As the recovery begins, it's a sobering thought that because they have become reconditioned by a common ‘batten-down-the-hatches’ approach to recession, few companies are likely to be engineered for growth. The repercussions could be fatal.
The danger is no longer 'boom and bust' - but ‘boom and rust’. Proactive organisations will grow, but more pedestrian businesses risk stumbling into terminal decline. There is the real possibility that if business owners/managers remain in a risk-averse mindset, they will preside over organisational paralysis that not only prevents growth, but also allows competitors to seize market share.
After five years of surviving it's an understandable response, but it leads to an uncomfortable truth – many UK businesses have forgotten how to grow.
So, as the 'green shoots' of recovery begin to take root, what should businesses be doing to reinvigorate themselves and create a platform for growth? Experience suggests that many will be doing the very thing they should most avoid – focus solely on profit.
The alternative approach will send chills down the spines of accountants the world over, no doubt, and it may appear to defy common business logic, but the best advice for business owners seeking growth through the upturn is don't just focus on profit.
There are tried-and-tested ways to keep your business small and stressful and the most common is to obsess about profit as the markets recover and hold on too tightly to the P&L. This approach will prevent you from creating the headspace required to innovate and grow. You may well stay profitable, but you'll also stay small.
In the longer-term, the most successful businesses will facilitate a fundamental shift from a focus on profit to a focus on 'multiple'. They'll look at the long-term value of their business and switch attention from the P&L to the balance sheet. And crucially, they'll shift their focus from income to assets. After all, income follows assets.
As well as traditional 'balance sheet' assets, there are ‘intangible assets’. And the key to long-term growth - and driving the value and multiple in a business - is to focus on the intangibles.
Intangible assets generally boil down to culture, talent and systems. They're the people and processes that drive equity value and combine to form your intellectual property. The challenge is to structure your business culturally and organisationally so that it drives value, grows sustainable revenue streams and supports your long-term ambitions. Creating and building upon the right cultural platform to empower staff to deliver these common objectives - leaving senior management free to plan for tomorrow - is critical.
The economic upturn should present a clear catalyst for growth - but business owners must not allow their desire for short-term profit to dictate caution about long-term planning and investment. Now is not the time for 'logical' product innovation and extension based on understanding today's marketplace – taking baby steps will only keep you small. Today's green shoots represent the ‘teenage years’ - and to exploit them, businesses need bold innovations if they are to capture whole new markets and appetites.
To progress, owners should consider pursuing an asset-based strategy. The challenge is to understand the ‘rocket juice’ in your business – the core intellectual property that powers your current product and channel. Once you identify it, you'll be well placed to innovate into radical new product areas and channels that are more lucrative and less competitive.
The most successful companies at this point in the economic cycle will always be outwardly-focused - and they will look for partners that can help stretch and stimulate their thinking. Business coaching can provide an independent perspective on how companies can invigorate their core intangible assets to drive value, increase their multiple and stimulate sustainable growth.
The most common way to keep your business small and stressful is to focus obsessively on profit. But there are also innovative ways to engineer growth and the best is to concentrate on intangible assets, and to work with a partner that can help to revitalise your company and create new platforms for growth. After years of austerity, UK businesses may well have forgotten how to grow, but they need to get their memory back - and quick.
Blog supplied by John Rosling, CEO of business growth consultancy Shirlaws (UK) Ltd.
Running your own business can be exciting, draining, liberating, stressful and satisfying – all at the same time. Doing it without outside investment can be a risky proposition, but with risk comes reward. While some people might view having a small budget as a disadvantage when starting a business, in my experience it proved highly beneficial in the long run.
I started market analysis consultancy White Space with my business partner Nick using just our individual hard-earned savings and no investor support or bank loans. We’ve now been running for eight years, rent a large office in central Oxford and work for more than 70 of the world’s most recognisable companies. There are many positives to funding your own business, and here I’m going to share some of my experiences and provide practical tips on how to overcome any disadvantages.
