business advisors | FSBA - Finance Solutions for Companies

Time to get back on the horse?

11/05/2012 By Mushroom Internet

Over the last few weeks and months (and for some possibly years) we have been buffeted with bad economic news. If it is not the plight of the Euro, it is the unemployment figures or the deficit or many other pieces of informatioin that makes us all feel gloomy about our prospects.

Well I say enough is enough!

We cannot sit on our hands for ever waiting for market conditions to improve. Conditions will not improve till WE do something about them. I know many companies that have had good years throughout the recession (double dip or not) Why? They have gone out and got on with business. They have not cut their marketing budgets and some have increased them and fought even harder against their competitors. They have not listened to the doom sayers and they have made their own ‘luck’

Talking to a small company recently they were moaning about the state of the Euro zone. This intrigued me as they do not export and have no intention of exporting, they do not buy from outside the UK and they only sell into a relatively small regional area. I for one cannot see how the plight of the Euro affects them. But it is an example of how companies get bogged down in the hype of the media and press instead of looking at their market and reacting accordingly.

So it is my view that having fallen off the horse it is time to get back on and ride you way out of the doom and gloom.

If you want help getting back on the horse call Bob Francis on 07941 426 807 or email me at bob.francis@sgba.co.uk or contact us

Deficit reduction or growth – which is the chicken and which is the egg

25/01/2012 By Mushroom Internet

Small business that get into trouble by over-borrowing, end up making no money, or even worse, making a loss because the cost of borrowing gets to be greater than their profit.

Where do they go from there?

Growth: you need money and resources for that and if there is none, you have to find it.

Deficit reduction: cost reduction is an absolute must for businesses in this position to free up some cash.

Restructuring: this is the White Knight option – someone, often a predatory acquirer, comes along who will take on the debt at a lower rate of interest – not many of those around today.

Default: for some companies going into Administration is the only option, with a pre-pack to take out the best bits and leave most of the debt behind. Shame for the the creditors, especially the tax man and the small shareholder.

So what about the National Debt?

Default – think of Greece.

Restructuring – think of the ECB and the IMF.

Deficit reduction – think of the UK and other realistic national plans to reduce government spending.

Growth: we need some or all of these to work if Government funding is to be available for growth.

So where does that leave us small business owners?

Sure, the government is doing its best to find some money, but we can’t rely on that really. It is being highly targeted, and there just ain’t much available, realistically.

So for most of us we are on our own. We have to find the resources from somewhere to grow our own businesses, and if there isn’t much cash the only thing we have is time, and making the best use of that.

Chicken or egg?

I’d argue that the egg is growth – its the future produced by the old chicken! Look after the chicken!

Posted by Peter Johnson, business growth advisor with SGBA. Contact Peter on peter.johnson@sgba.co.uk if you would like to discuss your business with an experienced advisor and fellow business owner.

Should we do more to repatriate jobs to the UK

21/11/2011 By Mushroom Internet

Are we missing a trick? Last week saw the US approving legislation to bring jobs back to America that had previously been outsourced to lower-cost economies. The measure is aimed at reducing America’s 9% unemployment, and with the economic case for outsourcing no longer as compelling as it was 10 years ago this seems like a good idea.

This begs the question – should we be doing more to repatriate jobs to the UK, to tackle our own unemployment?

Bringing jobs back to America

Congressman Frank Wolf reports that “legislation approved yesterday in both the House and Senate requires the Commerce Department to immediately set up a task force to examine what needs to be done to encourage U.S. companies to bring their manufacturing and research and development activities back to America’s shores. ”

“The department also must develop a list of “best practices” for states and communities to follow to help foster the repatriation of jobs that have moved abroad.”

Is this not happening already in the UK?

“Small manufactures are considering shifting production back from the Far East to the UK to save money and provide a better service to customers” according to the Telegraph.

Speaking recently to the owner of a Sussex-based electronics company, he agreed, saying that part of the recovery in his order book has been down to his customers bringing work back from China and India.

And this is happening in other sectors as well. To improve customer satisfaction, Santander had just brought its call centre back to the UK, and two years ago BT repatriated 2,000 call centre jobs.

Why is the repatriation of jobs such a good idea?

with labour costs going up, the lower-cost economies are less competitive;
transport costs have gone up with the price of oil;
political instabilities are increasing the supply chain risk; and
there are serious concerns about the environmental sustainability of an economic model that relies so heavily on transporting goods globally, etc.

Add these to the well-known issues surrounding the protection of intellectual property, and the consequences of goods being at sea for several months – inventory cost, on-time delivery, lack of flexibility for products that are configured to order – there seems to be a good case for in-sourcing back to the UK to create jobs for unskilled and semi-skilled employees right through to science and engineering graduates.

