As a business consultant probably 20% of the businesses that I have referred to me are seriously under performing or are in big trouble.
So why is that?
Well a mixture of reasons:
The ostrich syndrome, "its too painful to deal with so I'll ignore it."
The miracle wisher "if we could only get a big order it will all come right."
The change resister, (they ignore what's changing around them), and in any case, "we have always done it this way."
Ignoring the obvious, "I know we should not have reallied on one big customer for 80% of our sales, but we got on so well with them."
Ignorance, "We don't have time to keep monthly management accounts."
Often they only time many of these cases really see any figure is the end of year accounts from their accountant and even then they don't understand them.
But the two biggest reasons these businesses don't get help are:
They are too embarrassed or feel a loss of pride.
Or the old chestnut, "I don't need to pay someone else to come in and tell me what I already know."
Be honest, with yourself, If any of this sound s familiar then get help quickly, often if the businesses that failed got advice earlier on they could have been rescued.
Alan Briggs
Dynamic Business Strategies Ltd
Tel: 07917 446068
E-Mail: info@dynamicbusinessstrategies.co.uk
Website: www.dynamicbusinessstrategies.co.uk
Thursday, 27 December 2007
Monday, 24 December 2007
Is The Customer King?
For those of us who have been around the business world for more years that we want to admit to, the phrase ‘The Customer is King’ is a familiar cry.
Unfortunately on a daily basis I seem to be falling over suppliers, shops and businesses that have forgotten this vital rule.
My wife tells me that I am the world worst customer, I guess thats true if that means I only give one second chance to get it right to suppliers and shops.
In many cases these are businesses that are quality accredited. They have great systems to register complaints, customer service people by the drove and lots of quality policies and procedures. The trouble is that if all this forgets that at the centre of it all should be one aim, satisfying the customer, then it’s all just been a paper exercise.
Several things should be remembered:
Customers will often remember and recommend the supplier’s who go the extra mile to put right a mistake or redress a problem quickly and without fuss, (probably more so than the suppliers who have not caused them a problem).
Quality service is not expensive, but lost business and reputation is.
At the end of the day it’s the customer who pays for the wages of everyone they deal with!
Alan Briggs
Dynamic Business Strategies Ltd
14 Walford Place
Chelmsford
Essex
England
CM2 6PG
Tel: 07917 446068
E-Mail: alanb@dynamicbusinessstrategies.co.uk
Website: www.dynamicbusinessstrategies.co.uk
Monday, 1 October 2007
Succession Planning for Smaller Businesses
Any business owner, especially those in a family business, will tell you how hard it was to establish their businesses, then build it and make it successful, let alone having to worry about how they might ever leave them!
But those who are trapped in their business know is not a happy place to be. Unfortunately too many owner-managers find themselves completely shackled to their businesses because they didn’t plan ahead. Once a business is up-and-running successfully, there should be no more important an issue to address than Succession Planning, with as long a time-scale for its execution as you can possibly manage.
Clarification - Exit Strategies versus Succession Planning
Those owners who have had to raise funds to buy or develop their business may have been asked by their accountants, ‘what about your exit strategy’? If they have ever approached business angels or venture capitalists, they most certainly will have!
But, ‘exit strategies’ are not the same as ‘succession plans’. Exit strategies tend to focus specifically on how the owners may optimise the capital value of the investment in their business through an eventual sale. Of course you may not want to sell your business when the time comes to move on from your executive duties. Or you may have family members or loyal colleagues already identified to whom you want to pass the business on to. Whatever the choice, you will still need to plan for your succession.
An exit strategy without a succession plan is rather like a car with no engine: worth no more than scrap value. Neither will take you very far…
Why plan for your succession?
Here are three stories that will make you shiver – feel relaxed. Names have been changed to protect identities, but these are real people in real situations!
Alan set up a perfect business 20 years ago. Time came for Alan to move on, but he had made just one big mistake. No bank was willing to support an outside buyer because none believed his company was independent of him. Alan had no succession plan.
Alan’s business had been established for some years. Alan had found a highly profitable niche market that served a captive, long-term, customer base. His business model was sound. His company’s products carried no ‘big ticket’ purchase prices and therefore did not require main Board approvals. Even better, his products were only bought by large, financially secure customers whose main concern was faultless delivery.
Alan’s company had some great long-term contracts (which external funders will always look for), with many more prospective clients to develop (and funders love that too!), the business had a solid reputation which would support further growth - with proven potential for any new owner. Any investors would now be really excited!
