Published: Mar 31, 2022
Focus:
Insights
Companies in the early stages of their trading history have a number of areas that they need to consider and address, both operationally and strategically. In many instances, but not all, operational issues can often arise because of a lack of strategic foresight due to the day-to-day demands of the business and resources been stretched or tightly controlled. These are four areas I believe any business can action to make immediate improvements and ensure that it is on a good footing for future growth.
1: Business Planning
This is critical and must be easily accessible to as many groups as possible. A crucial step is to produce a detailed business plan and share a version with all Executives and Senior staff, so that the whole company team can see the direction of travel and relative benchmark goals. Without a clear plan, staff may become unproductive, disengaged, or demotivated, not understanding how they and their day-to-day role fits into the end game. The old Benjamin Franklin adage of “If you fail to plan you are planning to fail” does really stand the test of time!
The Covid pandemic has shown us that nothing is “sure and certain and beyond the bounds of possibility”. Since then, we have had the temporary closure of the Suez Canal and a fire in a major electronic chip factory in China which badly disrupted the flow of vital components. This combination of metrics has pushed steel and freight prices up to previously unseen levels and significantly extended delivery times with no immediate respite on the horizon. No business plan could have foreseen this level of disruption on financial planning and budgets, but if one was in place it would have some form of initial financial disaster planning contingency built into it, by way of a working capital line of credit safety net. That would have bought some time whilst the overall position was assessed!
2: The need for a Credit Safety Net
This is imperative, as no matter how much you plan, events outside your control (as outlined above) can occur and will have a serious negative financial impact on your daily cashflow and ongoing profitability. Covid-19 is the most topical, albeit extreme example, which as a global pandemic has affected everyone on the planet from a variety of directions. Staff availability, remote working, stock supply and price fluctuations to name just a few.
Cash is King and this will lead many businesses to seek outside investment from equity providers, angel investors or family and friends depending upon their business lifecycle stage.
Aside from the traditional lenders there is a myriad of other options for a business to choose from should it require to go down this route. Funds such as MEIF Maven Debt Finance may be able to help on their traditional lending metrics or via Government Support schemes. This includes the UK Government backed Recovery Loan Scheme, which remains open until June 2022 and could provide an immediate emergency cash buffer if a business is experiencing an uncertainty in prices or delivery times. If the outlook ends up not being as negative as first predicted, the funds can be left undrawn and paid back early in a lump or tranches that matches the pace of the individual businesses’ recovery.
3: Looking after your Staff
Employees are the life blood of any business and will go the extra mile for you if treated well and communicated in an honest and timely manner. Given that the physical constraints of Covid are easing businesses need to think very carefully on what the ‘new norm’ of working will be. A return to full office working for all may need a rethink, with a more flexible or remote/office hybrid system offered to now meet everyone’s requirements. Some anecdotal evidence has shown staff are leaving for companies who now offer that flexibility and understanding.
4: Professional Support
Most CEOs and Managing Directors know that they cannot do everything by themselves and in fact, really need two teams.
Every business will have an internal team which will vary in size depending upon its present structure. Larger SME’s should have well organised Department Heads reporting to the Board, which itself should ideally have at least one experienced Non-Executive Director (NED) to offer a truly balanced and independent perspective. Even the smallest business which heavily relies on just the MD/ Owner and one key member of staff, can benefit from the appointment of a NED, even if only for 1 or 2 days a month. Such an appointment would be money well invested and could be built into any funding request, which a lender would see as a positive strategy.
The external team will normally be comprised of strong professional advisers including an accountant and commercial lawyer with a proactive can-do attitude. If already not part of the internal team, then a contracted part time Financial Director to help advise on your company’s financial performance and collaborating with a good digital marketing agency are well worth the monthly investment.
Even the smallest businesses can look to appointing a non-executive director that has broad commercial experience in a number of these specialisms to help you stay agile, save costs, and guide you through both good and bad times.
