Optimism Realism - Your Next Move With The Economy

During the past 5 to 6 years we have had to deal with some of the biggest issues facing our business survival that have been encountered ever in this country.

In many ways the speed of this turmoil was exceptional from an SME prospective and we did not have proper time to react at the outset. But when the tsunami came it was overwhelming and it came from everywhere and all sections of our business.

One day the customers were there and the next day they were practically gone and the squeeze came. When this happened in the past we were able to go to our banks and they extended our facilities and this lead to us being able to trade our way out of the problem. However this was to be a major problem as the banks scrambled in all directions attempting to find a solution themselves to the credit crunch. We learned very quickly that there was no more money in the well. This was at first not a huge issue as we could sort this out within our business, but then came the further restriction from the banking circles that any implied limits were gone.

Next thing we went to our debtors and they were in the same turmoil and had not got the cash flow to pay us any quicker. The constriction in our business was horrendous.

We then faced the issue of staff and how the hell do we continue to pay them and keep them with us. We were facing some massive personal decisions here. The people that had helped build our business with us from the very outset were now possibly being laid off, an in fact many were. But before this happened we reduced our own take from the business and in a lot of cases stopped taking money altogether. The other thing that were done within a few months were to stop paying life cover pension premiums mortgage payments and all other unnecessary payments were stopped. The emotional effect on relationships and families will be felt for years and a lot sad to say did not survive.

The pressure then came from our creditors with one of the main ones being from revenue. They themselves came under pressure to collect money and this in turn led to pressure on the business owners.

Everywhere we turned we were constantly being told that we were not a bank.

One of the scariest things was the fear of the unknown and the stress that this caused was to lead to a lot of ill health among SME owners.

For the businesses that did not survive I personally think that the saddest thing was to see the complete lack of any financial support from the government for the business owner, when they eventually had to stop and give up.  They could not sign on as they were not entitled to claim because of the social welfare classes that business owners were on. This to me was  incredible and appalling.  Some of the biggest sponsors of charities such as Vincent de Paul  were now going to them to look for assistance.

The emotional and real effects  a business owner dealt with  during this time were lack of sleep, depression,

fear of the unknown, loneliness of the business owner, and feeling stuck in a rut to name just a few.

What did we do to survive?

The strangest thing happened during this recession. Businesses survived and some even grew. It is amazing how the entrepreneurial and inventive business owners dealt with this event.

But do not underestimate the speed at which they had to take decisions and the real impact that it made on their lives.

Banking Issues

The banks had no money to give out and no facilities, even though they said they were open for business the evidence on the ground did not support this. SME’s reinvented their ability to source cash in their businesses, and initially survived on their savings and had to borrow wherever they could. They got their cash flow cycle in order and began to move their business forward. However everything in the business came down to the cash flow. The question daily became, “How can we afford to do or not do this?”

Planning became a major focus. The real inventive planning came about as solutions to the daily grind. This was where the pinpoint of the daily grind came about, each night worrying about the next day and then coping with the problems as they arose.

Customer service

The businesses that survived through this period had to make customer service a priority. It was always a priority of course, but now the customer wanted more for their buck. Everybody was chasing a bargain and price was the major focus.

So the businesses began to do the only thing available when it came to customer service, in attempting to offer more for less money.

Time

Businesses owners gave up the remaining time that they had to themselves, and everything was in survival mode. This is where the real crisis began and ended: with relationships. The people that engaged their families and friends and shared the burden were without a doubt the most successful. The stress load was lightened.

People that did not do this also survived but it did add extra pressure in trying to protect their loved ones.

Sales

Depending on the type of business, sales opportunities came and were taken up. There were some fantastic opportunities in this area for people and organisations who were sales-focused. Customers that would never have dreamed of changing their suppliers were now glad to change as the major driver was now price. We can see in Ireland that some of the brands that would not come to Ireland pre-recession, were now thriving and have came to the fore.

The other big area here was the internet - the ability to shop online and have a product delivered to the front door. This has a huge effect on high street  shops and those who cannot move with the times here will in my opinion have a struggle for years to come. The old method of shopping and going to the local shop is under increased pressure here. One of the big advantages of the online shopping store is the low setup cost compared to the SME cost of regulation.

What should our next move be?

If you’re an SME business owner, the next move you need to make is critical and the timing of these events is also paramount.

A lot of people are talking about the economy changing and that we are now growing and we are out of recession. This in fact may be true but how does this affect your particular business? The fact that the recession came and we had to act extremely fast to survive does not mean that the recovery will also come as fast. We see it as three different timing issues here.

1. The time is just about perfect in our business for a recovery.
2. It is too early to plan for the recovery.
3. We are still in survival mode.

I personally think that each of these scenarios has some merit in our situation.

Wherever you are on the cycle, planning for the next stage of your business will be critical and is the most important.

Imagine that you are going on a car trip at night. The car is full of your family and friends. You are not responsible for their safety as you are the driver. The journey is 80 km away and all the people do not know the destination well. You get into the car and head off. Your lights are broken and the people are saying that you cannot go on the journey as you cannot see the road ahead. You have to agree with them. Now picture a different scenario the lights are working and you have the route planned ahead. The lights can only see about 50 meters away but you trust in the plan and the road ahead. You keep on the road and adjust your vision as the lights are dipped because on oncoming traffic but you mostly stay on the path.

Your business is in the exact same position. You get your plan organised and you mostly stick to the plan but adjust it for bumps in the road.

What do we do differently now and how do we protect our business from the mistakes of the past?

Paul Redmond