As a business owner, you’ll be under constant pressure to make decisions that are critical to the growth and direction of your business. Make sure you are clear about your overall strategic direction by applying the following principles:
Self-funding your business will cause you to reassess and prioritise your personal expenses. In the early stages, you will be surviving off very little, without the comfort of a steady income. Many financial survival tips are obvious, such as ‘save money wherever you can’. Here are three that are less obvious, but just as important:
Despite wanting to conserve your cash without any major capital outlays, there comes a time when a business needs to accelerate. A steady growth model is far more scalable and allows you to fully test the market before expanding further. You are also much less likely to fall victim to the cycle of ‘boom and bust’.
The right time for growth is when your business is in the middle of a successful period, with a few strong months just gone and a couple more forecast to follow. Be aware that expansion will eventually require additional resources to succeed, including labour, equipment, finances and more micro-management.
My experience has shown that the old adage – ‘revenue and staff numbers for show, profit for dough’ – still rings true. It can be exciting to feel like you are expanding, but never take your eye off the bottom line. For the vast majority of start-ups that are not expecting to be the next Twitter, this is the only true measure of success.
Self-funding your business can provide many advantages, from enormous personal satisfaction to being able to take a greater share of the spoils when your business succeeds. Making sure you have the right business proposition, the passion to make it happen and being realistic about what you can and can’t achieve are key to a successful and scalable business start-up model.
Blog supplied by John Bee, managing director of Oxford-based market analysis consultancy White Space.
There’s no denying that as a working population we are experiencing the throes of a revolution – and a flexible one at that. The concept of flexible working is one that is rapidly emerging, resulting in the adaptation of the traditional workspace as we knew it.
Rapidly advancing technologies are making it easier than ever for professionals to work remotely, on the move and reduce the need for a business to run its operations entirely under one roof 9-5, seven days a week.
The number of employers offering work-from-home options increased from just 13% in 2006 to 59% in 2011, according to the CBI/Harvey Nash Employment Trends Survey 2011. Indeed, its most recent survey in 2012 also spoke of the flexibility of the UK’s labour market, believing its freedom has made the country a good location for sizeable international projects.
Flexible working has psychological, financial and business benefits and these all result in heightened productivity and efficiency. Finding the right work-life balance is something we all strive for and can be one of the biggest challenges any entrepreneur faces when starting a business. Flexible working hours, whether that means working alternative hours or at different locations, may help to strike this balance.
One of the many reasons entrepreneurs start their own business is because they feel stressed and restricted by conventional working hours, particularly if they have young family commitments. The ability to work outside the office and keep your fingers on the pulse is a positive for both employees and employers.
Small-business owners concerned about the bottom line are also welcoming flexible working because it is proven to be good for businesses, too.
The Department for Work and Pensions produced a report on the effects of flexible working on employees and employers and it found a marked reduction in costs as a result of fewer people missing work or leaving their positions. Similarly, 58% of small-business owners recorded notable increases in productivity within their workforce.
Flexible working has made business increasingly global. Firms can entertain the idea of spreading their net further than ever before by travelling overseas for client pitches and meetings without the fear of taking their eye off the ball back at headquarters, with email, apps and the cloud improving connectivity in ways we could never have imagined just a couple of decades ago.
The growth of business hubs and fewer business owners demanding central office locations, combined with the continued use of smartphone and tablet devices means professionals can increasingly take responsibility for finding their own work-life balance.
Guest blog supplied by Generator, one of Europe’s fastest-growing hostel accommodation chains, with eight locations across the continent.
Choosing the right telephone number for your business is vital because it says a great deal about you. But if you don’t know your 01s, 02s, and 03s from your 0800s and 084s or the potential costs to you and your callers, it can be a minefield. Here’s a guide that should help you choose correctly.
Telephone numbers are more than just a means of customers and prospects getting in touch with you, key as that is to a thriving enterprise. They also reveal something about your business.
If you provide only a mobile (07) number, people may think your business is small. Choose a geographical number (beginning with 01 or 02) and you appear to be tied to a specific area, which, of course, is fine if you wish to operate on a local or regional basis, but not ideal if you have ambitions to trade nationally.