But so far I have not been able to trace any UK government initiative on the repatriation of jobs: feel free to post a comment if you can shed some light on it.

Posted by Peter Johnson, Business Advisor with SGBA. Call Peter on 07714 093406 or email him at peter.johnson@sgba.co.uk if you would to talk to someone about your business.

Bank or pawnbroker?

14/11/2011 By Mushroom Internet

There was a time when as a small business owner you could go to your bank with a reasonable business plan and you would get a modest overdraft. But not now: what has happened to make the banks so dislike overdrafts?

Are banks now behaving more like pawnbrokers than old fashioned banks?

Banks don’t like unused overdrafts

I was at a talk last week by a senior manager from a national bank, and he explained that his bank requires that an overdraft has to be covered by a capital reserve. And this is the case even if the overdraft is secured by the borrower.

And fundamentally, what the bank doesn’t like is unused overdrafts – they have a capital reserve for funds that have not gone out of the bank!

This is why, if you go in to talk about a long term facility, they move you towards a loan.

Short term support

However, the presenter did say that many clients make the mistake of asking for a long term overdraft facility when what they really need is short term help.

Especially for working capital to cover orders in hand, the banks like invoice factoring because they can let you have funds that are secured on invoices – they get their money when your client pays them and you get the funds a month or two in advance.

And there are now companies in the market that will factor single invoices, so you don’t have to enter into long term commitments with high charges to get access to short term money.

A short term overdraft

Nevertheless there is still the alternative of a short term overdraft. If they can see and believe that your business is sound and just needs help over a few months, they will consider a short term overdraft.

But like a pawnbroker, they will probably ask for business or personal security. Even so, this may be a decent option.

Squaring the circle

So here we have the dilemma. Banks don’t like having a capital reserve against a facility that is not being used; banks are reluctant to take any risk, and ask for security even against short term funds; and borrowers don’t like the idea of securing their overdrafts against their business or personal assets especially if they are not making use of the funds.

Surely, to square the circle, banks should be encouraged to go back to lending small amounts of money over a short term without needing security. For a micro business, 8% of turnover (equivalent to one month’s receipts) over 3 months would seem like a a good starting point.

Posted by Peter Johnson, Business Advisor with SGBA. Call Peter on 07714 093406 or email him at peter.johnson@sgba.co.uk if you would to talk to someone about your business.

Get a grip on your cash flow

24/10/2011 By Mushroom Internet

Predict and plan: work out in detail when you can expect cash to come in and plan how you will spend it. It will help you to see where you can generate extra cash to fund new projects if you are growing, or even pay off old creditors if you are stressed.

While this applies whatever the size of business, it is particularly critical if you are a micro businesses or a small businesses with significant order-to-ship lead times, buying materials and selling products on credit terms, when you will have a significant working capital – cash – requirement to fund the work in process.

On this article we’ll show you how to put together a cash flow management workbook that will help you to manage your cash, month by month.

Start with your order book and prospect list

Starting with cash coming in, you’ll know your order book, but what about beyond that?

This is the hard bit – study your prospect list and write down when you can expect to get new orders from those clients. For this you have to really understand your clients’ intentions and buying behaviour.

Then, for your current order book and your prospect list you document your cash inflow:

order dates;
shipment dates; and
client payment dates and amounts.

Suppliers and inventory

Do the same with the supplies, or the stock replenishment you will need to complete those orders – one of the major parts of your cash outflow:

supplier order dates;
goods in dates; and
supplier payment dates and amounts

VAT

At this stage you can then predict the two main elements of your VAT liability. This is particularly important if your are on the accrual system when your VAT is pinned to invoice dates rather than cash payments and receipts.

From your order book and your purchasing plan you have the tools to start to calculate the VAT reserve you will need at the end of each VAT quarter.

Staff costs

You should be able to predict these and add them to your spreadsheet, including PAYE and employer’s NI liability.

Overheads

These, you can obtain from your management accounts. If you don’t have monthly management accounts – and you should – you can use your bank and credit card statements, and your cash book.

The simplest way is to include monthly averages, making allowances for any known increases and decreases. You can then account for any VAT recoverable on overhead supplies.

Cash flow management workbook

So there we have it – your cash flow management workbook. From it you’ll be able to see:

what funds your have to pay off overdue creditors if your business is stressed;
what funds your have to fuel your growth;
which areas to tackle to improve your cash flow – for example see our article on creditors; and
what extra funds you will need to bring in to accelerate your growth.

Essential tools for well managed businesses!

