By Max Clarke
Record levels of inflation combined with falling consumer confidence mean the outlook for many SMEs continues to look uncertain, but Somerset-based business growth consultancy Portfolio Directors Ltd is adamant that the future is not as bleak as it may seem and insists there are many positives to be taken from the current economic difficulties.
Although many business owners may be feeling uncertain about the future, Emma Warren, Managing Director of Portfolio Directors, maintains that the tough lessons of recent times will help businesses weather the economic storm.
Emma says, “Many SMEs have spent the last few years learning the hard way about how to cope with change, fluctuating demand patterns and motivating employees when they haven’t got the resources to increase wages. A lot of businesses have had to examine the way they do things and be flexible just to get by.
“It has been hard and some difficult decisions have had to be made, but it has also meant that many business owners have now got a much better understanding of their business and its capabilities than they may have had in more profitable years. This is a strength that they can now draw on through the upcoming year. Potential inflation is, of course, a concern for businesses, but awareness of profit margins can mean that you are ready to move when opportunities come up and don’t get caught unawares by bad news.”
Portfolio Directors offers professional support and training to growing SMEs through the development of growth plans, process change and the acquisition of growth funding. In order to assist SME owners, Emma has put together the following top five tips to help them ensure that they are well-prepared and informed, giving them the best possible chance of success in these tough economic times.
1) Talk: to customers, competitors and employees to find out their views — this will give you a wider idea of what’s going on out there and can inform decisions you need to make — forewarned is forearmed, as they say.
2) Inform: keep key stakeholders like banks and employees informed — try and make sure that you operate a ‘no shock’ environment — people are much better able to assist if they have time to prepare.
3) Report: make sure that you know how the business is getting on — timely financial information is key in being able to make good decisions — remember “Turnover is vanity, profit is sanity and cash is reality!”
4) Plan: make sure that you know where you are going — that way you can set objectives to be achieved and can review the impact of unexpected changes.
5) Focus: there’s a lot to be said for concentrating on the things that you can influence and trying to make them happen, rather than spending time on things you can’t influence — like overall UK fiscal policy.
On a positive note, research by the Bain & Company consultancy shows that recessions are more likely to make than break a company’s reputation, with twice as many companies making the leap from laggards to leaders during the last recession compared with periods of economic calm. The same study also showed that gains in revenue or profitability that happen during recession are likely to be sustained through the next boom cycle, so if SMEs can get it right now, they can expect to continue reaping the benefits in the more buoyant times ahead.