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Business Development & Marketing Finance General

Running a small business is a juggling act

businessj juggling actA YouGov study has found that small business owners identified most strongly with the analogy of a juggling act when asked about running their businesses.
The analogy was strongest in the North West, in Yorkshire and Humberside, where 63 percent in each region compared themselves to jugglers.
Bookkeeping was rated the biggest chore by 27% of the 1000 respondents, while 42 percent of respondents believed central government added to the hassle for small businesses.
As an analogy it makes sense where dropping one ball can cause a knock on effect such as the consequences of not having contingency plans or missed payments or failure to file Tax Returns.
Among the issues identified in an article in The Economist on the same subject is knowing the right time to take certain steps in a business.   In that sense, it argues, the juggling act is a permanent exercise in balancing a variety of trade-offs. Such as holding high stock levels can help avoid the consequences of being let down by suppliers but it ties up working capital.
Knowing the right time to expand is a major issue: “by expanding too fast, companies risk losing control of product quality and messing up their management structure”.
Another is the tension between centralisation and delegation. A hierarchical structure can lead to a rigid and inflexible business structure and a loss of agility, while delegation of roles can only work if staff are well trained and the business has a clearly-defined set of goals with which everyone is familiar and on which they act in harmony.
Another juggling act is created by the tension between sticking with the core products or services and how much you can diversify away from the core.
“Choosing the right time to expand and diversify, and the right organisational structure to do it, is a matter of judgment. That judgment, and the flexibility to change plans, is what makes a good manager.” is the Economist writer’s view.

So how can an effective CEO handle the juggling act?

Firstly, they should learn to delegate effectively. They should not be trying to do everything themselves. However, this means that those to whom tasks are delegated must be well-trained and know the company’s goals and be suitably motivated and trustworthy when left to carry them out.
The effective CEO will always be juggling priorities but there are ways of managing them although this involves being well organised.
It helps to see a business as a system of systems by breaking it down into discrete and manageable sub-systems or processes with delegation and clear lines of communication to keep track of all the various activities.
Planning and managing time have been covered in previous blogs and are essential to ensure balls are not dropped. It is easy to put off tasks which can turn out to bite you on the backside if ignored. Examples of activities that are often put off are: the collection in book debts, paying suppliers, VAT and PAYE, boring things like compliance, insurance, allocating time for staff reviews, and even speaking with customers; indeed there is much to oversee the trick is not to do it all but have systems and processes in place to ensure each necessary activity is done.
Check lists and using management systems can make juggling easier. This might mean having KPIs (Key Performance Indicators), check lists such as one listing all the month-end accounting tasks, a monthly management report that consolidates information from departments including management accounts, an order management system to track the fulfilment and invoicing orders, a way of monitoring sales & marketing activities and their results. There are myriad sub-systems and processes that can make the juggling easier but they all need to be optimised and integrated as part of the overall business.
It is possible to make the juggling act manageable and efficient in a way that frees up the time of the CEO so they can focus on the future of the business giving them time to develop strategy. To work on the business, rather than be bogged down in the business.

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Business Development & Marketing General Interim Management & Executive Support

Is your business barely managing and if so why?

Business barely managing in stormEvidence suggests that many UK businesses are barely managing when compared to foreign-owned businesses of equivalent size operating in the UK.
At the moment it is easy to blame everything on the uncertainty surrounding the outcome of the UK’s negotiations to leave the EU, especially as political positions remain entrenched and seemingly irreconcilable with just 40 or so days to go before the deadline.
As the most recent productivity figures from the ONS (Office for National Statistics) showed, productivity and output per hour fell to their weakest in two years at the end of 2018, prompting FSB (Federation of Small Businesses) Chairman, Mike Cherry, to opine: “”Productivity data demonstrates exactly what a prolonged period of uncertainty does to an economy. Small business confidence has dropped to its lowest point since the financial crash, with four in ten firms expecting their performance to worsen.”
Of course, Brexit has prompted more businesses to divert their attention to do such things as stockpiling raw materials or components to mitigate any potential supply chain disruption, and of course, investors have been holding onto their money during this period of uncertainty.
It has also been suggested that another inhibitor to SME growth and scaling up has been what is known as the Seven-year Rule, whereby tax breaks for investors, made through tax-efficient venture capital trusts or via the enterprise investment scheme (EIS), are only accessible to companies for seven years after they make their first sale. This, it is argued, makes it harder for SMEs to access the finance they need to scale up.

