Friday March 1, 2019

The key elements of business success

Last month marked the seventh anniversary of FRP’s Economic Seminar. More than 100 local professionals attended as our speakers, who included Alex Golledge, deputy agent at the Bank of England and David Smith, economics editor at The Sunday Times, discussed the economy, leaving the EU and the future for businesses here in Essex.

It was clear that ongoing uncertainty is having an impact on business activity. During our seminar, we polled the audience and more than two fifths (42%) of those in attendance think leaving the EU will have a negative impact on their Essex based business. It reinforced the message that it’s important for companies across the county to work collaboratively, whether that is supporting other local firms or speaking to trusted advisers to help equip business as best as possible for what comes next.

But, it isn’t all bad news. Almost nine in 10 of the professionals present – that includes solicitors, bankers and accountants – from in and around Essex said they still feel positive about the future of the local economy despite this. The resilience firms have already demonstrated over the last three years has put them in a strong position for embracing new challenges. And, often with new challenges come new opportunities, too.

Importance of investment

Investment is crucial to any business, whether you are a start-up or an established brand. It can help drive expansion, strengthen a market position and scale up operations. But, despite this, almost half of the region’s businesses (44%) are putting expansion plans on hold as a result of Britain leaving the EU.

Almost two thirds (66%) of Essex businesses have also postponed investment plans as a result of Brexit. Concerns over what the UK will look like when a decision is made about when and how we exit the EU are undoubtedly responsible for this pause. Anecdotally, we’re seeing this sentiment echoed across the UK, as businesses across the country take a ‘wait-and-see’ approach to putting future plans into play.

Investments of any scale can put a dent in cashflow, and in times of turbulence business owners are less inclined to take a risk. But, forward planning is still important – it can save a business from long-term stagnation.

It’s times like these that management teams should look outside of their organisation for financial and strategic support. Funding products are designed to make growth affordable. Utilising tools like invoice financing or hire purchase agreements, and securing on a sustainable repayment plan, is just one way to stay two steps ahead of the game. It will also ensure your business remains financially stable.

While it’s important to think about what is happening here and now, it’s equally as important for business owners to think about the financial future of their own company – just as consumers would save money to prepare for their future.

But, like with any large investment, it’s important to consider the capital risk and financial position of the business before you dive in head first. If you already have sizeable creditor debts, these should be addressed before embarking on a new growth plan.

Finance directors should also consider the feasibility of a new investment before committing. It is important to know how these outgoings, although ultimately rewarding in the long run, will impact the day-to-day operations of the business.

The recruitment factor

In the UK, unemployment levels are at their lowest since 1975 and we have an enviable flexible labour market. In Chelmsford alone, the unemployment rate is half the national average.

But, one in five Essex businesses are putting recruitment plans on hold amid Brexit uncertainty. With rising concerns that the UK will experience a significant STEM skill shortage, it makes it more important than ever for firms to attract and retain the brightest minds in the industry. Despite apprehensions, management teams should continue to invest in their workforce to drive momentum.

While technology, new investment and acquisitions can give businesses the firepower they need for growth, it’s important firms also have the manpower in place to enhance productivity.

The right workforce and continued investment in employees’ skillsets are essential to fulfil contracts, deliver work to a high standard and remain competitive.

Businesses should also look to hire individuals directly in charge of driving new business and securing leads, particularly in sales fields. This way, new opportunities are less likely to fall through the net and there’s potential to grow your market share against competitors significantly, if you have a dedicated team member whose sole focus is to help drive expansion.

Plan, plan and plan again

Planning is an integral part of any business, and luckily more than two fifths (44%) of firms in Essex have a contingency plan in place to fall back on. Whether it’s financial forecasts, crisis management or recruitment, directors should stringently plan, review and alter plans, to suit changing dynamics regularly.

Budgets and financial forecasts, for example, are a useful tool for both planning outgoings as well as reviewing against actuals on a monthly basis. Any red flags or shortfalls will be spotted early on and tweaks and cut backs can be made to combat this, to avoid running into money struggles. Responsiveness, speed and adaptability are key.

It is essential for any business to have a contingency plan in place to account for any unforeseen circumstances. For example, if you rely solely on one client for revenue, you should plan to diversify your customer portfolio to ensure you have something to fall back on should a contract be terminated.

But, for those that don’t have a plan B to fall back on, now is the time to speak to a business adviser to create something sustainable for your business.

First published in the Essex Chronicle in March 2019.