Monday, 31 December 2007

Looking forward to 2008?

As tomorrow, 1st January is a UK holiday, I am posting this entry a little early so Happy New Year!

The beginning of a new year is a good time to be thinking about what could be coming and anticipating what it means for the small and medium size business.

First of all just before Christmas we had all that gloom about the expected poor times for retailers but not unexpectedly suddenly the shops filled up just after some big price reductions. You see the UK consumer is getting used to a pattern hold off with your purchases and bingo just see those last minute reductions!

So perhaps there may be a lesson for the retail sectors i.e. don’t panic and slash your prices too early.

The move to buying via the internet also had an effect with another dramatic increase in gift buying on line.

My 2008 tip to ‘e-tailors’ in the UK though is to make sure that you look at your delivery systems especially if you have used the Royal Mail up until now people are going to be wary of doing business with anyone who relies on them. We all have seen the long lines of people trying to find out if their gifts were held up at the parcels depots. Customers will long remember being let down and especially if their kids were missing some of the presents that they were expecting.

Now onto the money, the UK fall out from the sub-prime lending crisis has had an effect on all lending especially to businesses.
I am not joining the recession bandwagon but expect a slowing of the economy as people sit back and take stock, reducing their debts.

The coming year is likely to be one where banks are more cautious. What this means for the small and medium business is the bank will keep a closer eye on your overdraft and borrowing. Requests for increases in overdrafts or additional lending will be looked at more critically so your business plan will need to be bullet proof especially the numbers, (bank mangers will try to break your projections and see if the lending proposal is still viable).

My network of senior people at the banks are telling me that they will be examining their client lists (portfolios in banker speak) and looking out for clients who could be struggling as the lending gets tighter.

The UK Bank Base Rate is I believe likely to drop 3-4 times this year by a quarter of a point each time.

If your business is affected by the housing market then I am predicting a gradual slowing of the market (no big crashes just more sensible pricing of houses resulting in a smaller increase in values). This I believe means that coupled with the introduction of the Home Information Pack (HIP) people are less likely to move as readily as in the last few years. This could mean that they will spend money on improving what they have already so opportunities there then!

The commercial property market is a different matter, there seems to be a lot of empty property available at the moment and the market feel is that the increases in value that have been gained are at risk. In the short term we could even see recent gains wiped out.

Do remember though that property is a longer term investment; so don’t panic.

So what should you be doing this coming year?

1 Examine all costs and overheads trim where you can.

2 Revisit your business plan now and see what effect a slight slowdown would have for your business forecasts. If you haven’t got a business plan then how do you expect to anticipate and be ready for what comes?

3 Examine your business finances if your overdraft is fairly consistently in the red then covert some of it to a commercial loan (it’s safer and cheaper).

4 If you are selling on line make sure that you revisit your delivery carriers

5 Someone’s losses are another one's potential gains look for opportunities resulting from the economic picture.

6 I am being biased here, but get someone in from the outside to look at your business to carry out a business diagnostic many of us don’t charge for that. If any consultancy or mentoring needs are identified see them as an investment not a cost. If the consultant/mentor knows what they are doing they will save you many times what they cost and or increase your profits.

Lastly I am not predicting a recession in the UK just some sensible and timely belt tightening.

Alan Briggs

Dynamic Business Strategies Ltd
Tel: 07917 446068


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