Table of Content

Thursday, April 30, 2009

Making Businesses Help Themselves During A Recession?

The British Government has announced a raft of measures to aid businesses through the recession, including the Enterprise Finance Guarantee, 'business health checks' offered by Business Link and a variety of schemes to help with staff training. Whilst the Government is offering "real help for businesses now" in reality it's taking time to feed through to individual businesses, as the banks are still deciding upon the best ways to use the funds made available to them.

Not all businesses have their own finance directors to provide strategic financial support and guide them through the recession, but that doesn't mean that sound financial guidance is impossible to find. As a business owner, there are many local initiatives available right now to help you through these tough times, along with business advisors that are dedicated to helping businesses like yours to thrive. There are even professional firms available, such as Orchard Growth Partners, which provide dedicated part-time finance directors to businesses that do not employ a high-calibre financial expert full-time.

Here is the tips for Starting a business during a recession

Whilst it may seem far too risky to start a business during a recession, anecdotal evidence suggests the contrary. If a business is able to weather an economic storm such as this one, it will be in great shape for the expected upturn. It also means that the business has a model that is likely to be less dependent on high risk lending strategies, and a product or service that is genuinely in demand. It can take time for a new business to find its feet, and having a chance to do that before the market picks up again may well benefit the business in the long term.
Whilst there is a lot of doom and gloom in the media, there are two major differences between this and the last major recession. One is that it is easier to start a business than ever before, and secondly, there has never been such a spirit of entrepreneurialism in our economy as there is now. The internet has opened up access to global markets for smaller businesses, as well as multinational corporations, so everybody has the opportunity to trade on a different scale than before.

Help for new and established businesses

Chambers of Commerce

Many local Chambers of Commerce are pulling the stops out to help businesses to not only survive, but thrive during the recession. Some, such as the Birmingham Chamber of Commerce are offering free director development workshops. Others are offering discounted training for members, whilst some are going the extra mile, such as the Surrey Chamber of Commerce which offers the Spelthorne EZone. The Spelthorne EZone (Enterprise Zone) is a scheme is designed to help businesses in their start-up phase. It provides a fully equipped office area with reception and secretarial support, along with access to business services and advice. It gives the opportunity for new business owners to share ideas and get peer support from other local entrepreneurs.

Business Link

Another place to look for help is the local Business Link branch. Again, there is a huge amount of support for new businesses, but for those that are already established there is a free Business Health Check that begins with an interactive tool on the business link website. Business Link is an excellent resource for practical advice, and also networking opportunities.
Business advisors

As well as the resources outlined above, there are many skilled business advisors out there who run courses and seminars designed to help businesses succeed; one example of this is the SMART campaign run by Orchard Growth Partners.
The SMART programme is a series of simple steps and tips which businesses can follow to improve business and financial performance. The programme can be carried out by companies using their own internal resources although there are major benefits in getting a fresh view from an outsider such as a non executive director or a flexible finance director. Orchard advocates this as it provides a business with dedicated attention from a financial management expert with commercial business experience.

The worst course of action is inaction

When times are tough it can be tempting to hide away, or just stick to old ways of doing business that once worked well. Businesses have to be creative and flexible in recession, otherwise they cannot adapt to the change in demand. The help is out there, if you want it, the businesses that thrive in this recession are going be the ones who seek advice and are then prepared to implement it.

Ash Mehta
Chief Executive of Orchard Growth Partners

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Top Ten Tips On How To Deal With A Crisis - For Businesses Without A Crisis Plan

As human beings, we're very good at thinking that really bad things only happen to other people - or that by virtue of Murphy's Law, they are inevitable and unavoidable. The same attitude applies in many businesses despite well documented casualties from recent events such as flooding and supply chain issues. Crisis planning is an essential component of being a well managed and resilient business and offers the best chance of staying up and running after a significant disruption.

What qualifies as a business crisis?

The nature of a crisis can vary widely - from natural disaster, through a leaked memo containing sensitive information to the office next door involving you in their crisis by default. In other words, a crisis can come from almost anywhere but by definition is unexpected and has the potential to have negative consequences. A crisis may affect the safety of staff, the availability of resources, critical systems, shareholders and potentially threaten the mid to long term success or existence of the business.

Here are some tips on what to do if a crisis strikes your business before you have a crisis plan in place.

