Wednesday, 30 September 2009

Cash flow is always king

I was talking to a colleague about setting up his own business this morning, and we were working through some numbers.

Looking at the amount of income per transaction compared with the outgoings per transaction, the business looked like it could work. There will be overheads, of course, but the start-up costs of this particular business are minimal. There are some costs per transaction.

The trouble is that he has really almost no money to put into the business. It really is starting from scratch. He might have to take out a loan from a bank, but it does increase the hoops you have to jump through. Best avoided.

It is the costs per transaction that could be the killer. It reminded me once again that "cash flow is king". If he can ensure that he gets payment in as soon as possible and delay payments to his supplier as long as possible then with positive cash flow he could make a go of it. But if he fails, without funds to fall back on, he could come crashing down as soon as the business starts.

A small investor might be the best answer. We'll discuss further...

Tuesday, 29 September 2009

Good service is what we need

My BlackBerry started to fail on Saturday morning. The trackball - used like a mouse to navigate around the screen - stopped scrolling left/right, so I could only move up and down the left-most options on the menu! Slightly limiting!

I am on a business contract so I called into the T-Mobile shop in town and, although they tried to help, they couldn't fix the problem. "Dial 150," I was advised, "and follow the menu options. They'll send you a replacement within 24 hours."

The failure on the phone meant that I could not access any incoming texts, nor my address book. I mainly rely on the phone for emails, but two texts arrived ... and I had no idea who they were from. Frustrating.

To be fair to T-Mobile I waited until Monday to call them, and, just as I had been told, they quickly said they would send a new phone to arrive on Tuesday and, as I was nearing the end of my contract, I could choose a new phone for another contractual period. I thought that was good service.

The new phone should arrive any moment now - a BlackBerry Curve.

It's what you want when you're in business. Good service, and problems rectified quickly.

(Incidentally, although the trackball still doesn't work, I did find a way to access my texts. they weren't critical!)

Monday, 28 September 2009

Bonuses should only be paid for success

As the Government promises to introduce legislation to combat the excesses of bank bonuses, there is a counter-argument that suggests that if top people are not paid top bonuses, they will "go elsewhere".

If bankers paying themselves large bonuses were indeed to go elsewhere, would the country lose out? Surely the country has already lost out to these gamblers who have brought the country to its knees with a debt-ridden future. If they went elsewhere, one would be tempted to say "good riddance"! I'm all for payment by results, but surely bonuses should only be paid for successful outcomes. The ruination of the banking system hardly qualifies as success.

Yesterday, Prime Minister Gordon Brown, voiced concerns that bankers were determined to return to "the bad old days".

Alistair Darling will take the opportunity at the Labour Party Conference in Brighton to lambast the bonus culture in banking. He will warn the banks that "there will be no return to business as usual for them." There will be "an end to automatic bonuses year after year".

Perhaps the bankers will flee the industry. Maybe they'll think about becoming an MP - with all those lovely expenses!

Friday, 25 September 2009

Is the Bank of England happy to see sterling fall?

With the pound falling once again against the dollar and euro, it would appear that the governor of the Bank of England is quite happy with the situation.

I'm guessing that most of us would prefer to see a strong pound, giving a boost to the general well-being of the country, and also making our money buy more when we're abroad.

Apparently Mervyn King doesn't see it that way.

He said: "The fall in the exchange rate that we have seen will be helpful to that process [he was referring to exports]. There's no doubt that what we need to see now is a shift of resources into net exports."

His comments caused the pound to fall further. If the Bank of England is seemingly unconcerned about the plight of the pound, why would investors put their faith in it?

The value of sterling also reacted badly to the news that the Bank will be holding a meeting with senior City economists to discuss the Bank's Quantitative Easing policy amid speculation that markets are losing faith in the strategy.

Currency strategist at Bank of New York Mellon, Simon Derrick, said: "The perception in the market is starting to build up that Mervyn King is not averse to sterling continuing to weaken, as long as it is not at an overly fast pace.

"If you smile and are not seen to be frowning at the fall in sterling it's another way of weakening monetary policy."

Thursday, 24 September 2009

Green shoots or a false dawn?

Last night Gordon Brown told the BBC that Britain could look forward to "some economic growth" to be announced in the late October pre-budget report. A return to growth by Britain in the third quarter would be ahead of schedule.