Alan had a new wife and wanted to sell and go round the world with his new wife. He had three senior managers, all excellent at their jobs, but they were on ‘second careers’, working part-time for the fun of it. Not one of his senior managers was committed to staying with the business should he sell it.
Some ten years later, Alan has still not managed to find a buyer for his company. He is running a very profitable business, with part-time senior managers and still with no succession plan in place.
Alan’s his wife isn’t happy with him spending so much time on his business but he can’t find anyone who might run his business better than him.
And maybe he never will!
Liz was very different from Alan.
She established a business more than 15 years ago at the age of 50, within five years she realised she recognised that she needed a much larger infrastructure around to take the business to the next level and beyond, preferably with people young enough to take over from her in due course. So she set out to do just that.
First Liz first expanded the team recruiting younger people, which included her two oldest children as recently-qualified professionals.
However as the team developed, Liz found they didn’t always appreciate the difference between being an ‘expert’ in their professions and the vastly different management challenges of running a demanding business. Several said privately that what Liz did in actually running the business, was ‘self-evident’ and ‘trivial’ - compared to their own tactical but highly specialist contributions.
To make things worse (as many of my clients report in these situations!), Liz felt increasingly under-valued as the business founder. But, she persevered with her longer-term plans.
She then recruited some outside help for her business in the shape of a Non-Executive Director, and they drew up a strategic plan and devised long-term management development and mentoring for her next generation of managers. This was a challenging time for them all. But Liz’s visionary succession plans paid off in spades.
Seven years later, Liz began to sell her shares in the business to her management team in small parcels as they developed. She then passed on the post of MD to her eldest son and became Non-Executive Chairman.In the last three years, her business now has a hugely capable executive board comprising her two children and three other professionals, the business has grown more than threefold - and profits have quintupled. All her team have become very wealthy through her enlightened generosity. Alan would be deeply jealous!
Sometimes though, succession planning has nothing to do with your existing Team, or your own family.
Neil established a company based on his own academic research, and quickly gathered 4 more researchers like him to invest in his business idea. Of course building their business took a while because, unlike Alan and Liz, none was sure if there was a market for their ideas.
Happily, Neil and his colleagues did find a market. He also found that most of his founding investors didn’t want the tedium of business management, but they very much enjoyed contributing technically.
Neil’s had planned ahead of course – and considered not just how to commercialise the opportunities they had found, but how to develop them as a ‘real business’.
After recruiting brining in a consultant to guide him and to offer broader business mentoring, the first thing Neil did was to create a detailed succession planning strategy, to find some carefully-selected senior managers to fill the management gaps that were identified and start to devolve responsibilities in a smooth and planned way.
Less than eight years on, Neil sold his business and is a multi-millionaire. He has also made his original shareholders and senior managers millionaires.
The Moral
The lesson to be learned here is that every business and especially family businesses need to plan for succession or you will find the future that you had in mind doesn’t turn out as expected.
Contact us today on 07917 446068 or e-mail info@dynamicbusinessstrategies.co.uk for a free business diagnostic and plan for the brighter, richer future that you want and deserve.
But those who are trapped in their business know is not a happy place to be. Unfortunately too many owner-managers find themselves completely shackled to their businesses because they didn’t plan ahead. Once a business is up-and-running successfully, there should be no more important an issue to address than Succession Planning, with as long a time-scale for its execution as you can possibly manage.
Clarification - Exit Strategies versus Succession Planning
Those owners who have had to raise funds to buy or develop their business may have been asked by their accountants, ‘what about your exit strategy’? If they have ever approached business angels or venture capitalists, they most certainly will have!
But, ‘exit strategies’ are not the same as ‘succession plans’. Exit strategies tend to focus specifically on how the owners may optimise the capital value of the investment in their business through an eventual sale. Of course you may not want to sell your business when the time comes to move on from your executive duties. Or you may have family members or loyal colleagues already identified to whom you want to pass the business on to. Whatever the choice, you will still need to plan for your succession.
An exit strategy without a succession plan is rather like a car with no engine: worth no more than scrap value. Neither will take you very far…
Why plan for your succession?
Here are three stories that will make you shiver – feel relaxed. Names have been changed to protect identities, but these are real people in real situations!
