Business

FIGHTING THE CREDIT CRUNCH

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17 November 2008

What’s next for those in business...

WE SUPPOSE that we should predicate this editorial with a refresh of what has happened, as in most cases of bad news, other bad news tends to get in the way and we forget the recent chaos in our economy.

Our banks ran out of money, no in fact they almost went bankrupt, due to their own lack of due diligence in borrowing money without assets - laughable really, as banks never lend to business without any loan being underwritten by solid assets. Why should they be an exception? So we, the taxpayer, lent them vast sums to bail them out and then they have the arrogance to say that they will not lend it back to us on rates that are affordable.

This was primarily caused by the Government not putting into place as part of the loan of our money a harness that brought them into line. The opportunity to do that was lost. It is noted that the Chancellor has tried to exert some traction on them, but in all probability it’s a tad too late. The bottom line is that the banks have got away so far with one of the biggest robberies of our time, and yet we still have no admittance from them that they might be in the wrong. This strikes at the heart of their culture of greed.

It’s not all bad news. It remains quite amazing that businesses will survive, but off course they will. Some will flourish as their management and leaders are strong enough to make tough but competent decisions, to ensure survival, so it becomes almost Darwinian in the view that only the strongest  and fittest survive.

A great part of Southwark is rooted in our cultural history brought to life by Charles Dickens, so are we now actually living his novel of 'Hard Times'? And shall we re-open the Marshalsea debtors’ prison!

The reality is that Credit is really tight, business risks are increasing, investment is stalling, inflation is rising, and asset values are falling. What is a business to do?

For many businesses worldwide, the current credit crunch is crucifying many great business deals, delaying already-agreed projects, and casting a sleeping sickness on the world-economy.

There are no easy answers...

1. Find out what is really vital in your changing markets .

In the past, customers may have welcomed either radical innovation or the ease of past relationships. Now, buyers will most likely want to challenge both novelty for its own sake and easy past relationships, in return for the guarantee of utter reliability, security and back-up.

Some customers will say they always seek the cheapest least-cost offer - and wouldn't you?

But what would you really want as a professional buyer? If the proposed purchase is at all mission-critical, isn't it always going to be a matter of utter reliability against agreed service criteria, long-term security and continued back-up?

2. Offer what your clients will most want!

This is always true, and the mantra of 'Do what you always did and you will get what you always got' may still work for some. So if this still works for you, carry on! But if the buying criteria of your core clients is changing, change with them!

3. Choose your clientele carefully!

Wherever you may be in the supply chain, in any sector, note one definition of marketing as "having great customers". It isn't complete by any means, but it if you work with those who don't value you, ask why you bother?

If any client spins your wheels, doesn't pay your bills, changes the rules of engagement part-way, seeks your special knowledge and willfully shares it with competitors ignoring your intellectual property, or in any other way tries to take advantage of you, take a hard lesson. Feast with the devil with a long a spoon - or let others. This is a hard lesson, but be sure that bad clients beget bad suppliers.

4. Keep on investing!

Whenever times are hard, sales are reducing and margins are under attack, cash will always be king, Nevertheless, if you possibly can, even though you will have to reduce some overheads, do invest in what you most believe in. If your business is to have any future, you must safeguard your organisation's core skills to keep it going for the future with further development, sharpen your business processes and adapt to changing times.

Easily said! Ready cash will always be a core driver. But beware. As many businesses may fail without this attention to the longer-term in any upturn, as may fail in a downturn.

5. Never under-sell!

For those readers who are buyers, you are regularly reported to say you generically buy first on quality and fitness-for-purpose, then reliability, and finally price. Smart move!

But it may come as no surprise that most sellers regularly report that they perceive the complete opposite!


...and those starting up
 
IF YOU are a potential entrepreneur think of starting your own business you are facing a considerable challenge. But, it is potentially one of the most exciting and rewarding things you will ever do!

Many dream of achieving wealth, fame and fortune. The successful Richard Branson, the founder of the Virgin Group, is a role model for many. Others admire the inventive endeavours of James Dyson and his revolutionary vacuum cleaner. How then can you turn your dream into reality?

Timing is key!

When to start your business it is often very difficult to decide when to start for some of us, whilst others may feel they are forced into starting a business right away, as they may be facing unemployment or frustration with their current job and lifestyle and just want to try to take control of their own lives. The secret is to find out all you can, by taking expert advice and try to make a balanced decision, before you make a commitment. Once embarked on the road to starting and growing a successful business, it is often not that easy to change your mind and turn the clock back. A major consideration has to be related to the sector and the overall economic climate that your business will operate in. It is not just your personal circumstances that should influence the decision.

Reasons why you may start your business now!

-  Lower commercial rents
-  Very low interest rates
-  Low inflation rate
-  Poor conventional return on personal savings
-  Good tax and other incentives

Reasons you may not want to start your business right now!
-  Uncertainty in the UK economy
-  Personal financial pressures.
-  Difficulty in raising finance
-  Reduced demand in the market place or in a specific industry sector

On a positive note there is never a right or wrong time to start a business and it all depends on specific circumstances, but there is a need to take expert advice and think very carefully about timing your move, if you want to stand the best chance of success.

For professional help for setting-up a business in Southwark contact:

Business Extra, 175A Walworth Road, London SE17 1RW 
Tel: 0207 7010011
info@bizextra.biz 
www.bizextra.biz

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