Posted by Peter Johnson, Business Advisor with SGBA. If you would to talk to someone about your business, please call Peter on 07714 093406 or send him an email to peter.johnson@sgba.co.uk.

Selling into export markets

10/10/2011 By Mushroom Internet

Occasionally you come a cross a business that reminds you of what it takes to be successful. Here was a export business that was selling process control instrumentation into a well defined global niche market.

Selling was done by a UK-based sales engineer who had intimate knowledge of his market place, and with a market-leading technology, the company had been able to price its products to make a handsome profit.

Support costs were low and the products were made entirely in the UK. What more could a government want – a tax-paying export-led business that created employment in the UK!

Many different ways of selling into export markets

However, for most businesses, growing an export business is not going to be quite that straightforward.

A product that someone wants; selling it to them; shipping it; getting paid; low aftercare costs; and making a profit – in principle doing business overseas is the same as doing business at home, but it is certainly more complex, and it is the complexity that adds cost and increases business risk.

How you deal with overseas clients is key

But fundamentally it is how you access and deal with the overseas clients themselves that will determine the success or failure of your export venture, and that will depend on the territory, your product, its addressable market, your target sales volume, and the level of expertise required by sales personnel etc.

Export sales channels

Thus you will be faced with a number of options for each territory you decide to exploit. Here is a brief list of some of the alternatives:

e-commerce: mostly for low-value commodity sales supported by web-based marketing;
Telephone/fax/email: for sales of low-to-medium value commodities, services and configured products;
UK-based Sales executives: for items such as high-value engineering products, specialist niche products and software development contracts, sold through sales visits to clients’ premises;
Agents: commission-based lead generators and often sales representatives, usually for low-to medium volume, high-value goods into territories where the sales are significant;
Distributors / re-sellers: buy and re-sell your products, usually as part of a portfolio of related products into a specific market; and
Overseas offices: replacing distributors, agents or UK based sales executives, where setting up a local office either reduces the cost of selling into a territory and/or enables you to manage better important key accounts along with providing a base for installation and service personnel.

And as you grow your export business, you’ll probably end up with a mix of channels in different territories depending on local factors, whilst ensuring that each one is contributing to profit.

Posted by Peter Johnson, Business Advisor with SGBA. If you would to talk to someone about your business, or your export strategy, call Peter on 07714 093406 or email him at peter.johnson@sgba.co.uk.

Why are small businesses not borrowing from banks?

04/10/2011 By Mushroom Internet

A recent article in the Daily Mail suggested that small businesses are hoarding cash because they fear overdrafts could be slashed at any moment.

However, isn’t it more likely to be the issue of personal security – business owners are just not interested in offering personal security for what in many instances are relatively modest sums of money, required on an intermittent and short term basis.

What are overdrafts and loans for?

You get the impression that the banks are trying to re-establish the principle that overdrafts are essentially for managing cash flow and that loans are for working capital. This distinction was blurred until recently due to the banks’ historic attitude to risk that has recently toughened, and the risks and time-scales are different in the two cases.

You need a good business plan

But, whether it is for an overdraft or a loan, a good business plan is required to present to the bank, but they are not the same plan – they have different objectives and time-scales to reflect the issue being addressed and the associated risks.

And you will probably be asked for personal security – that’s the rub!

And these days, the plan should include also considerations of personal security or other security as we know increasingly the banks are looking for that, on top of a good plan.

So that’s the rub – no matter how compelling is your business plan, and no matter what size of loan or overdraft your are looking for, you are likely to be asked for personal security or some other form of security to hedge the bank’s risk.

Banks should go back to taking some risk

But it is no surprise that business owners who already have a huge personal stake in their business, don’t want another charge on their own assets.

Business owners want the banks to go back to taking some risk at least for a small overdraft, if the business case is sound. And if the banks say they are doing that – you have to say that is not the impression given.

Posted by Peter Johnson, Business Advisor with SGBA. If you would to talk to someone about your business, or your business plan, call Peter on 07714 093406 or email him at peter.johnson@sgba.co.uk.

What do you do when a customer makes a complaint?

21/09/2011 By Mushroom Internet

What will you do if your product or service fails to meet your client’s expectations and they make a complaint?

You certainly don’t put it in your desk drawer and hope it will go away – that’s a sure way to trash your reputation.

And don’t hide behind your Terms and Conditions. We’ve all experienced being given the brush off when we thought we had a legitimate complaint – it makes you think twice about using the same company again.

Actually, you get back to them promptly and talk to them about the issue: you promise to try to resolve it within a given time-frame, and try to keep that promise.

Your client might still be unhappy with what you supplied, but they’ll be happier with you and your company as they will know you have responded to their complaint and their issue is being addressed.