Alan set up a perfect business 20 years ago. Time came for Alan to move on, but he had made just one big mistake. No bank was willing to support an outside buyer because none believed his company was independent of him. Alan had no succession plan.
Alan’s business had been established for some years. Alan had found a highly profitable niche market that served a captive, long-term, customer base. His business model was sound. His company’s products carried no ‘big ticket’ purchase prices and therefore did not require main Board approvals. Even better, his products were only bought by large, financially secure customers whose main concern was faultless delivery.
Alan’s company had some great long-term contracts (which external funders will always look for), with many more prospective clients to develop (and funders love that too!), the business had a solid reputation which would support further growth - with proven potential for any new owner. Any investors would now be really excited!
Alan had a new wife and wanted to sell and go round the world with his new wife. He had three senior managers, all excellent at their jobs, but they were on ‘second careers’, working part-time for the fun of it. Not one of his senior managers was committed to staying with the business should he sell it.
Some ten years later, Alan has still not managed to find a buyer for his company. He is running a very profitable business, with part-time senior managers and still with no succession plan in place.
Alan’s his wife isn’t happy with him spending so much time on his business but he can’t find anyone who might run his business better than him.
And maybe he never will!
Liz was very different from Alan.
She established a business more than 15 years ago at the age of 50, within five years she realised she recognised that she needed a much larger infrastructure around to take the business to the next level and beyond, preferably with people young enough to take over from her in due course. So she set out to do just that.
First Liz first expanded the team recruiting younger people, which included her two oldest children as recently-qualified professionals.
However as the team developed, Liz found they didn’t always appreciate the difference between being an ‘expert’ in their professions and the vastly different management challenges of running a demanding business. Several said privately that what Liz did in actually running the business, was ‘self-evident’ and ‘trivial’ - compared to their own tactical but highly specialist contributions.
To make things worse (as many of my clients report in these situations!), Liz felt increasingly under-valued as the business founder. But, she persevered with her longer-term plans.
She then recruited some outside help for her business in the shape of a Non-Executive Director, and they drew up a strategic plan and devised long-term management development and mentoring for her next generation of managers. This was a challenging time for them all. But Liz’s visionary succession plans paid off in spades.
Seven years later, Liz began to sell her shares in the business to her management team in small parcels as they developed. She then passed on the post of MD to her eldest son and became Non-Executive Chairman.In the last three years, her business now has a hugely capable executive board comprising her two children and three other professionals, the business has grown more than threefold - and profits have quintupled. All her team have become very wealthy through her enlightened generosity. Alan would be deeply jealous!
Sometimes though, succession planning has nothing to do with your existing Team, or your own family.
Neil established a company based on his own academic research, and quickly gathered 4 more researchers like him to invest in his business idea. Of course building their business took a while because, unlike Alan and Liz, none was sure if there was a market for their ideas.
Happily, Neil and his colleagues did find a market. He also found that most of his founding investors didn’t want the tedium of business management, but they very much enjoyed contributing technically.
Neil’s had planned ahead of course – and considered not just how to commercialise the opportunities they had found, but how to develop them as a ‘real business’.
After recruiting brining in a consultant to guide him and to offer broader business mentoring, the first thing Neil did was to create a detailed succession planning strategy, to find some carefully-selected senior managers to fill the management gaps that were identified and start to devolve responsibilities in a smooth and planned way.
Less than eight years on, Neil sold his business and is a multi-millionaire. He has also made his original shareholders and senior managers millionaires.
The Moral
The lesson to be learned here is that every business and especially family businesses need to plan for succession or you will find the future that you had in mind doesn’t turn out as expected.
Contact us today on 07917 446068 or e-mail info@dynamicbusinessstrategies.co.uk for a free business diagnostic and plan for the brighter, richer future that you want and deserve.
Tuesday, 7 August 2007
New Requirements for Driving Impacts All Businesses!
A new Government initiative designed to impact businesses employing 5 employees and over could still affect those with less than 5 staff. The requirements cover both employees driving company vehicles but also employees driving their own cars during work related activities even on a limited basis.
So what is the business case for this initiative?
Work-related road accidents have more hidden costs many employers realise. The cost is much more than the garage bill for the damaged vehicle and in many cases less might be covered by insurance than can be assumed. It has been estimated that the full cost to the employer might be £8 to £36 for every pound paid on an insurance claim. Some items cannot be covered by insurance.
Of course it’s best not to have a crash in the first place - and it’s been proven that some simple measures any firm can take will make one much less likely.