Provide a number that begins with 084 or 087 and callers may fear the call will cost them too much following the recent bad press about them being used for helplines at premium rates.
Opt for an 09 number and people will know you are looking to make serious money from the call, perhaps, quite rightly, for a cause or a competition – or maybe they’ll just think you’re greedy!
First impressions count. The customer or prospect may not make the call – and perhaps you just lost a new client or maybe an existing customer went elsewhere.
Yes, playing the numbers game when it comes to choosing a phone prefix for your business or organisation can be daunting, but for smaller businesses, 03 could be your lucky number.
So why is 03 so good? While it may not suit every business, 03 has the following advantages:
Public awareness of 03 numbers is limited. There’s no doubt the government needs to do more to promote the benefits of an 03 number for callers and business owners, especially in the wake of recent legislation banning the use of 084 and 087 numbers for consumer helplines.
Blog supplied by Lindzey Evans, Client Support Manager for Penelope, the virtual phone system for start ups and emerging businesses.
With little or no daylight outside of work, it’s perhaps easy to understand why people’s morale descends into the abyss during winter.
As some employees suffer a bout of the winter blues, small businesses can breathe a sigh of relief when they begin to realise that very little budget is needed to boost staff morale.
In fact, contrary to popular beliefs, money isn’t the best motivator. Praise and flexibility are far more influential than bonuses and pay.
A high proportion of small businesses will suffer a drop in staff numbers this winter, whether that’s caused by a spike in sickness-related absences or an influx of last-minute holiday requests. Combine the two, and your other employees could be facing a crippling workload.
A watertight sickness absence policy and holiday request policy offer the best preventative measures to manage the risk of a limited workforce.
It’s also crucial not to forget those who are left behind, with recognition for their achievements helping to reinforce morale.
Adopting a flexible approach also helps to keep morale high. Take severe weather for example. Offering your employees the chance to work from home helps to reduce absences and prevent the business from grinding to a halt. In such an event, it’s crucial that you have a robust flexible working policy in place.
A dysfunctional team can have a devastating impact on productivity, which is why good communication within the workplace is vital.
Be sure to keep your employees up-to-date of any business news. However, do remember that this is a two-way street, as your employees should be able to approach you with any work-related issues.
A well-engaged workforce will ultimately deliver increased productivity and performance, therefore it’s crucial to recognise and meet the needs of your staff.
Remember that even the smallest gesture can make a big impact, such as enabling staff to leave early once targets have been met or even treating them to lunch.
At the end of the day, it’s up to you as the employer to motivate your workforce and prevent a dip in staff morale.
Blog supplied by Helen Pedder, head of HR for ClearSky HR.
I ask every audience I talk in front of one key question: “What’s the most important thing to measure if you want to find out how well your business is doing?”
And, without fail, people always come back to me with the wrong answer! They call out ‘sales’ or ‘turnover’ or ‘profit’, but they hardly ever mention the right and probably only answer that really matters – ‘cash’.
In reality, it’s impossible to carrying on trading if you run out of cash.
In the current economic chaos there are plenty of casualties, the weak and vulnerable businesses will go bust. More worrying is the profitable businesses that go to the wall because they run out of cash.
So, how do you keep your head above water? In basic terms, sell something people want; make sure the difference between what you buy it for and what you sell it for is big enough; find a way to get people to buy from you, take massive action. And, of course, make sure you collect all the money you are owed:
As a self-confessed serial entrepreneur I hate the detail and intricacy of putting cash-flow processes in place, but you can’t afford not to.
Being British, we do love to complain about the weather. However, over the last few months we’ve seen an unusually high number of storms, bringing with them strong winds, torrential rain, and tidal surges.
Compared to our usual seasonal inclemency, this flurry of storms really has given us something to complain about. Thousands of homes and businesses across the UK have suffered flood damage or power loss at some point.
Sadly, if your business has been affected, there’s not much you can do apart from dry yourself off and move on.
But that’s not to say you can’t be prepared for the next time.
So, to help keep your business up and running (whatever the weather), here are our top tips for avoiding trouble. Business continuity might sound a bit stuffy, but it’s really simple and could save you a shedload.
