge? how do they like to be contacted? do they have any pet hates? It may mean knowing milestone dates like their birthday, whether they have children, loved pets, even what their particular non-work interests are. All of this can be recorded in a good CRM system and some include automatic reminders when a significant date is coming up.
Customer communication is about building and sustaining long-term relationships and businesses can build on this information by identifying clear purposes to their customer communications.
The basics include ensuring that they remain aware of your business, informing them about new products or services, and monitoring the relationship by checking they are happy with your service, such as using a brief questionnaire at the end of a job or carrying out a customer satisfaction survey.
More nuanced contact might be thanking customers for their business and support, passing on leads, or sending them relevant articles or information about subjects that you know are close to their hearts.
Thanking customers for their support, sending greetings on milestone dates, sending them interesting articles or details of events and seminars on topics that you know are close to their hearts may not at first sight seem to have much to do with closing a sale or winning a repeat order.
However, relationships with customers are essentially all about valuing them and providing evidence to make them feel valued.

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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 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 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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Business Development & Marketing General Turnaround

Keeping on top of Facebook analytics

facebook insight imageWhile all social media analytics offer helpful insights into the behaviour of customers and the effectiveness of marketing campaigns, they need to be approached with caution.
There are several reasons for this.
Firstly, all platforms are also businesses and therefore want to encourage businesses to use their paid-for promotional products.  This is particularly true of Facebook.
Secondly, they are constantly seeking ways to improve the experience of users.  Recent examples in Facebook have been offering people ways to refine and personalise what they see in their news feeds and changing the “like” button at the bottom of posts to a series of six images that allow people to more accurately reflect their feelings about the content.
Facebook uses all the activity on the platform to monitor and refine the performance of posts. Anyone who frequently checks in to monitor post performance will see that the weekly statistics for post reach and people engaged shown at the top right of pages regularly go up and down throughout the course of a day or a week.
facebook analytics image 2It can also happen that a business page that has been doing well for several weeks will show an unexpected dip in performance.  This may be the result of external circumstances, such as an imminent holiday, when people perhaps are doing other things but it can be difficult to precisely pin down the cause.
While it is important for business owners to look regularly at their business page performance it can be difficult to draw conclusions when the information is so fluid. Nevertheless business owners or managers do at least need to be aware of what the analytics are showing in order to have meaningful discussion with marketers.

Consult your marketers

Monitoring the data and what is driving it constantly changes. This requires the marketers’ expertise to keep an eye on trends and interpret the performance of a particular marketing campaign.
They will be able to advise on whether a campaign is subject to momentary fluctuations that require no intervention or whether the analytics are revealing that a campaign is not performing to produce the goal it was set up to achieve.
They will also be able to suggest ways of adjusting a campaign’s social media activity to better achieve those goals.

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Business Development & Marketing Cash Flow & Forecasting General Turnaround

Effective social media strategies need analysis

The use of various social media platforms is becoming established as a part of a business marketing strategy in the 21stCentury.
But how many businesses use data to monitor the results of their efforts, to check it is working and then to use the feedback to modify their activity?
We recently asked delegates at a business conference how many of them had ever seen Twitter or Google Analytics and were staggered when from an audience of around 120 senior executives only one put up their hand.  Yet in a global marketplace the digital world is crucial to successful business.
Over the next few weeks we will be looking at the data you can collect from Twitter, Google and Facebook and how you might use it.

First, finding Twitter analytics

an image showing Twitter analyticsIf your business has a Twitter account you can use it to login to https://analytics.twitter.com to find the data collected on your activity, known as Analytics.
You can also access analytics direct from Twitter by clicking on logo picture top right then select Analytics from the drop down menu.
You will find:
Home – a month by month summary and a last 28 day summary.
Tweets – a tweet by tweet summary of engagements, which is how many people have acted (commented/liked or shared your tweets) and reach, which is how many people your tweets have been sent to.  Top tweets help you identify what works and what doesn’t.
Audience – you can review your audiences’ interests and compare to other audiences. Top mentions help you find out who your fans are, who is promoting your business, who to thank.
You can change the date range if you want to look at how a particular set of tweets has worked.
If your business runs its own campaigns in-house rather than using a social media marketing expert this information is essential to assessing how effectively you are communicating.
Once you have collected the information the next step is analysing whether or not what you have been doing has achieved the results you had hoped for and if not deciding how to alter your activity so that it performs better.  That’s the subject for another blog.
For the moment it is worth just looking at the rich data available and considering how it might benefit you and your business. Should any of it become one of your KPIs?

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

Time for a Fresh Start. Take time to Re:flect

Blog Reflect Jan 5 2016It is all too easy during the first week back in the office to rush into work.
I hope that you have used the Christmas break to reflect on your business and personal priorities and consider what you want to achieve in 2016.
Once you get sucked into the day-to-day minutiae of work, those holiday initiatives quickly get buried rather than turned into plans and implemented.
I recommend using this first week in January as time for a fresh start, time to write down your ideas so your notes can act as a framework for considering them. This process of reflection allows you to consider them in more detail and where necessary gather more information before refining them into goals.
A useful way of thinking about ideas is to use Kipling’s Six Honest Men approach which seeks to answer the questions What and Why, Where, When, How and Who.
They would suggest using this first week to concentrate on ”What?” and “Why”. What are the potential opportunities? What do I want out of my business? Why am I working so hard? What are my/my business’s possible goals?
Over the next four weeks, we will encourage you to adopt a systematic and logical approach to setting achievable goals (what and why) before we identify the actions (where, when how and who) that will be needed to accomplish them.
For example, sounding out colleagues can help you clarify what may have only been a broad outline of an idea. They may also have innovative ideas to contribute as well as more hands-on experience of the practical implications of what is being considered. You might also ask if they are prepared to help you, especially if your ideas involve change.
Summarising the essential points at the end of this period is also crucial before progressing to the next stage which I will cover next week.
There are other benefits from involving colleagues. Consultation can also help to engage and motivate staff, get their buy-in and help them to understand the process so that when it comes time to implementing your plans they won’t be sabotaged.
(Image courtesy of pakorn at FreeDigitalPhotos.net)

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Business Development & Marketing General Rescue, Restructuring & Recovery Turnaround

Why do successful people practise time management?