The Benefits to the Employer
The benefits of implementing and managing a driving for work policy include:
Although the new Department for Transport (DfT). ‘Driving for Work’ initiative was drafted to cover enterprises with 5 and over employees most businesses are unaware that the overarching duty of care for employees under Health and Safety at Work Act 1974 would mean that these requirements result in the need for businesses of all sizes to comply with most of the procedures. There is also a duty of care to others who may be affected by their business activities, which, in the case of driving, means all other road users. Therefore all enterprises should have a 'driving for work' policy then manage their risks accordingly.
Read the notes below and speak to us today to find out how we can help you to comply at minimal cost, for more information Click here
Still Not Convinced it’s Important That You to Act Today?
Here are some frightening statistics!
- There are an estimated 3 million company cars on the roads and roughly 1 in 3 will be involved in an accident each year.²
- Company drivers who drive more than 80% of their annual mileage on work related journeys have more than 50% more injury accidents than similar drivers who do no work related mileage.²
- Business drivers have collision rates that are 30 – 40% higher than those of private drivers.
- Every week around 200 road deaths and serious injuries involves someone at work.
About 300 people are killed each year as a result of drivers falling asleep at the wheel. - About 4 in 10 tiredness-related crashes involve someone driving a commercial vehicle.²
- Work-related road accidents are the biggest cause of work-related accidental death. Between 800 and 1000 people are killed annually in work-related road traffic accidents compared to approximately 250 fatalities due to accidents notified annually under the Reporting of Injuries Diseases and Dangerous Occurrences Regulations (RIDDOR).
1 National Travel Survey
2 DFT Road Research Report No. 51
So what is the business case for this initiative?
Work-related road accidents have more hidden costs many employers realise. The cost is much more than the garage bill for the damaged vehicle and in many cases less might be covered by insurance than can be assumed. It has been estimated that the full cost to the employer might be £8 to £36 for every pound paid on an insurance claim. Some items cannot be covered by insurance.
The following is a list of items business may find they have to cover themselves:
- Loss of company reputation and contracts
- Fines and costs of prosecution
- Damage to products/ plant/ building and equipment
- Staff down time for medical appointments/attendance at court etc
- Replacement staff costs and sick pay
- Loss of production or production delays
- Increased insurance premiums and excess
- Excess on a claim
- Offenders’ own legal fees
- Claims from third parties
- Accident investigation and paperwork
- Repairs to damaged equipment
- Alternative transport for repair duration
- Inconvenience
- Re-delivery
- Management and administrative time.
Of course it’s best not to have a crash in the first place - and it’s been proven that some simple measures any firm can take will make one much less likely.
The Benefits to the Employer
The benefits of implementing and managing a driving for work policy include:
- Reduced accident losses
- Defence against criminal prosecutions and civil litigation
- Lower insurance premiums
- Lower transport costs
- Improved business performance
- More effective vehicle use
- Less down time
- Improved safety culture
- Improved public image
- Higher staff morale
What do you need to do?
The basic system for managing ‘driving for work’ comprises the following elements:
- Draw up an overall policy statement
- carry out risk assessments
- minimise risk through control measures
- implement rules and procedures
- manage data recording
- audit, communication and review
Friday, 3 August 2007
Angels Rush in Where Banks Fear to Tread
A Guide to Business Angels and Venture Capital investment
Business Angels can offer investment, particularly in the early or growth stages of development, in return for equity.
Of course because of the risk to their funds, investors expect a higher potential return than for safer, more secure investments.
Equity Finance is often a suitable option where:
• the nature of a business or project deters other debt providers, e.g. banks
• the business does not have enough cash to pay loan interest because it is needed for business activities or funding growth.
The questions business owners should ask themselves include:
• Are they prepared to give up a share in their business and some control?
Investors expect to monitor progress and most will want involvement in significant decisions.
• Are the owners and their key people confident in the business 'product/service?
· Does the product or service have a unique selling point that singles it out?
• Do they have the drive to grow the business?
• What industry experience and knowledge does the management team have? Is there a variety of skills required to grow the business?
After considering the above, owners should seek advice from a professional adviser.
So what are Business Angels?
Business Angels (‘BA’s’) are independently wealthy individuals who invest in high-growth business in return for a significant equity share in the business. Some ‘BA’s’ invest on their own, others do so as part of a network, syndicate or investment club. In addition to money, ‘BA’s’ often make their own skills, experience and contacts available to the company.