1: Find out what has happened

This may sound like an odd thing to begin with, but it's arguably the most important. When a crisis strikes, whatever the cause, it can be hard to get a handle on what exactly has provoked the alert. How have you heard about it? Are your sources reliable? Do you have any staff that can give you eyewitness accounts? Only once you know the true nature of the crisis and its extent can you deal with it appropriately. Separating rumour from fact can be more difficult than you imagine in the immediate aftermath of a crisis.

2. Clearly identify a crisis team and team leader

The key characteristic of a crisis team is that they need to work well together, whilst also having a wide range of skills and knowledge. There must be at least one person with enough authority within the team to make strategic decisions and authorise spending as some crises will necessitate emergency funds to cover accommodation, travel and food for those involved.
The team leader doesn't necessarily have to be the most knowledgeable about the business, as long as he or she has the ability to stay calm, assimilate information presented by the crisis team, can command respect and act decisively, delegating as necessary. People are likely to be stressed, sometimes panicky - can the crisis team leader handle that?

3. Assess the impact (on your people, assets, customers and reputation)

Once you understand the extent of the crisis, you can evaluate how it will impact upon your business. Are any staff hurt or in danger? Do extra members of staff need to be brought in (because the crisis has happened out of business hours or during a holiday for example)? Do you have any stock that is at risk? Are you still able to provide essential customer services, or will you need to close? How will the press react?
It is important to understand what at this stage is time critical for the business so you can prioritise what is needed to continue operating effectively.

4. Develop an action plan

Having assessed the impact, determining what needs to happen in a methodical way ensures that nothing is left out nor actions duplicated. Most crises involve time pressure; some people refer to a "golden hour" immediately after the crisis has occurred; what you do in that first hour can significantly impact upon the outcome. Don't underestimate how chaotic things can be during some crises - once immediate responses have been carried out (i.e. evacuation of a building) time taken to lay out a plan could potentially alter the outcome for your business. A plan, however basic, will help ensure there is integration and co-ordination in what happens - and minimise the likelihood of 'left hand /right hand not talking syndrome'.

5. Develop a timeline of what is happening when

This is clearly going to differ depending on the nature of each crisis, but based on your plan could include events such as arrival of critical staff members, arrival of technical support teams, anticipated restoration of power, broadcast times etc. Outlining when key events are going to happen enables the efficient allocation of resources.
The best crisis teams are able to focus on the future effectively, see needs approaching and prepare for them as well as avoiding issues that inevitably occur along the way. Many times the crisis is just the first in a string of events that ensue as a result of the disruption to normality.

6. Implement the plan

Having developed the plan, the next major challenge is communicating it effectively to those that need to know. This is a real test of your team and, without a pre-determined and rehearsed crisis plan already in place, one of the most difficult areas to manage well ‘on the hoof'. How you talk to staff, executives, emergency services and the many other people who need to know what you are doing and when is critical to your success in managing the crisis and your reputation. At the end of the day, you must DO something. The worst plan is one that arrives too late.

7. Maintain a log of decisions, actions and issues

Maintaining a detailed log of decisions, actions and issues is an important component of crisis management. Not only will it enable you to ensure all actions are completed on a continuous basis and help tie up loose ends when the crisis is over, it may become a legal document backing up accounts of events should litigation ensue. Choose the person to maintain it with care and ensure it is reviewed by the crisis leader on a regular basis.

8. Develop an internal and external communications plan

Communications are critical - brief those who need to know on a regular basis: the media, your staff, stakeholders and customers. However, it is important that the right information reaches the right people in a timely fashion so development of a clear communications plan will support you in achieiving this. Effective communication in the face of crisis can greatly enhance your reputation.

9. Look after your staff and their welfare

Your staff may be coping with shock, stress and more. Ensuring their welfare is clearly within the remit of a responsible employer, but it also means that the crisis won't be worsened by neglect of their needs. In some instances there can be long term impacts if issues are not dealt with correctly in the early stages.

10. Manage your information

One of the greatest challenges in dealing with a crisis is the management of information as it flows in and out of your crisis team. This is where you develop a clear picture of what is reality and separate fact from fiction. The lynch pin of your response will be centred around the information you receive and how you respond to it so its processing must be fast and accurate. White boards, flip charts and briefings all help.
And when the crisis is over?

