In the current climate it would be easy to get despondent which can naturally affect business mindset. Interest rates, inflation and taxation are all rising and the news repeatedly states that the economy has crashed and we are now in recession. For those of you old enough to remember Private Frazer, the dour Scotsman from Dad’s Army, “we’re doomed!”.
When it comes to business mindset, here are some things to keep in mind:
- We are not yet technically in recession. There has been a contraction during the quarter ended 30th September and there is likely to be the same in the next quarter leading to recession. However construction showed growth in the last quarter which is key to us here in the South East where so much revolves around the City and construction.
- Inflation is likely to peak now and fall dramatically in the new year. It is unlikely that inflation will be the same this time next year. In fact inflation is expected to fall. It may rise further in the short term but is expected to fall back to nearer 5% by the end of 2023.
- UK employment rates remain strong with the estimate of payrolled employees for October 2022 showing another monthly increase, up 74,000 on the revised September 2022 figures, to a record 29.8 million.
- The unemployment rate for July to September 2022 decreased by 0.2 percentage points on the quarter to 3.6%. There is no mass unemployment. Good people are still difficult to find.
Anecdotally I am talking to many clients who are looking forward to a great 2023.
The key is to accept that you can only control what you can control. The reality is that there is always bad news everywhere which can trigger events. But it is how we react to those events that determines what really happens to us.
The pandemic’s impact on business mindset
When the pandemic happened many business owners simply folded their businesses as they could see no way through the crisis. Many survived due purely to government aid.
However, at the same time many owners pivoted their businesses and moved into new markets or came up with ingenious ways to get their products and services to market. Many businesses grew and profited during this period.
One thing is for certain this time there will be no bounce back loan or furlough scheme. We are not looking at a major contraction of the UK economy but simply a modest one in 2023 followed by growth in subsequent years.
How you react to coming events will be key to your success or failure. With this is mind I have put together a 11 positive actions you can take in 2023 to help transform your business mindset.
Action Point One: Review, review, review
Review workloads and confirm orders. Orders may be cancelled or postponed, so you need to get a handle on what work you are expecting in the coming months.
Action Point Two: Cashflow forecasting
Cash is king! Prepare a cashflow forecast (it doesn’t have to be complicated), what monies are coming in and going out over the next three months will probably suffice. Best case and worse case scenarios should be reviewed.
It is essential you identify the pinch points – when will cash potentially run out as this will negatively impact business growth. It goes without saying to review expenses and see if you can cut or defer non-essential expenditure. A simple cash flow forecast template can be found here. If you want to look at more automated solutions then talk to our cloud team headed by Bradley Medhurst who can help you with a solution.
Action Point Three: Credit control
Get a grip of credit control. When there are good times it’s easy to get complacent about chasing debts. In recession cash is your life blood. In a previous blog for the construction industry we detailed a 14 step credit control system to help businesses. If you are looking for an automated solution using cloud software speak to Bradley Medhurst and his team.
Action Point Four: Preparing accurate management accounts
If you are running your business on bank statements or your total billing then talk to us about preparing accurate management accounts so you can better monitor the profitability of your business and other KPIs (key performance indicators). Again talk to Bradley and his team about how they can help you get the most from the accounting systems.
Action Point Five: Understand your figures
Still don’t understand the figures and not making enough profit or have enough cashflow? Then talk to Andrew Grant about a profit improvement/cashflow improvement session. In just a couple of hours Andrew can show you several simple ways to increase profitability and cashflow.
Action Point Six: Review your team
Your biggest expense is likely to be your employees. Getting good people is still difficult and when there is an upturn finding them will still be difficult, so make sure you keep hold of your good staff members. Conversely there is nothing like a recession to get rid of the deadwood! But first make sure you take the right advice and speak to HR consultants such as AHR.
Action Point Seven: Understand your tax liabilities
Make sure you are aware of all your tax liabilities both personal and corporate and have the monies put aside. If not talk to us about arrangement payment plans with HMRC.
Action Point Eight: Payment terms and flexibility
Talk to your suppliers and the bank about flexibility in payment terms or extending facilities. But remember that all your suppliers are likely to be in the same boat as you. They, like you, will remember those businesses that were supportive during difficult times.
Action Point Nine: Understand your options
Talk to the banks, mortgage companies and credit card companies. They may be able to help with refinancing or payment holidays.
Action Point 10: Review your Marketing
Review your market and marketing. As with Covid you may need to pivot your business to find new markets or to address your marketing and be more aggressive in your approach. Business is easy in the good times and definitely more challenging in difficult times.
There is nothing to stop you from taking a more aggressive approach and taking a bigger piece of the pie, even if the pie is shrinking.
Talk to us about creating a business plan or use us to talk through your ideas. Think carefully before cutting your marketing spend. Review it to ensure you are getting the best return on your investment but remember the leading businesses in all business sectors aren’t the ones with the best products or services but the ones that market themselves the best.
Cash may be king but without sales there is no business.
Action Point Eleven: Beef up your management team
Finally consider actually beefing up your management team both internal and external. As a business we grew through Covid and also grew through previous recessions.
Whilst turnover increased it was really on the back of the development of our management team. If you look around for the most successful businesses in your industry you will usually find they are not one or two man bands.
Good businesses are generally built around great teams. This is probably the most challenging part of being a business owner and is the one reason so many businesses remain small. Taking the decision to build a team is easy. Implementing it successfully is challenging. If you need help in building a great business by developing your team talk to us about how we can help.
Implementing a positive business mindset
It is possible that despite carrying out all the above action you may conclude that the business in its current structure cannot survive. If that is the case then please talk to us about your options. We work with a number of insolvency practitioners and more often than not if the underlying business is good they will find a solution.
I hope this blog will be helpful. It is easy to get depressed in the current climate particularly if you have worked hard to survive the pandemic and now see a recession looming.
If you survived the pandemic then whilst we may be entering another challenging period you can still prosper but you have to get your mindset right.
Take massive action on areas you can control. Seek help where necessary. We are here to support you. Now is the time to double down on activity and make things happen. Above all be positive, particularly if you have a team behind you. They are looking for leadership and yet again it is time to step up!
If you would like to find out more, please contact Mark Friend on Mark.Friend@friendandgrant.co.uk or call 01634 731390
If you would like to find out more about some of our services that might help you please take a look at our related pages:
Blogs related to Business Growth
Take a look at our other blogs on the topic of business growth:
Redefining success and 2022 vision
Growing your business without the financials
The content in this blog is correct as at 1st December 2022 See terms and conditions.