‘BA’s’ will typically invest in businesses with:
• an investment requirement of between £10,000 and £250,000, (most initial investments are less than £75,000).
• who have the potential for generating a high return for the Angel – unlike other sources of finance ‘BA’s’ are not averse to high risk scenarios
• good early stage development or expansion
• a presence in a particular sector.
If a business successfully attracts a business angel investment, they're likely to find it easier to secure further funding from other sources.
The advantage of using a business angel is that they often make an investment decision quickly, without complex assessments.
However, owners will still need a professional and tailored business plan.
Most business angels can bring valuable first-hand experience of either working in a small business or running their own business venture. They're also likely to have local knowledge, as they tend to focus their investments within a small geographical area.
Some ‘BA’s’ may be eligible to have their investment funds matched by the UK
Government under its Enterprise Capital Funds (ECF’s) scheme. ECF’s are commercial funds, investing a combination of private and public money against a share of equity in small high-growth businesses seeking up to £2 million of equity finance.
There are of course disadvantages, business angels don't make investments very regularly and may not be actively looking for an opportunity, so they may be difficult to find. While you may decide to approach use an adviser to help you with this link up, business angels will place a lot of emphasis on the chemistry with the owner and how well they can work together directly with the owner and the management team. Tracking down the right investor may take longer than expected and can typically take several months but business owners can short cut this by working with an experienced consultant.
A consultant experienced in working with Business Angels and Venture Capitalists will guide a business owner through the minefield and help to get a business investment ready, helping to prepare an tailored business plan and to prepare the business owners for a presentation or ‘elevator pitch.’ The current TV series ‘The Dragons Den’ gives a flavour of the presentation process but of course it not entirely accurate as the ‘Dragons’ don’t get the business plan and a lot of dramatic licence is used.
The Exit
Usually at an agreed point in the future the BA will want to sell their shares and realise a significant return on their investment, when this happens in many cases the owners will want to buy out the ‘BA’s’ shareholding. Of course in a significant proportion of cases they don’t have enough money to do this. In this scenario the ‘BA’ will sell and the owner will be forced to agree or sell their share to the same buyer (this is known as the ‘drag along’ clause and is contained in the investor agreement which is set up at the beginning.
Alternatively If you the owners want to exit the business and sell their shares to a third party obviously the ‘BA’ would have to agree and would expect to also sell their share holding to the same buyer again this is included in the investor agreement (known as a ‘tag along’ clause.
Costs
This varies vastly dependent on the investment groups that are approached also there are seem to be some unscrupulous consultants charging extortionate fees to help prepare business plans and get owners investor ready.
Click here to contact us for more information and hear how we can help owners become investor ready and link owners directly to BA’s at low cost
Venture Capital
Venture Capital is also known as private equity finance. Unlike Business Angels, venture capitalists (VC’s) look to invest very large sums of money in return for some of a business' shares.
VC’s typically invest in businesses with:
• a minimum investment requirement of around £2 million, though many smaller regional VC organisations may invest from £50,000.
• an ambitious but realistic business plan.
• a product or service that provides a unique selling point or other competitive advantage
• a large earning potential and offering a high return on investment within a specific time frame, e.g. five years
• sound management expertise – unlike Business Angels, VC’s tend not to get involved in the day-to-day running of the business, although they may help with a business' strategy.
• a proven track record - for this reason start-ups are generally not considered by VC’s for investment
The advantages of securing a VC are that they can provide large sums of equity finance and bring a wealth of strategic expertise to a business. Again, like the business angel investment if a business successfully attracts a VC, they're likely to find it easier to secure further funding from other sources.
The disadvantage is that securing a deal with a VC can be a long, expensive and complex procedure. Businesses are required to draw up a very detailed business plan, including financial projections for which businesses are likely to need professional help.
Also, if owners get through to the deal negotiation stage, they will have to pay significant legal, accounting and other fees whether or not are successful in securing funds.
The Exit
At the exit point, (agreed at the beginning) normally the business is sold as a whole even if the owners don’t want to. So this needs to be kept in mind, (the only other options may be through a management buy out, (MBO) and refinancing which would normally involve refinancing the business.
