Friday, 19 September 2008

A Wake Up Call For Small Business

By a quirk of good timing (not sure that is the right expression but...) I found myself attending two events yesterday against the backdrop of the firestorm that has raged through the global banking system.

At the first John Moulton, who I have quoted (or rather deliberately misquoted!) here before, was the keynote speaker. At the second: Richard Lambert, Director General of the CBI.

Mr Moulton gave some sage advice: A downturn is happening. It WILL affect your business. You will have bad debts. Margins will be under pressure. The waters will be very choppy indeed. You need to have a grip. You need good real time financial figures for your business. You need to keep debtors where you can see them and act decisively in dealing will wayward payers.

He listed a barrage of things that businesses need to now be doing in a less easy rolling environment.

Every one of them mirrored the themes that I have repeatedly covered here: See the list of posts on the right. Start with this one or this one. I didn't learn anything I didn't already know.


I guess the history of Severn Delta has been such that we are very familiar with how to manage our business in tough times because as a UK consumer goods manufacturer times have been tough more often than not. Hence Mr Moutlon pretty much described how we run our business as how you should run your business, not just in troubled times but all the time.

The strongest message was of course the importance of good cash management. CASH is not only KING right now it is god and emperor all mighty because it is suddenly in shorter supply. He emphasised the growing importance of good management systems and information in how banks and investors judge businesses. The better the systems, the better the IT, the better the information: the higher the confidence levels.

Ignore this at your peril.

This first event was in London. So after a brief sortie into Covent Garden en route to Paddington I returned to Bristol for the annual CBI dinner as a guest of HSBC.

Much of the discussion at our table over dinner was about the importance of good Management Information even in small businesses. An example of a c. £1m turnover business unable to provide any information less than three months out of date.

Let me be clear: If this is how you run your business you need to change and you need to change FAST. You may have got away with this during the easy rolling years of constant growth.

No more.

The world has changed this week. You need to know what is happening financially to your business in real time. You should know this anyway. Put it right. Or the moment things get tough and you need a bit of slack from the bank or your backers you will be in trouble.

And the next time you get a renewal agreement or offer letter it will have as a condition that good, regular management information will be provided. It was probably there in the past but not made too big a deal of. Expect that to change. If they say they want it you may well have your facilities withdrawn if you don't provide it.

As for Richard Lambert, having spoken to businesses across all sectors up and down the country, he was cautiously optimistic. Glass half full. He said. Keep your heads.

My advice: If you want you glass to stay half full pay attention to my words.