Is business barely managing a “British Disease”?

However, in this context I would argue Brexit is a distraction and a convenient excuse for poor productivity and that the answer lies in the way UK businesses value, or actually don’t value, their people.  This is backed up by plenty of research from many sources.
According to the Guardian business and economics opinion writer Philip Inman there is a significant difference in productivity between the way foreign-owned businesses in the UK and UK-owned ones are run.
According to ONS figures foreign-owned businesses make up one in four of large UK-based businesses and are twice as productive as their domestically-owned equivalents. When it comes to medium-sized companies the foreign owned ones are about three times as productive.
Why should that be?
There is, argues Inman, plenty of evidence that the foreign-owned UK businesses pay attention to two things that affect productivity: processes and structure.  The ONS has found that there is a positive link between attention to these two and productivity.
Other researchers have argued that UK businesses do not value or pay enough attention to good middle-tier management, especially in family-owned firms that have been running for more than three generations.
Middle managers often have little management training or support and this leads to a lack of confidence among both senior managers and workers that their ideas are valued and suggestions acted upon.
UK businesses of all sizes clearly need to pay more attention to their people skills and competence, their processes and structure, especially once they find themselves cast adrift on post-Brexit competitive waters.

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Accounting & Bookkeeping Banks, Lenders & Investors Cash Flow & Forecasting Factoring, Invoice Discounting & Asset Finance Finance

January sector focus: Fintech

using Fintech to make purchase in shopFintech is used describe new technology that seeks to improve and automate the delivery and use of financial services.
Originally the term was applied simply to technology employed at the back-end systems of established financial institutions.
Over time, however, the Fintech definition has been expanded to include any technological innovation in — and automation of — the financial sector, including advances in financial literacy, advice and education, as well as streamlining of wealth management, lending and borrowing, retail banking, fundraising, money transfers/payments, investment management, asset management and some would now also include crypto currencies such as Bitcoin and their administration.
Fintech is also sometimes described as disruptive technology, in that many Fintech start-ups are designed to provide financial services in non-traditional ways, such as by offering online shoppers to secure immediate, short-term loans for purchases, bypassing their credit cards or by offering online and App-only services that bypass traditional lenders.
While traditional lenders and finance providers have tried to adopt some of the Fintech innovations, they begin with burdensome overheads and cannot generally compete unless they embrace the need to fundamentally change their existing thinking, processes, decision-making, and overall corporate structure. This is not something most managers can cope with.
There is now a vast array of Fintech categories of which the following are just a few examples:
B2C for consumer banking activities such as arranging loans and providing customer credit facilities,
B2B for small business clients (as above)
B2B for small businesses for activities such as taking payments, credit management and managing debtor ledgers
B2C for consumers for activities such as contactless payment and payment by mobile phone, online banking, applying for financial services such as a mortgage or loan, online shopping payments and many more.

Fintech as a part of the UK economy

In 2017 at the first ever International Fintech conference argued that the UK was the leader in this sector with a competitive advantage in the provision of Fintech services due to its sophisticated financial community and the growth of technology hubs like Silicon Fen in Cambridge and Silicon Roundabout in London.
The phenomenon was described as being an essential aspect of the UK vision for “an outward-looking, Global Britain” which would not only provide a high skilled, high wage economy but would attract the best talent from all over the world.
At that time, according to Treasury figures, the industry was worth £7 billion to the UK economy and employed an estimated 60,000 people.
It has been calculated that there are almost three times as many UK banking and payments companies now than there were in 2005 while the rest of the world has seen theirs fall by around one-fifth on average.
In May 2018, Technation reported their research in an article in Information Age that the UK’s tech sector, of which Fintech is a part, was expanding 2.6 times faster than the rest of the UK economy, with Fintech start-ups located not only in London but throughout the UK.
The Technation analysis also looked at the impact of Brexit on the sector, finding that by and large tech firms were undaunted by the prospects of leaving the EU.
However, Financierworldwide, provided a more sober analysis, identifying some of the potential challenges to Fintech.
These included future freedom of movement of labour and the absence of sufficient numbers of skilled tech workers available in the UK, the loss of the ease of the passporting of services to other EU markets and consequently the decision Fintech companies may face of whether to relocate to other countries in Europe, at least in the short term. Among the cities expected to be most likely to benefit from welcoming such moves are Dublin, Paris and Berlin.
There is also the worry that the loss of passporting rights after Brexit would deter the currently high levels of investment in UK Fintech.
Finally, regardless of Brexit, if Fintech is to thrive, after a year of seemingly frequent banking technology meltdowns, not to mention hacking scandals, there needs to be much more robust and secure protection against fraud and data protection. To achieve this we at K2 have invested in Tricerion as the future of login security. Check it out at www.tricerion.com.
 