Click here to contact us for more information and hear how we can help owners become VC ready and link owners directly to Venture Capitalists at low cost
The Exit
Usually at an agreed point in the future the BA will want to sell their shares and realise a significant return on their investment, when this happens in many cases the owners will want to buy out the ‘BA’s’ shareholding. Of course in a significant proportion of cases they don’t have enough money to do this. In this scenario the ‘BA’ will sell and the owner will be forced to agree or sell their share to the same buyer (this is known as the ‘drag along’ clause and is contained in the investor agreement which is set up at the beginning.
Alternatively If you the owners want to exit the business and sell their shares to a third party obviously the ‘BA’ would have to agree and would expect to also sell their share holding to the same buyer again this is included in the investor agreement (known as a ‘tag along’ clause.
Costs
This varies vastly dependent on the investment groups that are approached also there are seem to be some unscrupulous consultants charging extortionate fees to help prepare business plans and get owners investor ready.
Click here to contact us for more information and hear how we can help owners become investor ready and link owners directly to BA’s at low cost
Venture Capital
Venture Capital is also known as private equity finance. Unlike Business Angels, venture capitalists (VC’s) look to invest very large sums of money in return for some of a business' shares.
VC’s typically invest in businesses with:
• a minimum investment requirement of around £2 million, though many smaller regional VC organisations may invest from £50,000.
• an ambitious but realistic business plan.
• a product or service that provides a unique selling point or other competitive advantage
• a large earning potential and offering a high return on investment within a specific time frame, e.g. five years
• sound management expertise – unlike Business Angels, VC’s tend not to get involved in the day-to-day running of the business, although they may help with a business' strategy.
• a proven track record - for this reason start-ups are generally not considered by VC’s for investment
The advantages of securing a VC are that they can provide large sums of equity finance and bring a wealth of strategic expertise to a business. Again, like the business angel investment if a business successfully attracts a VC, they're likely to find it easier to secure further funding from other sources.
The disadvantage is that securing a deal with a VC can be a long, expensive and complex procedure. Businesses are required to draw up a very detailed business plan, including financial projections for which businesses are likely to need professional help.
Also, if owners get through to the deal negotiation stage, they will have to pay significant legal, accounting and other fees whether or not are successful in securing funds.
The Exit
At the exit point, (agreed at the beginning) normally the business is sold as a whole even if the owners don’t want to. So this needs to be kept in mind, (the only other options may be through a management buy out, (MBO) and refinancing which would normally involve refinancing the business.
Click here to contact us for more information and hear how we can help owners become VC ready and link owners directly to Venture Capitalists at low cost
Tuesday, 29 May 2007
DYNAMIC CASHFLOW MANAGEMENT
Money is vital to any business it is the life blood that keeps it alive.
When I visit clients to conduct a free business diagnostic I regularly hear the same comments:
‘We are regularly exceeding our overdraft’!
‘We never seem to have enough money!’
‘We always have trouble getting paid.’
The starting point in putting things right is normally to explain this old business maxim which is as still true today as when it was first made:
‘Turnover is vanity, Profit is sanity, and Cash is reality’.
Unfortunately many businesses do not remember this and often chase turnover to solve the cashflow problem, after all more sales = more cash right! Sadly this is wrong and in a lot of cases businesses pays the ultimate price, bankruptcy. Businesses are commonly Over Trading or Trading Insolvently without even knowing it.
Firstly does the business have Sales, Cashflow and Profit & Loss forecasts, (they must include columns for forecast and actual, most that I see don’t).
My next move is to check that business has costed and priced their products or services correctly and are charging an appropriate price.
Thirdly do they specify their trading terms in writing and enforce them.
After that what are their debtor days, (how long are they waiting to get paid) and examine ways to improve their credit control.
Of course businesses are not always financed to the appropriate level, with enough money to fund their survival or stage of growth and maximising the use of the right type of finance is important.
The most common source of funding is the bank, however businesses often utilise the bank products and services in the wrong way.
For instance let’s say that a business has an agreed overdraft limit of £5,000 but the business constantly operates their account with the overdraft fluctuating from £3,500 to £5,000 but it never drops below £3,500.
The business should consider changing the £3,500 solidified debt into a commercial loan and then change the overdraft to cover the fluctuating debt of £1,500. This could dramatically save money in interest charges. Additionally it will secure the bank lending so that a change of circumstances or change of bank manager does not result in the risk that the overdraft could be cut impacting seriously on the business.
There are other ways to fund cashflow.