Continuing our series on successful people this time we are looking at the importance of time management.
There are two important reasons for practising time management.
Not only is it important to create a structure to the day that makes it possible to define what needs to be done but also it enables tasks to be prioritised so that the most important are the first to be dealt with.
Time management, using lists and a diary, makes it possible to review the task list, to allocate time and in particular to reschedule the less important from the most urgent along the way.
A second important reason to practise time management is to build in the necessary free space for taking regular breaks from the desk and the phone and for research, personal development and creative thinking.
It is neither mentally nor physically healthy to remain sitting at a desk all day without taking regular breaks to at least stand up and walk around the office for a few minutes.
Pausing to think, visualise what success will look like and to then plot the steps needed to get there is one of the things that distinguishes successful people from those who are competent at their job.
Too many business managers feel obliged to multi-task especially earlier in the day when they feel freshest, but research conducted at Stanford University has found that multi-tasking is less productive than doing one thing at a time and fully concentrating on it.
The danger with multi-tasking and not managing time becomes more apparent when things start to go wrong in a business. Then the failure to prioritise and build in thinking time will show up as stress and an inability to make the right decisions necessary to deal with a crisis.

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Banks, Lenders & Investors Business Development & Marketing Factoring, Invoice Discounting & Asset Finance Finance General

Is raising finance from debt crowdfunding a good idea?

In the second in our series on crowdfunding we’re focusing on debt crowdfunding, also called Peer to Business lending.
Typically lenders are looking to finance tangible assets that they can secure, such as book debts, vehicles or plant & machinery. However all too often businesses want to finance business growth which might involve business development, staff or simply working capital. The banks have largely withdrawn from such funding unless security can be provided. As a result there is an explosion of crowdfunding with most models based on loans.
In the debt crowdfunding model most loans are based on compounding interest with equal monthly repayments for the duration of the loan which is normally for between 2 and 5 years.
According to Nicola Horlick, chief executive of Money&Co, writing in CityAM in April 2015, debt crowdfunding is the source of funding for the vast majority of UK SMEs. She argues that this type of crowdfunding is less risky than equity crowdfunding because of the high failure rate of start-ups, whereas a debt funder like herself will ask for several years of made-up accounts.
Funding Circle is probably the best known debt crowdfunder in UK. It has loaned about £750 million to 7,300 businesses in UK and US. Examples include Blood & Sand who borrowed £104,000 in October 2014 from 100s of individual lenders to refurbish their new cocktail bar in London.
Given the risks, such loans are not much cheaper than those from a bank but they tend to be easier to obtain. However despite the perception of an easy loan, most funding platforms rely on directors giving a personal guarantee so as to make sure that they have every intention of repaying the loan.

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Business Development & Marketing Finance General Uncategorized

Starting a business is no easier for ex-corporate executives

While a business rescue advisor usually enters the picture at the point where a business is struggling often they can trace financial problems back to its early days.
Setting up a business is not easy, even for the formerly successful executive coming out of a big business, and often the advisor will identify structural problems that have been there since the beginning.
For a start-up, a major problem is the number of documents that have to be prepared, checked and approved, from the terms and conditions for clients, suppliers and a website, to the documents like a shareholders agreement, employment contracts and a staff handbook in addition to establishing robust back office with admin, record keeping and accounting systems.
Where the executive may have been able to call on both in-house HR and legal help and will have been backed by ample resources the start-up has no such in-house help. How does a new business owner assess the validity and worth of any advice, especially when he or she has to be careful about the cost of advice?
Then there is the problem of selling the business product or service. Some entrepreneurs are brilliant sales people, who give little thought to systems and accounts, while others are systems or financially oriented but with little experience of business development and selling.
While everyone encourages you to jump, if you are coming out of a big business intending to set up your own company you need to pause, reflect and find out what needs to be done before taking the plunge.
Our next blog will focus on how to find the right advice.

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Business Development & Marketing General Rescue, Restructuring & Recovery Turnaround

Change is now the only constant

 

Consumers and clients are fickle, the pace of life is accelerating and it’s all thanks to the internet.

It may be a bit harsh but the SME that wants to do more than just survive needs to not only ensure the quality of its products or services and of its customer service, but also to be alert to potential new innovations and changing customer habits.

Here’s an example – a cafe in London recently switched from charging customers for coffee to charging customers an hourly rate for the time they stayed there.  The owner had noticed that his cafe had become popular with self employed people with laptops looking for a place to work.

The change has reportedly been popular with customers and illustrates the point that these days it pays to be flexible, responsive and therefore change the business model to meet new situations.

Here’s another example.  At one time a business website would likely have been seen either on a PC or a laptop.  Not any more. Now web developers have to produce something that will accommodate itself to these and to tablets and mobile phones.  It’s called responsive design.

A business model does two things.  It can set short, medium and long term financial and growth goals but it is also a daily and weekly satnav to be referred to often.

Increasingly, savvy businesses need to build a responsive model that can cater to changing circumstances as well as keep them on track for the longer term.

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General

Don’t Waste Your Money Marketing

When business owners run short of cash they get desperate. They pretend nothing is wrong and often they pick up marketing ideas. These activities would have been helpful at an earlier stage. Applying them indiscriminately without understanding the context of how the concepts work as part of a strategy late in the day is disastrous.