However, the Daily Telegraph reported that the Bank of England's Monetary Policy Committee voiced concerns on the same day. MPC member Kate Barber said in a speech that the coming months would be a test of whether the recovery will be maintained or not.

"Although there has been quite a lot of positive data, both for the global economy and for the UK, in recent months, it remains unclear how far this represents a recovery," she said.

The MPC said that even if the economy did start growing again, the sustainability of that growth could be threatened by rising unemployment and weak consumer spending.

Weak bank lending, high levels of debt and damaged bank balance sheets could all send the economy downward again.

I think it sends the message to business owners to tread with caution over the coming months. It will important not to dive into anything with overconfidence only to find it rebounding on us.

Remember - as the banks stock pile cash again - cash flow is king.

Wednesday, 23 September 2009

Be wary of growing too fast

When new businesses start up it is often a dream to build very quickly into a "money-making machine".

However, reality can be very different and dreams can fall apart just as rapidly.

If your business is fairly new, be wary of taking on a "big deal" that would turn your start-up into a multi-million pound operation.


Because you're not ready!

Or at least, you're very unlikely to be.

The most successful, robust and long-lasting businesses are built on sound management and sound processes. Could you really handle a multiplication of your business by, say, a hundred times in just a few weeks?

The likelihood is that you will take the deal on, and despite all good intentions, fail to put in place processes or staff to handle the new work. The result could be a disaster, and it would not be stretching a point to say that it could mean the end of your business.

Don't go too fast. Grow steadily and always be sure you can manage what you take on.

Tuesday, 22 September 2009

Small businesses must look to save energy

I was asked to complete a business survey online yesterday. I was happy to do it because I know the company - Vanson Bourne - and they provide good incentives too.

One strand of the questioning was about small businesses and energy saving.

I am lucky in that I run my business operations from home, so my carbon footprint must be low (I've never worked it out!), with few car journeys, for example.

With the current recession, climate change and energy savings have taken a back seat, especially for small businesses, but I have little doubt that as we emerge from the recession, they will take on increasing importance.

There is, of course, the issue of "saving the world", so that any reduction of carbon emissions will be a good thing. It's a fundamental truth.

For small businesses, there will be two other key points.

The first is that any saving in energy will mean a saving in money, and as we struggle out of the recession, such savings will be important. Simple survival has been more critical in the last 12 months, but this will change henceforth.

The second is that as the really bad times are left behind, people's attention will turn once again to environmental issues. The businesses that can demonstrate that they are aware of and addressing these matters will get a "thumbs up" from customers and fare better than those who do not.

It's a good time to start looking at these issues right now.

Monday, 21 September 2009

Time to think anew?

A friend of mine has recently had a 10 per cent cut in his wages, along with everyone else in his company. It's a trend of the current recession. He's not very happy about it, and who can blame him.

Looking from the other side of the fence the company would argue that it's better that everyone takes a pay cut, rather than making people redundant. That may be true, but everyone who takes the cut will find it tough to bear in their own way, whatever their circumstances.

My friend works shifts - two days on, two days off - 12 hour shifts. I reckon he's in a great position to think about starting his own business. Given his shift pattern, he will have plenty of time on his days off to organise his business. Also, it is best to try out a new business of your own when you're still in employment.

Without much in the way of savings, and without the income (since the cut) to finance a loan comfortably, he will be starting from a standing position, without doubt.

However, it is a great opportunity to make a start, with some back-up (his current job) in place. I hope he gives it a shot.

Friday, 18 September 2009

Take time to think

When you're working for a large corporation it is impossible to justify thinking time. Imagine if you spent an afternoon in an office on your own and told your boss you were "thinking". You'd probably get told that you're not paid to think!

When we own or run a small business, thinking is crucial.

It is important not to spend the whole time "doing", but to spend some quality time "thinking". As business owners or entrepreneurs, it is incumbent upon us to come up with new solutions, new ways of doing things, new products, new ideas.

And to do that, you need time to think.

Sitting in an office may not be the best place to do it. Get away from interruptions - yes, turn the mobile phone off! Go for a walk in the countryside, or even the city, lie on the beach, or in your garden. Take a notepad and jot down any ideas that come to you.

Often, there may be none, but it doesn't mean that ideas will never come. And it's good relaxation anyway.

Make time - and take time to think.

