By Tyrone Courtman
Posted: 19th May 2014 09:12
The Budget 2014 reminded us all that growth appears to be finally taking root in UK the economy and at last, for those in business, there now appears to be some light at the end of the six year austerity tunnel. Nothing dramatic, but at least it looks as if growth is finally back! Albeit economic output still remains below the levels we were enjoying pre September 2008. But nonetheless there is economic growth.
And you would be right to be asking why is a Restructuring and turnaround professional talking about economic growth? So before you all reach for the champagne and celebrate the beginning of a new era and let down your survival guards, I felt duty bound to remind you all of some of the pitfalls associated with ‘economic growth’. Why is managing growth an issue? Let me explain.
I too am an entrepreneur, involved in running my own business, albeit in partnership with 22 others, and I have been very fortunate in having experience of working with businesses and their owners in challenged circumstances for the past 25 years or so. Many of whom have grappled or attempted to grapple with the rather thorny subject of managing growth. And rather sadly, mostly got it wrong. So I’ve seen a lot of what not to do!
If you’re experience is anything like ours, the past six years have been tough, very tough. Since 2008 business suddenly got a lot more serious, and whilst some of that may be due to the changing face of the accountancy profession, I suspect you too, in your businesses, have had to become equally more focussed. Perhaps now we can avoid being a bit less intense and can afford to relax now?
Unfortunately, however, the road to success is paved with many twists and turns. No more so than the momentum and pressures on growth that you may be experiencing right now in your business.
I’ve lost count of the number of businesses that I went into, as we came out of the early 1990s recession, who proudly asserted that in the month prior to entering Administration or Liquidation, that it was their best month ever! But it is a fact. More businesses go bust after the worst of an economic downturn than in the lead up to or during it.
As economic growth returns, and your businesses balance sheets remain fragile, you must think very carefully about how you are going to manage your business during any upturn in it. I speak not of ill intent but because I am passionate about making sure you don’t make the same mistakes as many before you will have done!
So what is your growth strategy? Do you have one? Is it simply survival? Or is it simply to seize every opportunity that presents itself? Carrying on doing what you always did and at best you’re very likely to get what you always got. Assuming little or no change in your market. But in how many sectors can you expect to see little or no change in the foreseeable future? I bet you would struggle to name one. And what of your business?
So having a strategy for growth is critical, but fundamentally you need to determine your vision. So I would ask you to think about your vision for the business. What will it need to look like in 5 years’ time? What will its proposition be that will cause it to exist? What will be its competitive advantages?
Trouble is, once growth starts it’s very difficult to stop, but you must retain control, and having meaningful management information, in this information age, is absolutely critical if you’re to know which levers to pull and the likely implications of you doing so. Do you know which the most profitable part of your business? What your most profitable products are? Who are you most profitable customers? What are the drivers of cost in your business? Many opportunities will present themselves as the economy recovers but have you got the financial wherewithal to digest them?
So what is your personal Vision? I would ask you to think about your own personal objectives too. You too need to have an end game in mind and that requires a Vision. From your Vision you can then determine your growth strategy. Which products, markets, and customers do you want to serve? Which markets/customers are likely to afford the greatest, most profitable growth opportunities in the coming years? What will the next technological leaps be in your industry? What changes will they bring about? How different will your business need to look to embrace those changes? The list goes on. I cannot hope to provide all the questions let alone the answers in this piece, but I hope it causes you to reflect of your businesses future direction and growth strategy.
But once you have a Vision and you’ve determined your growth strategy, the next critical step is to develop a plan and this may take many forms, from an operational plan on the one hand to a financial plan on the other. And you may need to have a number of versions of each if you’re to adequately assess the risks associated with the fact that more often than not things just don’t go according to plan!
The financial plan is a critical one. You need to understand completely the implications on cash flow of your plans. Many fail to appreciate the full extent on working capital and cash flow of growing their business and sadly many are no longer around to tell the tale. So make sure you completely understand the implications on cash flow before you embark on a particular plan of action, identify the key dependencies and sensitivities to it going wrong. That way you’ll have time to remedy any shortcomings within it or alternatively to secure the necessary funding facilities to see it through to a successful conclusion.
We’ll shortly be consolidating our three PKF Cooper Parry offices in Derby, Leicester and Nottingham into one at East Midland’s airport. As I conclude, what changes are you now going to make to your Vision and growth strategy to really make your business fly too?
Service Group Leader
Tyrone is a chartered accountant, a fellow member of ICAEW and a licenced insolvency practitioner. A lead partner of the firm’s business restructuring practice, he has over 25 years’ experience advising lenders, corporates, investors and individuals in complex financial restructuring and recovery situations across a range of industry sectors and jurisdictions.
Tyrone’s considerable experience spans across many industry sectors and includes advising on and implementing business turnaround; process reengineering; acting as chief restructuring officer; leading distressed mergers and acquisitions; acting as expert witness; mediation and negotiated settlements; and accepting formal insolvency appointment as administrator, administrative receiver, liquidator, trustee, receiver and supervisor of both corporate and individual voluntary arrangements.
Tyrone was UK President of the Turnaround Management Association (UK) in 2008 and 2009 and is currently President of the European Association of Certified Turnaround Professionals. He also sits on the ICAEW special interest committee for Insolvency and Restructuring.
Tyrone Courtman can be contacted by phone on +44 (0)7770 738277 or alternatively via email at email@example.com