Put in a Complaints Handling System

And you should do this systematically for every complaint.

Faced with this, recently, a client asked me what was meant by a Complaints Handling System that conformed to the guidelines in ISO 10002 – the client was required to do this for their accreditation.

Now, these International Standards don’t normally tell you how to do it, but amazingly there is a really good explanation in that Standard* of a complaints handling process for a small business – essentially this:

Devise a system to log, track and resolve complaints;
Set target time-scales for contacting the client and for resolving their issues;
Tell the client what these time-scales are, and talk to them regularly about your progress;
Appoint someone to administer the system – making sure these commitments are met;
Decide which staff will be involved in dealing directly with your clients, and get them some training if necessary – they may have to deal with frustration, anger or confrontation over the phone;
Take it really seriously – carry out regular audits at director level to ensure things are being done on time;
Use your audits to drive continual improvement; and
Carry your staff with you and reward them for their performance in a difficult role.

This sounds like a lot of work

Not really. If you have a culture of client satisfaction and continual improvement, you are probably carrying out most of these steps anyway.

And remember, most growing, high-performing businesses are process-led, so if you want to be like that I guess you’ll have to start putting some processes in.

Posted by Peter Johnson, Business Advisor with SGBA. If you would to talk to someone about your business, including your complaints handling system, call Peter on 07714 093406 or email him at peter.johnson@sgba.co.uk.

*ISO 100002:2004(E) Appendix A.

Business Improvement Strategy

13/09/2011 By Mushroom Internet

Imagine a business that was trying to grow, but was making no profit, generating no cash, and not paying its owner-directors a proper salary or dividends.

By going over their business, end-to-end, and they found 27 areas where their business could be improved, and by implementing their 27-point plan, within a year they had turned their business around to a PBIT (profit before interest and tax) of 17% of sales.

They then tackled their interest payments: with help, they were able to find lower-cost working capital so that they could pursue their plans for growth, and still have enough to pay themselves a decent return.

Business improvement should be part of your business strategy

There is as lesson to be learned here about thorough and systematic business improvement: no matter whether your business is rocky like theirs, or doing reasonably well, there can be a huge benefit in having business improvement as part of your business strategy.

It can help you to:

Find new opportunities for growth;
Squeeze out additional margin, profit and cash;
Reduce your loans or overdraft;
Increase your working capital; and
Pay yourself more.

And all of this will serve to increase the value of your business when you come to sell it and move on.

Areas of where your business can be improved

There many be benefits to be found, some small, some larger, from every area of your business:

Revenues: existing customers, new customers, pricing, use of assets;
Cost of Goods Sold: development, production, procurement, service, logistics;
Overheads: costs and shared services;
Taxes;
Balance Sheet; receivables, payables, inventory, property, plant and equipment; and
General Management: planning, delivery, performance, operational capabilities, stakeholders and other external factors.

Focus on the issues where the return is worth the effort

So, as part of your annual strategy review, maybe you should crawl over your business, end-to-end, looking for areas where it can be improved.

The only caveat is, recognising your time is your money, you should only work on those areas where the return is worth the effort.

Continual Improvement

And while there may be one-shot improvements you can make, such as outsourcing an overhead function to make a net saving, there will always be those areas that need to be addressed gradually, step-by-step.

These are areas where a Continual Improvement programme can really help.

Posted by Peter Johnson, Business Advisor with SGBA. If you would to talk to someone about your business, including your business improvement strategy, call Peter on 07714 093406 or email him at peter.johnson@sgba.co.uk.

Joined up thinking for business support for SMEs?

07/09/2011 By Mushroom Internet

A few days ago I moaned about the lack of joined up thinking in business support for SMEs in the South. At that point there was to be one stop on the Startup Britain (http://startupbritain.org) bus tour in the region but it was closed to the public! This bizarre state of affairs has now been corrected and the following public announcement was made on the Startup Britain blog:

Our morning visit to the Portlade Aldridge Community Academy in Brighton on the 19th of September is now open to the public!

Portslade Aldridge Community Academy

Chalky Road

Portslade, Brighton

BN41 2WS

We have also arranged an additional afternoon event on the 19th of September from 2-4pm at the Falmour Campus at Brighton University.

The Checkland Building

University of Brighton

Falmer, Brighton

BN1 9PH

Business advisor’s and professionals will be on board giving invaluable, first-hand advice ranging from everything including social media, to finance, technology and accountancy. We look forward to seeing you there!

It just shows you what effect a good old fashioned moan can have. If you want to have a moan contact us or comment on our moan!

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Bringing jobs back to America

Is this not happening already in the UK?

Why is the repatriation of jobs such a good idea?