Thursday, 17 September 2009

Get someone else to promote your business

One of the most difficult things facing a small business - and especially a sole trader - is how to sensibly use the Internet to promote their business.

It is virtually impossible these days to conceive of a business that could not use the Internet in any way. However, it is all too easy to imagine how the use of websites, email and social media (for business) sites could become nearly all-consuming.

The proliferation of social media sites that are touted as good for business is scary for those whose busy has very little to do with computers (e.g. builders, plumbers) and it will probably not stop here.

How on earth does someone who spends their days "doing real work" manage to spend any time promoting their business (I'm not talking about social fun here) on sites such as facebook, twitter and myspace, let alone wider promotion via Digg, Reddit, etc?

It's a tough one.

One way would be to use a third party and pay them. Tell them about your business, what you can offer etc, and ask them to promote your business for you. Some offer to pay by results, so some risk is removed.

These days, it's almost too risky not to use the Internet and social media sites to promote your business.

See who offer this service.

Wednesday, 16 September 2009

Inspired by business books

Over the years I have read various books on business, and do admit to finding those self-help business books quite inspirational.

Among the books I have read are:
Small Business Guide (Lloyds TSB) - Sara Williams
Working From Home - Hugh Williams
The Rich Man, Poor Man series - Robert T. Kyosaki
The Magic of Thinking Big - David J. Schwartz
The E Myth Revisited - Michael E. Gerber
The 80/20 Principle - Richard Koch

If I had to pick one to recommend - which would be tough - I think I'd opt for The Magic of Thinking Big.

It's a great motivator, helping you to think bigger, wider, better in your job, family and social life.

I'd be interested to hear if anyone has got a business book recommendation for me. Let me know!

Tuesday, 15 September 2009

How we forget - the stock market cycle will go on

I've been reading about the US stock market crash of 1929 in John Kenneth Galbraith's "The Great Crash 1929", and it is remarkable how many of the phrases used in the book (written in the 1950s) have been heard over the last couple of years when talking about our own stock market fall.

And we read on the BBC website a headline that says: "Bank crisis lessons 'not learned' ".

It seems the lessons are never learned.

In keeping with pace of modern life, we are quicker to forget than we ever used to be. In the arena of finance and the stock market, people are always looking to make money, and an over-regulated system prevents that from happening. Therefore, whatever regulations are put in place following a crash, they will eventually be eroded so that money can be made again.

The facts are these:
- You can never get rid of 'boom and bust'.
- What goes up can come down.
- The fall will always be faster than the rise.
- Long term, and in general (i.e. not every specific stock) values WILL go up.

If you invest in the stock market - or property - you need to go in with your eyes open. We've seen it go down, and we're seeing it go back up again.

The cycle will continue.

Note: No part of this article constitutes financial advice.

Monday, 14 September 2009

Business Confidence up, but TUC doesn't share it

For the first time in two years the Business Confidence Monitor from the Institute of Chartered Accountants in England and Wales (ICAEW) has turned positive.

It may be seen as evidence that the UK economy is improving. The figure recorded, +4.8, was up from -28.2 and was the best since Q3 2007. The ICAEW used the figure to predict that UK GDP will rise by 0.5 per cent this quarter.

The change is the largest quarterly improvement seen since BCM began, and the optimism is backed up by expected rises over the next 12 months in 13 out of the 14 financial measures detailed within the BCM.

When questioned, 41 per cent of senior business professionals were more confident about economic prospects for their business in the next 12 months.

The optimism is not shared by Brendan Barber, general secretary of the Trades Union Congress. He said that public spending cuts would bring about a "double-quick, double-dip" recession which could result in four million unemployed. Speaking on Sunday 13 September, the eve of TUC conference, he said that calls to cut public sector deficit were "astonishing". "When the economy shrinks, goverments need to spend more on benefits," he said.

Friday, 11 September 2009

11 September

It's one of those dates that has little other meaning: September 11, 2001.

It will be remembered forever for the terrorist attacks on the Twin Towers in New York and at the Pentagon.

And it's one of those dates that you will always remember where you were.

I was working in the IT department of an insurance company in Farnborough, Hampshire. By UK time the attacks started at about 1.45pm. A colleague, Nigel, had received a phone call from his wife, and he suddenly said to the open-plan office: "A plane has just crashed into one of the Twin Towers in New York." My first reaction was, how could anyone be so foolish?

