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.

Business Development & Marketing Cash Flow & Forecasting Finance General Turnaround

Economic forecasts for SMEs

Nobody starts a business without expectations and plans for its future success, and we all need to make predictions about the future when preparing plans and making key decisions?
While many plans and decisions are based on what happened last year, a view of the future is required. Decisions need to be underpinned by predictions about the market and the economy. While few SMEs carry out formal market research, they are generally well informed about their market and have a good feel for how to satisfy their customers at a profit to themselves. Indeed if they don’t they won’t survive.
SMEs also need to make predictions about the economy and broader market, and how this might influence key decisions: What type of products/ services to provide? How much stock to hold? Forward orders for supplies? Need more or less staff? Increase wages? Can prices be raised? Invest in new plant & machinery? Grow or contract the business? Say “no” to new business? Develop or reduce capacity? Interest rates? Exchange rates? Carriage costs? Invest more on marketing? Buy or lease vehicles? Enter into long term contracts?
The building sector is a good example: is it booming? Or are customers hanging on to their cash? Another is retail: how much and what type of stock to I need for Christmas? Indeed we have seen the recent collapse in commodity prices which has caused the collapse of steel manufacturers.
Despite any economic uncertainty there is still a need to make decisions and SMEs need to develop their own economic forecasts.
There is a wealth of macroeconomic data sources that can provide valuable insights into almost all markets. It may take time to find the ones that are relevant but once found they can become part of a tailored economic forecast for a business.
Baltic Dry - 30-year indexAs an example, the Baltic Dry Index (BDI) is an economic indicator issued daily by the London-based Baltic Exchange that monitors the price of moving the major raw materials by sea. This is relevant because it is a measure of the demand for shipping capacity versus the supply of dry bulk carriers where it takes two years to build a new ship, and the cost of laying up a ship is too high to take out of trade for short intervals. So, marginal increases in demand can push the index higher quickly, and marginal demand decreases can cause the index to fall rapidly.
Another is the Shanghai Containerised Freight Index (SCFI) that tracks spot rates (not contractual rates) of shipping containers from Shanghai to 15 major destinations around the world. It can give a useful view of global trade and another perspective on the cycle of boom and bust. Despite many pundits suggesting we are doing rather well, the SCFI has collapsed with the index down 51% since February this year.
SMEs that have their own economic forecasts can use them to inform both short term decisions and long term plans.