Firstly examine if the terms of trade with your suppliers can be extended. At the beginning businesses are usually paying on Pro-forma (payment with order or cash on delivery, C.O.D.). Once some trading history has been built up it is usually possible to agree improved terms ie 30 days. Sometimes this can be increased to a longer period dependent on the industry norms. But remember just simply taking longer to pay your supplier can damage your relationship or even affect your credit history and rating when you try to get other products or services on account. And you never know when you will need a favour from your supplier.
The source of funding that should always be pursued is savings or family & friends but make sure that there is an agreement drawn up to protect all parties.
Invoice Discounting
This is also known as ‘factoring.’ Put simply the finance company inspect your books and agree to pay you a percentage of the value of invoices that you send to your regular clients at the time you issue them and pay most of the rest of the value when they get paid.
They can either run your debtor book for you chasing the payments or you can be responsible for chasing payments. Obviously in the first case it relives you from that time consuming and some times uncomfortable chore but the cost are higher and you may feel that your clients might not like someone with whom they do not have a business relationship chasing them form money.
Asset Based Lending
This is a similar form of financing and the finance company agree to provide you with a percentage of the value of your sales even before you invoice, this is especially helpful to businesses who do not invoice until the end of the project. The facility allows manufacturing businesses or other industries like builders to fund the cost of materials and labour or other processes which extend the time before the business gets paid. Again the finance company inspect your books and agree to pay you a percentage of the value of the sales. Debts can be secured against stock, machinery, premises, invoices and even brands
E-mail me today to receive a Finance Options Table showing various funding options, costs and initial guidance to help you to select the best option for your situation.
These issues are just the starting point.
There are other financial issues for businesses, Commercial Loans, decisions about how best to buy an asset (Leasing Vs Purchasing).
Then the thorny subjects of equity investment in the business, capital purchases, bringing in outside investors etc.
Those are all subjects for another day so watch out for the next finance posting.
When I visit clients to conduct a free business diagnostic I regularly hear the same comments:
‘We are regularly exceeding our overdraft’!
‘We never seem to have enough money!’
‘We always have trouble getting paid.’
The starting point in putting things right is normally to explain this old business maxim which is as still true today as when it was first made:
‘Turnover is vanity, Profit is sanity, and Cash is reality’.
Unfortunately many businesses do not remember this and often chase turnover to solve the cashflow problem, after all more sales = more cash right! Sadly this is wrong and in a lot of cases businesses pays the ultimate price, bankruptcy. Businesses are commonly Over Trading or Trading Insolvently without even knowing it.
Firstly does the business have Sales, Cashflow and Profit & Loss forecasts, (they must include columns for forecast and actual, most that I see don’t).
My next move is to check that business has costed and priced their products or services correctly and are charging an appropriate price.
Thirdly do they specify their trading terms in writing and enforce them.
After that what are their debtor days, (how long are they waiting to get paid) and examine ways to improve their credit control.
Of course businesses are not always financed to the appropriate level, with enough money to fund their survival or stage of growth and maximising the use of the right type of finance is important.
The most common source of funding is the bank, however businesses often utilise the bank products and services in the wrong way.
For instance let’s say that a business has an agreed overdraft limit of £5,000 but the business constantly operates their account with the overdraft fluctuating from £3,500 to £5,000 but it never drops below £3,500.
The business should consider changing the £3,500 solidified debt into a commercial loan and then change the overdraft to cover the fluctuating debt of £1,500. This could dramatically save money in interest charges. Additionally it will secure the bank lending so that a change of circumstances or change of bank manager does not result in the risk that the overdraft could be cut impacting seriously on the business.
There are other ways to fund cashflow.
Firstly examine if the terms of trade with your suppliers can be extended. At the beginning businesses are usually paying on Pro-forma (payment with order or cash on delivery, C.O.D.). Once some trading history has been built up it is usually possible to agree improved terms ie 30 days. Sometimes this can be increased to a longer period dependent on the industry norms. But remember just simply taking longer to pay your supplier can damage your relationship or even affect your credit history and rating when you try to get other products or services on account. And you never know when you will need a favour from your supplier.
The source of funding that should always be pursued is savings or family & friends but make sure that there is an agreement drawn up to protect all parties.
Invoice Discounting
This is also known as ‘factoring.’ Put simply the finance company inspect your books and agree to pay you a percentage of the value of invoices that you send to your regular clients at the time you issue them and pay most of the rest of the value when they get paid.