Although the internet was on everyone's PC it was not yet a time when people had a browser open by default. We all clicked frantically to look at news sites, but most were already clogged up and access was difficult and slow.

Other people made phone calls home, and soon the news came through: "Another plane has crashed into the other tower." Oh, my lord! "They suspect terrorists." The frightening truth began to hit home.

The afternoon unfolded in one unbelievable event after another as news came through of the Pentagon attack, the collasping towers and the failed attack of flight United 93. It was too much to take in.

The next day was my birthday and I had the day off. It was the bleakest birthday ever as I sat in front of Sky News nearly all day watching with morbid fascination as the channel repeatedly showed pictures of the crashes, and related incidents.

I still watch programmes about 9/11 now. It's still hard to take, even after eight years.

Thursday, 10 September 2009

The value of great management

When Fabio Capello was given the England manager's job in 2007 there were some eyebrows raised about his salary, reported to £4.8 million a year and rising to £6 million a year. It could cost the FA £26 million to 2012.

As the Daily Telegraph put it: "Capello is on a multi-million-pound bonus to turn players who struggled to conquer Andorra last season into world-beaters within 800 days."

Well, maybe he has done just that. After last night's 5-1 victory over erstwhile England conquerors Croatia, England have qualified comfortably for the 2010 World Cup in South Africa, and can now start counting the likely dividends of qualification.

It is reported that it could be worth around £100 million to English football, and could boost the UK economy to the tune of £1 billion. No wonder Scot Gordon Brown immediately pledged his support for the English football team in the finals!

The possible riches now put Capello's salary into perspective and demonstrate the value of good management.

I guess the banks might like to argue the same thing. The trouble is the managers of UK's banks look rather more like Steve McClaren than Fabio Capello at the moment.

Wednesday, 9 September 2009

Annoying bank charges

When I first started in business in 2002, I was able to open a bank account with Bank of Scotland with minimal charges. The only thing they charged for was cheques. Everything else was free.

Unfortunately, that bank account has gone as the business it was for was merged with another business I ran, and the latter's bank account prevailed (out of necessity).

Charges appear to be "a fact of life", but they are frustrating for small businesses, and represent a higher percentage of our outgoings than for larger businesses. I was once phoned by the bank and asked (among other things) what was the worst aspect of business banking. "The charges," I replied. I never heard anything more about it.

My bank (Lloyds TSB) used to include a sheet of charges with my bank statements every month, but recently I have noticed this has changed. Now, separately, the bank sends an "invoice" for their charges. What's this all about? Because it's an invoice, am I happier about it? Do I not notice it? Is it easier to pay?

No, no and no!

You all know what they charge for, you're all charged similarly. But here's the list:

Payments OUT:
Direct Debits, Standing Orders, Internet or Phonebank Debits.

Payments IN:
Automated Credits, Credits paid in, Faster Payment Credits, Cheques paid in.

Plus, of course:

Account maintenance fee.

Here you are bank. Have your cake and eat it too.

Tuesday, 8 September 2009

UK has longest tax guide in the world

Apparently the UK now has the longest tax code in the world. No, not that silly number with a letter on the end that you get given every year.

We refer to the UK (Tolley's) tax guide. The UK's runs to 11,520 pages, an increase of 10 per cent on last year, and double its length when Labour came to power. That's ten times "Lord of the Rings"! Heavy going indeed. Good luck to anyone who tries to read it. Accountants say it is unnecessarily complex, and it would hard to argue.

It certainly adds (literally) weight to the thought that the tax burden had increased under this government. The increased legislation is said to be down to the Government's recession-busting measures and new laws on Corporation Tax.

It's hard enough ploughing through the apparent help guide for a regular tax form. Even accountants couldn't find this interesting!

Monday, 7 September 2009

Business is NOT a game

It would be a great notion if business were a game - and there probably IS a PlayStation/PC/Wii business game out there.

Sadly, for those of us striving in small businesses, it is NOT a game. It's a serious ... well, business, as we do our best to make a living from running a business.

Neither is business a game for big companies, especially in these days of recession, money that's hard to come by, and a UK government that owes billions.

This blog will be about the trials and tribulations, the successes, the failures, the exasperations and the joys of running a business in the UK.

I hope you join me for the fun!