No one likes bad weather, but at least your business doesn’t have to suffer. Just keep an eye on the weather report and to make sure you’re well prepared to deal with potential disruption. It’s better to be safe than sorry.
Hannah Tonge, PolicyBee professional insurance brokers
Further reading: how to make an insurance claim
Business costs continued to rise during 2013, with energy costs still the most commonly seen increase among small businesses, according to the national business group, the Forum of Private Business.
The Forum's Cost of Doing Business survey, carried out among its members, shows firms are still facing an uphill battle to make ends meet, despite positive signs of an economic recovery as the infographic below demonstrates.
The results showed that 94% of businesses saw an overall increase in their business costs. 87% of businesses reported an increase in energy costs, 83% in transport costs, 78% a rise in marketing costs, and 69% a rise in the cost of raw materials/stock.
Worryingly, the report also identified that 41% of small business owners admitted to being unable to pass any rising costs onto customers, forcing them to cut their own costs to keep prices static. Just 2% were able to pass on costs in full.
Alexander Jackman, the Forum's Head of Policy, said: "The major reasons for increases in prices were predominantly down to transport and energy prices rising, coupled with the continued weakness of sterling for importers. The economic outlook may be better but costs still remain an issue for our members and a key focus of our lobbying and support services.”
"Unfortunately, it doesn't look as if there is going to be any respite from energy hikes any time soon, despite the ongoing political pressure to take action to introduce more competition in the market, with many of the major players recently announcing significant increases and others expected to follow suit.”
While annual inflation continued to fall from 3% to 2.7%, the research also found that prices have continued to rise faster for micro, small and medium-sized employers at 6%, although this is less than the 6.7% figure reported by the Forum the previous year in research into business costs, suggesting things are improving – albeit slowly.
There was a significantly lower proportion of businesses concerned by credit restrictions last year, with a higher proportion seeing credit restrictions as having little impact on their operations. However, credit restrictions were still apparent, with 26% of businesses feeling they had less leeway in coping with business costs than they had the previous year.
81% of firms indicated that rising business costs had been detrimental to their business. 73% had cash flow issues as a result and it had a detrimental effect on 51% of firms when looking to invest. 51% also reported that it has been damaging for employment levels and 63% felt that it had inhibited their plans for growth.
Despite the recent positive news on the economy, rising business costs could continue to restrict the ability of many SME’s to take full advantage of the signs of recovery, with 83% of business owners quizzed expecting prices to continue to increase, and 16% expecting a significant increase.
The most frequently cited exacerbating factors were customers paying late (59%) and competitors offering products below cost price (51%). Excessive administrative demands forced on businesses by the government, banks and customers meant that 35% of businesses had not been able to focus on business activities. Changing payment terms had been a problem for 24% of businesses in dealing with suppliers, and 26% in dealing with customers.
“The findings suggest that significant action is still needed to tackle late payment, through strengthening the Prompt Payment Code to prohibit businesses from signing the Code if they have extended payment terms in the last 12 months. We would also like to see the government make it compulsory for PLCs to declare their annual payment time statistics in annual audits to support better payments.
“As well as positive action on late payment we’d like to see further steps to help small firms with business overheads. We’d like a freeze on business rates and small business multipliers in 2014. An extension of small business rates multipliers until the end of the current parliament would also be welcome and we’d like to see the government commit to undertaking independent research into business rates. While the Chancellor’s announcement of a fuel duty freeze at the Conservative Party Conference in 2013 was a welcome move, we feel that further action should be taken to investigate where further savings could be made across government to ensure that fuel duty is not raised again before the end of this parliament.”
For many businesses planning for growth, exporting can seem a highly attractive, but sometimes daunting, opportunity.
According to the Department of Business Innovation and Skills, approximately one in five of the UK’s 4.9m SMEs already exports and the Confederation of British Industry says you’re 11% more likely to survive if you export. So, it seems natural for many SMEs to start trading internationally, especially since many have suffered from stagnation or declining domestic sales in recent years.
But there is a degree of risk. Among the cultural, legal and bureaucratic barriers sits the challenge of financing new oversee sales and ensuring that your cashflow remains healthy.