They can either run your debtor book for you chasing the payments or you can be responsible for chasing payments. Obviously in the first case it relives you from that time consuming and some times uncomfortable chore but the cost are higher and you may feel that your clients might not like someone with whom they do not have a business relationship chasing them form money.
Asset Based Lending
This is a similar form of financing and the finance company agree to provide you with a percentage of the value of your sales even before you invoice, this is especially helpful to businesses who do not invoice until the end of the project. The facility allows manufacturing businesses or other industries like builders to fund the cost of materials and labour or other processes which extend the time before the business gets paid. Again the finance company inspect your books and agree to pay you a percentage of the value of the sales. Debts can be secured against stock, machinery, premises, invoices and even brands
E-mail me today to receive a Finance Options Table showing various funding options, costs and initial guidance to help you to select the best option for your situation.
These issues are just the starting point.
There are other financial issues for businesses, Commercial Loans, decisions about how best to buy an asset (Leasing Vs Purchasing).
Then the thorny subjects of equity investment in the business, capital purchases, bringing in outside investors etc.
Those are all subjects for another day so watch out for the next finance posting.
Wednesday, 9 May 2007
Code for Leasing Business Premises
A new code of conduct has been developed which aims to promote fairness in commercial leases, and recognises a need to increase awareness of property issues, especially among small businesses, ensuring that occupiers of business premises have the information necessary to negotiate the best deal available to them.
‘The Code for Leasing Business Premises in England and Wales 2007’ is the result of collaboration between commercial property professionals and industry bodies representing both owners (Landlords) and occupiers (Tenants).
The Code is voluntary so occupiers should be aware that not all Landlords will choose to offer Code-compliant leases. The Government, however, takes a keen interest in ensuring the property industry complies with this voluntary Code.
The Occupier Guide is not a substitute for professional advice and tenants are encouraged to seek professional advice as soon as possible.
The Code consists of three parts:
Click here to receive the entire code (PDF 1.3MB).
Remember even after you have reviewed these documents or completed the Draft Heads of Terms it is important to seek professional advice regarding you individual situation!
The Code for Leasing Business Premises is endorsed by:
The Association Of British Insurers,
British Council for Offices,
British Retail Consortium,
Confederation of British Industry,
Communities and Local Government,
British Property Federation,
CoreNet Global,
The Forum of Private Business,
Federation of Small Businesses,
the Welsh Assembly Government,
Investment Property Forum,
The Law Society of England and Wales,
The Royal Institution of Chartered Surveyors.
‘The Code for Leasing Business Premises in England and Wales 2007’ is the result of collaboration between commercial property professionals and industry bodies representing both owners (Landlords) and occupiers (Tenants).
The Code is voluntary so occupiers should be aware that not all Landlords will choose to offer Code-compliant leases. The Government, however, takes a keen interest in ensuring the property industry complies with this voluntary Code.
The Occupier Guide is not a substitute for professional advice and tenants are encouraged to seek professional advice as soon as possible.
The Code consists of three parts:
10 point requirements for landlords in order for their lease to be Code-compliant;
A guide for occupiers, explaining terms and providing helpful tips. click here to receive the document
A model Heads of Terms (which can be completed electronically and downloaded). click here to receive the document
Click here to receive the entire code (PDF 1.3MB).
Remember even after you have reviewed these documents or completed the Draft Heads of Terms it is important to seek professional advice regarding you individual situation!
The Code for Leasing Business Premises is endorsed by:
The Association Of British Insurers,
British Council for Offices,
British Retail Consortium,
Confederation of British Industry,
Communities and Local Government,
British Property Federation,
CoreNet Global,
The Forum of Private Business,
Federation of Small Businesses,
the Welsh Assembly Government,
Investment Property Forum,
The Law Society of England and Wales,
The Royal Institution of Chartered Surveyors.
DISCLAIMER - PLEASE NOTE: The ideas and information shared with you in this email are intended to inform rather than advise. individual circumstances do vary it is important that consult your adviser before implementation. If you do or do not take action as a result of reading this information, before taking professional advice we will accept no responsibility for any financial loss incurred.
Dynamic Business Strategies Ltd
The Counting House
14 Walford Place
Chelmsford
Essex
CM2 6PG
Registered in England. Reg No.5418835
Tel: 07917 446068
E-Mail: info@dynamicbusinessstrategies.co.uk
Website: www.dynamicbusinessstrategies.co.uk
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