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Business Development & Marketing Cash Flow & Forecasting Finance General Insolvency

Are you prepared for the next crisis?

crisis preparationFinance may be a primary consideration but it is not the only cost to a business in preparation for a crisis.
Being ill-prepared can damage the relationship with customers and employees, and ultimately, if the crisis is badly handled, it can damage the business’ reputation.
Complex, fast-moving threats to organizations can happen at any time, so being prepared for a crisis is about having the right people having been trained with communication tools and strategy in place ahead of an inevitable yet unforeseen event.
Business management consultants Mossadams produced a useful cost management guide to dealing with a crisis in April 2020, which sets out six elements to pay attention to. These are strategy (covering a customer analysis, product mix, recovery plan and financial forecast), assessing operating models, the trade-off between risks and opportunities, a situation analysis and a financial analysis.
According to the Harvard Business Review “When companies seem ill-prepared in the face of a crisis, the first question people ask typically is, “Where was top management?”
Ideally, it advises, boards should dedicate a block of time each year to better understand and prepare for major threats to the business.
It advises that boards should have both a strategy and a core team at board level trained and ready to deal with the crisis itself, as exemplified by the UK Government’s Cobra (Cabinet Office Briefing Room) group.
Of course, for a business facing a crisis the key is to take control of the messages and immediately review finance. While directors might worry about a hit to profits, in fact they should first and foremost have a plan in place for controlling expenses and for protecting and managing cash flow. Of course, ahead of the event it is wise to build up some financial reserves and to avoid taking on debt wherever possible. The less outside funding a business has to sustain when dealing with a crisis, the better.
Part of preparation for a crisis, however, and arguably as important, is the way it handles its messaging and nurtures the relationships crucial to its continued existence.
Stakeholders, customers and employees are likely to be panicked and worried about their future so communication is essential, not only to keep people informed and reassured in the present but also to protect the business’ future once the crisis is over. Indeed, critical to any crisis is to plan for emerging from the crisis so that the business does not remain in crisis mode.
In a crisis, everyone becomes acutely aware of the behaviour of others. This is therefore a key factor for reassuring stakeholders.
In this context, it really is a case of leading by example, so, perhaps it would be unwise for a business to pay out dividends to its CEO, when others are having their working hours cut or suppliers are receiving fewer orders because a business is scaling back activity..
The lesson is that preparation for a crisis is infinitely preferable to being faced with reaction without it.

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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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Business Development & Marketing Finance General

Why business owners should have an exit strategy from the start

statue of man thinkingIt is the last thing a business owner is likely to think about at the start or in the early stages of a new business, yet many consultants advise that an exit strategy should be part of the start-up plan.
They argue that knowing their eventual goal will determine how owners structure and develop their business and the kinds of people they may employ.
Among the eventual goals could be:
* A large income
* Wealth from a sale of the business
* Ego by providing evidence of your success to others
* Power from having influence over others
* Lifestyle being your own boss, doing something you enjoy or making a decent living to fund something else you want to do
* Security or legacy by building a business that can be passed on to children

These goals will determine both exit strategy and business structure

Fundamentally the choice is between building a business that can be managed by others, or one that will die when the owner ceases to be involved.
Legal identity tends to be key as a Limited Company is easier to sell than a sole trading business.
Consider, also, what is a realistic time frame in which to achieve these goals. There are plenty of stories about young entrepreneurs who started a business in their early 20s, made a fortune and were able to retire in their early 30s. Do you have a unique idea for a product or service that will be snapped up rapidly?  If not the time frame to bring the business to a saleable point may be longer but these days retiring at 50 with a comfortable income for many is an attractive proposition.
Having clarified the goal, it is also important to consider anything that might limit its saleability. Do you intend to have shareholders? What long-term contractual agreements is the business involved in?
There are generally three categories of buyer for a business: a trade buyer who knows the industry, a finance investor who likes the income, or existing management.
The type of buyer is influenced by your goal and at an early stage the expectations of key people will need to be managed. Managers and family in particular will need to be trained if they are to become directors and owners, which is very different to what will be expected of them if the business is sold to a private equity company as a finance buyer.
There are many other factors to consider at start-up. A key one being the brand and the culture needed to establish a solid and reliable reputation that justifies a loyal customer base.
Being your own boss and making a decent living depends more on sales and margins than investing in the future of the business. However, while you may be making good money and enjoying what you are doing, it is still wise to plan for exit which may be retirement. Investing in a pension may be more important than investing in the business but still requires planning long before any decision to sell the business or indeed to close it down.

Include the exit strategy in the business plan

Whatever the owner’s goals, the exit strategy should be included in the business plan since this is the end goal and essentially the main purpose of the strategy.
Along the way, you will need to assess whether the business is still on track to meet the exit strategy and if necessary to make adjustments to either the exit strategy or the plan.
In a second blog, coming soon, John Buxton, of Kingsworth Associates in London has kindly prepared notes and a checklist covering the considerations and steps for implementing an exit strategy once the actual decision to exit has been made.

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Business Development & Marketing General Rescue, Restructuring & Recovery Turnaround

Revisiting the role of the manager

remote workingThere has been a massive reduction in middle management positions in recent years which raises questions about the role of the manager in 21stCentury businesses.
Is the management hierarchy giving way to greater employee empowerment?
Have we moved to a world where actually much routine management is no longer a discrete function but is now a part of doing a job as part of the value chain?
To what extent has initiative taking been devolved to members of staff, who no longer want to feel managed and want to get on with the job themselves?
Many of the historical management functions, such as decision making, organising, planning and administration, can be carried out by members of staff if they are suitably trained, empowered and experienced to take them on and there is some mechanism whereby they can be accountable for their actions.
Arguably a flatter organisation with fewer levels of hierarchy is more efficient and more competitive being less expensive due to the need for fewer staff and much quicker when decision making doesn’t require management.
If a business is known for empowering its employees it can also make it easier attract more highly-skilled people which in turn contributes to being more efficient and competitive.

Efficiency or stagnation?

In many ways when a business is stable and working efficiently there is no need for the traditional management role of overseeing the activity of others.
So while there is still a need for senior managers even in a business with a flatter hierarchy, their time is freed from overseeing the actions of others to focusing on the strategic, on management of specific issues and on one-off problems that are not part of the day to day course of business.  Trained, experienced and empowered staff can now deal with such things as customer complaints, refunds, advancing loans or monitoring processes for example.
Therefore, the core role of management is now more about mentoring and providing support for the empowered and capable staff and less about supervising them as with a historical command and control approach to business.
There is however another view: businesses that are going nowhere don’t need managers to administer genteel decline. A fear of risk and little appetite for growth among owners and investors has resulted in many businesses pursuing short-term profits. Those with ambition need managers to make decisions, to take risks and deal the challenges ahead if they want to be successful.