On returning to normality, review how you dealt with what happened and learn the lessons for next time. If you are reading this and are lucky enough to have escaped a business crisis so far, do consider developing a crisis plan - the time spent planning is never wasted and will enable a much more effective and controlled response, reducing the strain on your staff - "train hard, fight easy" is a worthwhile maxim in the world of crisis management and is supported by the experience of all those businesses who have gone before you

Dominic Cockram
Founder and Managing Director of Steelhenge Consulting Ltd
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Create Your Fortunes in the World Recession

Almost every country around the world has been paid deep a concern in current world crisis.There are two questions on all our lips. “How am I to avoid falling victim to the economic plaque?” and “How do I make money, profit and improve my position for the future in the current distress?”

We have arrived at the generational time when man can attempt, if he so desires, to control the economic powers around him and dare to guide the “invisible hand” of wealth creation.

Opportunities abound but it is the smart investor who will succeed. It is more likely that investor- led acquisitions to build turnover will be the remedy of this plaque.

Businesses and assets are already available at a fraction of their value compared with only three months ago. More opportunities will emerge throughout this is year and without being the voice of doom well into 2010.

Private equity investment firms are not infallible and, like many commercial businesses, will have erred in buoyant times in their decisions to invest. There is no reward for failure, and private equity firms are accountable to other, much the same as many of us. They will need to deal with their rotten eggs and make better investments for the future. However, not all investments go as planned with sky rocketing returns. Cash is in demand and, with bargains to be had, private equity investment in the form of turnaround finance stand in the best shoes to back growth. It already is, and will be, very important in the forthcoming years.

The starting point to surviving the recession is ensuring that your own ship is in order. Taking on water in stormy seas is a disaster waiting to happen. Now is the time to check for leaks, remove unwanted weight taken on in fair weather and to tighten the sheets. This is a time for the captains of industry to make a cold reflection on what will make your business sink or cut gracefully through the troubled waters. The inability to take and implement aggressive decisions in respect of operating costs, staff, marketing and other sector issues will determine how much extra baggage and the number of leaks your ship carries forward into the storm. The lighter, streamlined ship is often the stronger in this race.

With the sails trimmed you need to keep a vigilant watch. Corrective action to a rogue wave will prevent untimely and unwanted course deviation. You want your ship to be streamlined, clean-sailing and reactive to correction, particularly in the present climate. This strategy will give any business the best chance of a strong financial base. Of course, all this must happen with the assumption that things will get worse with lower turnover as the storm strengthens.

With your own business on sound footing, it is only then possible to look outward for the opportunities to be had.

There is lots of competition out there. Lots of businesses, investors and others are financially willing and able to take advantage of deals. As the business values erode, the opportunities increase (as does investor interest); but not without risk. Any distressed investment requires focus, toughness, industry knowledge, experience and consensus. If you don’t have these, aligning yourself with those who do could mean the difference between a successful investment or otherwise.

A bridging statement is fundamental to this process and helps to visualise (and bring to life by implementation) the impact of cost cutting, operational changes and lower turnover. It is the sextant of the canny investor or turnaround practitioner and helps guide them through the darkened seas.

If, for example, you operate or have an existing investment in one sector, there may be other business in the same sector you would like to own. Last year, any valuation to those businesses would have been too high. Now, however, it is likely that the valuation is reduced, the market is affecting that business and they may not have taken any corrective action to streamline their business. They may be distressed, in which case it is an ideal arena for building your own turnover by acquisition. This can be cost effective and, done well, can reap the full benefits of economies of scale. In time, these consolidated investments would lead to strong investor returns.

Structuring deals, aside from the value brought by bridging statements, is important. There is little value to be had from treating the symptoms of the plague rather than finding a remedy to removing the course. Such remedies could include renegotiating the bank’s position. For example, a percentage compromise on loan to value (a deal better than the bank appointing a LPA Receiver). Compromising unsecured creditors are prime considerations. This could be done with debt for equity swaps, informal workouts or insolvency processes in such a way as to not damage the business. Creditors would rather have a compromised return that no return at all. After all, the plaque affects us all.

Turnaround finance, either your own or outside investment, is also critical. The deal structure is only one part of a three-legged stool. Management (plan), Restructuring (deal) and Turnaround Finance (cash) are the legs. If any of those legs are missing, the stool will fall. There is a core group of experienced and storm weather turnaround investors who not only have the cash behind them to invest directly or alongside other owners, but which have also weathered previous storms and bring the scars, knowhow and technique to the table. Sail with the experienced sailors to avoid being caught by the storm and dashed against the rocks on a plagues-infested land.

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