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

Strengths, Weaknesses, Opportunities, Threats – SWOT, So What?

business improvement working digitallyInvestors, banks and advisers often ask clients to carry out a SWOT analysis.
But a SWOT analysis is meaningless unless the business is clear about its purpose and intends to arrive at a series of actions to be taken as a result.
While it is perfectly acceptable to use a SWOT analysis as part of a business review, all too often it is an overview that doesn’t help anyone.
(image courtesy of Pixomar at
FreeDigitalPhotos.net)
More helpful are the insights that can be gained from a close look at different aspects of a business.

Here’s an example

SWOT analysis diagramA business might choose to analyse its process from production of a product through to delivery.  The SWOT analysis may reveal a Strength in producing consistently good quality products.
However, when it comes to delivery it may identify specific issues such as poor labelling or packaging that doesn’t reflect the quality of the goods, or failed deliveries because the customer isn’t in to sign for the goods which both might be classified as a Weakness due to poor service quality.
Delving deeper will produce actions that can be taken to improve these, such as changing the packaging and couriers.
It could also mean looking more closely at the customer service process or considering setting up a tracking system that customers can use to find out delivery date and time.
This example focuses on improving the customer experience and reinforcing the business’ reputation for quality:  great goods, in good packaging, and delivered on time. The analysis is used to reveal the Weaknesses but the key is to have an action to do something about them.
When looking at the SWOT items it helps to look at them through the customer’s eyes so that actions benefit the customer, as well as the bottom line.
Rather than wait to be asked for a SWOT analysis, they can be carried out regularly. It is useful to focus on one aspect of the business at a time but treat the review as part of normal business.
Great businesses do this all the time and simply call it Continuous Business Improvement.

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

Negotiating on prices – what's your business model?

Business processes word cloudHere’s an amusing, but remarkably effective, tool that graphically demonstrates the choices that have to be made in negotiations over the supply of goods or services.
When a potential customer meets this businessman they will see a wooden block and two wooden pegs on his desk. The block has three holes in it labelled quality, cost and speed.
The purpose of the pegs becomes clear as negotiations proceed.
Suppose the customer emphasises really high quality, but also wants the lowest possible price.  The pegs go in the cost and quality holes. The customer’s needs can be met, but only within the current capacity of the company’s production schedule.
If the customer wants their order delivered fast, however, the pegs would go in the speed and quality holes. The businessman knows that to produce high quality goods at speed will mean rearranging his company’s existing schedules or increasing working hours, so speed + quality would increase the production costs.

There is always a trade-off between quality, cost and speed of delivery

While customers inevitably want all three, the fact is that generally there is a trade-off. Indeed everyone knows that overnight delivery is more expensive than second class post, but customers often need to decide what their priorities really are.
If a business is well known for the quality of its goods and services it is likely to be not only successful but also working to full or near-full capacity.
It will not want to compromise this reputation so the businessman’s little wooden block is a very effective way of demonstrating the compromises that may have to be made to satisfy a customer’s requirements.
In Europe, for example, many factories will not change their production timetable but sell their capacity. Customers know what quality they will get, what price they will pay but must wait for the next available slot on the production line. This is in fact a very efficient way of producing high quality output at a reasonable price since it allows for planned production and avoids the mistakes that can be made by disruption.
Businesses need to consider their business model and decide whether they will sell their capacity, i.e. goods at a fixed price, and to have a system for providing quality goods and services. The alternative is to offer speed but recognised that they will need to be flexible to meet customers’ demands.
The one area we believe should never be compromised is quality since this relates closely to the values of the business.
(Image courtesy of Stuart Miles at FreeDigitalPhotos.net)