Standard considerations when you’re an exporter include taking a localised approach, adapting your pricing strategies, perhaps establishing a local agent partnership and seeking support from a foreign trade advisory service, such as the UKTI.
But SMEs are faced with numerous challenges and difficult choices, and you may need to make some adjustments and allowances.
Recent data from the Economia Exports Survey suggests that SMEs that are new to international trade (as well as experienced exporters moving into new markets) cite a number of success factors, including having the necessary finance (34%), the ability to manage payment risk (26%) and solid management and leadership skills (28%). Concerns associated with exporting include the cost (36%), not getting paid (29%) and risk control (29%).
The international market is highly competitive and credit terms offered to prospective new customers can be the difference between winning or losing a deal – especially when it comes to larger clients. When you are at the mercy of their terms, foreign exchange fluctuations and cashflow management can be an issue. Not only might you have to manage extended credit terms, but high-value material costs may also need to be paid up front, while goods will now take longer to be shipped to the customer. The result is a cashflow void, and small businesses need to have cash management strategies in place to lessen the negative impact this might have on them.
Short-term finance is sometimes necessary to bridge the gap between supply of the product or service and payment receipt. Traditionally, financial securities such as International Documentary Collections and Documentary Credits have offered exporters peace of mind, however, it is estimated that as many as 80% of exporters have moved away from these somewhat burdensome trade finance products. Instead, they are conducting international trade on the more cost- and time-efficient open account basis.
For small businesses trading with an overseas customer for the first time, trade finance might not offer much help if less than favourable terms have already been agreed. Similarly, an open account may be a risky option early on in the relationship.
To overcome the financial challenges of operating in foreign markets, invoice trading has emerged as a new form of trade finance and it allows invoices in foreign currencies to be traded. This means that businesses can remove the ‘cashflow squeeze’ that can occur in contract delivery.
The result is a flexible and competitive way to raise short-term working capital without having to sign lengthy contracts. SMEs can obtain up to 90% of their international invoices upfront from investors who understand the commercial realities of international trade and bid between themselves to provide the lowest cost finance.
When essential cash is needed to finance paying upfront for materials and maintain a healthy operation until the end customer pays, invoice trading can provide a valuable lifeline.
Ultimately, the success of a business may be the result of taking a risk. In the context of international export, that risk may be the acceptance of a new, large customer. The right short-term finance and cashflow products in the form of selective international invoice sale and repurchasing can provide one of the building blocks for export success.
Blog supplied by Beth Nicholas on behalf of Platform Black, provider of complementary and alternative finance solutions including invoice trading, supply chain finance and channel finance.
Flexible working isn’t right for all businesses. Call centres, for example, can only function with a traditional workplace structure in place. For creative and consultancy-based disciplines, however, you can match and even exceed productivity by giving your staff greater flexibility. In our quest to be a better employer – and get the most out of our staff – we’ve learned a few lessons we wanted to share.
Teams that perform knowledge-based roles can work pretty much anywhere they can get reception and plug in a laptop. For that reason, we have a developer who works 300 miles away and barely steps foot inside our Stockport-based offices. Similarly, I’m only in the office two days a week, spending the remaining three beavering away from my home. All the work gets done, though, no matter where we are located.
However, we need our distribution staff to work in our warehouse to set hours, it’s the only way to meet delivery deadlines. Flexible working for this function is just not an option.
If you’re adopting a more flexible hours/location approach, you’ll need to revise your line management model, and the solution for this is to replace a hierarchical structure with a flat one.
This means instead of employees measuring their progress by their peers, they measure their own achievements against KPIs (key performance indicators) you’ve agreed with them.
There are three reasons for having a flat structure. Firstly, it’s purely practical. If your employees are working out of the office, they no longer have peers constantly within sight to use as benchmarks. Secondly, they become more concerned with their own development than their colleagues' – reducing time spent on office politics, increasing time spent on development. Thirdly, you are both very clear on what you expect from them.
