If you listen to the media at the moment, we are heading for economic collapse that could potentially see the end of the euro and a number of countries - including Greece, Italy and Portugal - go bankrupt! On the other hand, if you are trying to find a 5* hotel for a weekend break in Devon or Cornwall, you'll struggle to find a vacancy (even at the really expensive hotels in Salcombe, Padstow, Looe and alike). So what is going on and why are the media been so down beat?
We need to put this into context, at the risk of repeating what I believe we all know. The current economic crisis started a long time ago (as far back as Thatcher) with bank deregulation and was compounded by actions taken by New Labour. The net result was a banking system that was prepared to lend money to people with no income, no jobs and no assets (NINJAs) and then under write them through credit default swaps (CDRs) and was a global issue with politicians and bankers making decisions, which in hindsight were bonkers.
The first we mere mortals knew about it was in the last quarter of 2008 when Northern Rock spectacularly collapsed and we saw the first run on a bank since the '30s. Arise the economic editor, who suddenly found out, that everyone wanted his / her opinion; the likes of Robert Peston, Stephanie Flanders and Evan Davis.
This is where it all got scary as the banks ran for the hill - in this case us (the tax payer) - for support and governments across the world found themselves bailing out banks that were simply too large to fail. Then the mud started flying and the media (and others) started finding out exactly what the clever bankers had been up to.
Since Autumn 2008 - four years ago - we have been in a tumble drier economically. We have seen the FTSE drop to below 4,000 and then bounce back up (and down again)! Every time we think we are pulling out of all this doom and gloom another organisation like the IMF or ONS warn of growth flat lining. And now we have the euro in virtual collapse (or do we)?
I am sure for many business owner / managers the last four years have presented a hole array of hurdles for you to jump and for some to fall away. Size doesn't matter; we have seen the collapse of one of Wall Streets great (Lehman Brothers), one of the UK oldest retailers (Woolworths) and many more. For smaller businesses it has been about survival of the fittest!
Certainly in the first two quarters of 2009 it was not a great time to be running a business and I remember feeling helpless as clients and suppliers dropped by the wayside. We had rationalised our business - prior to becoming incorporated in the Autumn of 2008 - and we're in good shape with no borrowing and a lean mean fighting machine. I would like to claim that I had a crystal ball and put everything in place, but I would be lying. This enabled us to stumble through the first six months of 2009 when cash froze within the pipeline of business (and burst in some places).
The private sector looked more like the fields of Flanders, although many business owners stuck their heads in the sand and hoped it would all blow away.
Survival of the fittest
Some of us are just lucky, others are very clever and we are still here. All I know is I decided that we were doing well until the first quarter of 2009 and the only thing that had changed was the environment we were working within (aka the banks), so stuck to my way and slugged it out (it could have been a mistake, but I went with my gut instinct).
I am not looking for praise, I don't deserve any, I simply did what I thought best. Praise should go to our armed forces out in Afghanistan, who are putting their lives on the line every day.
The lessons learned
So what lessons have we learned over the last four years (and to some extent over the last ten years)?
Here are just a few of the tips
I don't care what tools you use, but plan ahead - business plans, capacity plans, etc., - because you need to know as soon as possible when things are going Pete Tong!
- Cash flow
Cash is king, you can turnover as much cash as you want, but if you bank runs dry you are in serious trouble. Credit control is just one tool, but don't look at what you have done (rear view mirror accounting), look at your forecasts and make sure you know what is coming towards you. The sub text to this is planning (again).
- Focus on profits
I hear you groan, but the simple fact is the gap between costs and turnover is what keeps you (and your team) in gainful employment; turnover is vanity, profit is sanity.
To find out the rest of the tips / advice read the full blog post on the Ayrmer Software Blog.
We would welcome your experiences and tips as well.