Thanks to today’s technology, you and your team can be virtually in the same room, even though you’re physically miles apart. Meaning there are lots of ways combine the benefits of working from home with those of being in an office.
For example, I work at home for three out of five working days each week. But Google Hangout allows me to virtually work side by side with colleagues who also work at home. We turn the camera off (as we have no interest in being in our own reality show!), but keep the sound on so we can talk through issues in real time, update each other on projects and ensure we have a healthy amount of banter to keep us sane.
We’d also recommend ensuring you’re in constant communication with your team, even if you’re working remotely. Each morning our senior team ‘meets’ for a 20-minute call so we can discuss the previous day’s activity and agree plans for the day ahead. It ensures we’re all working in sync.
Finally, we’re huge fans of Google Suite. It’s a fantastic tool with a series of apps that allow you to collaborate on one project at the same time and save files to a cloud. Meaning there’s no need for a hard drive, jobs can be are completed much faster and gone are the days of 23 versions of the same document.
We all know that a project’s success is due to the productive hours put in – rather than the minutes clocked up with bums on seats. Just because someone appears to be at work does not always mean they are!
But we know from talking to some of our ‘old-skool’ contacts, it can be hard to trust that staff are working when they’re ‘working from home’. So we’re huge advocates of KPIs. They enable you to set targets and measure progress, leaving you to trust your employees to get on with their work. If they’re hitting the numbers, the work’s being done – and it doesn’t matter if they’re working from midday until 6am or from their second home in Spain.
Replacing a traditional workplace structure with something more fluid has delivered two key benefits to our business. Firstly, our time has increased. We no longer have to deal with the endless ‘can I leave early?’ questions, which zap time that can be better used.
Secondly – and most importantly – staff are happier, more relaxed and able to achieve a better work-life balance. By trusting them, they respond with greater productivity, resulting in a win-win for everyone.
Blog supplied by Sean Blanks, marketing director of Cartridge Save Ltd (“the UK’s largest reseller of ink and toner”).
1 “Being your own business cannot be improved by unnecessary physical ‘accoutrements’, so think carefully about any purchases you think you need to make because you’re now ‘a business’”
2 “In the UK, anyone can call themselves ‘an accountant’ – even if they aren’t qualified. So, ensure that the one you choose is suitably qualified and part of the relevant professional body”
3 “Spend 30 minutes each day thinking. It seemed to work for Bill Gates. He’s reported to have spent one month every year thinking up ideas for his business”
4 “Managers make sure that everything is controlled properly; leaders create the vision, the enthusiasm and the passion. The best leaders are those who inspire and create followers”
5 “It's funny how the best ideas can come to you by accident – literally, in my case”
6 “Let’s be honest, a boring, drab, dark office has never inspired anyone to do anything”
7 “Think about issues that people are faced with every day and write them down. Helping to solve such problems could enable you to come up with some excellent ideas”
8 “Look for a business mentor to help you stay on track and advise if things get tough”
9 “In 1919 a man called Jack Cohen decided to sell more than just syrup and fish paste. He started selling tea and laid the foundations for what we now know as Tesco”
10 “Nobody wants to think that what you thought was the perfect hire could result in a costly tribunal case, but one in six disputes do – at an average cost of £9,000”
11 “According to Experian, there are some 900,000 businesses in the UK that have real potential to start exporting and yet they are still only serving the UK market at the moment”
12 “Never sit back and admire what you’ve achieved – look forward to what’s next. Have the courage of your convictions and think about what you need to do to reach new markets”
13 “Up to £150 per head of the cost of holding a Christmas party is an allowable tax deduction and VAT can also be recovered on staff entertaining expenditure”
Thank you to our sponsors for their support last year. Many thanks also to the experts who shared their knowledge and provided content that ensures this blog remains a popular source of information, advice and inspiration. A big ‘Thank You’ also to our ever-growing list of partners – we look forward to working with you this coming year and beyond.
Finally, a massive ‘Thank You’ to all our readers in 2013. Whether you were thinking of starting your own business and were looking for inspiration or were starting your own business and needed advice, we hope you found what you were looking for.
Happy New Year and here's to a superb 2014…