All the nasties……?

Oh dear. It seems that one in four small business owners are so depressed by the state of the economy that they want to give it all up and revert back to being salaried employees again. Apparently they have lost their enthusiasm for being the boss and crave the relative stability of working for somebody else.

Yes, frustrations with increasing regulation are being blamed, but I tend to think it is the constant worry about where the cash is coming from to pay suppliers and wages and the efforts involved in trying to win new orders and deal with ever more demanding customers (i.e. the travails of everyday business for which the buck stops with the business owner) that is the real culprit. No wonder eyes are cast enviously towards the idea of a no risk monthly payment into their bank accounts that enables them to leave their work at the office when they go home every evening.

Make no bones about it many of these business owners did extremely well during the boom years of the last decade. Equally they have had to dig deep into their pockets over the last few years to keep their businesses afloat during the downturn. Therefore their trepidation at the prospect of another year or more of austerity is understandable.

Of course risk free salaried work is also not what it used to be. There is a noticeable increase in the number of job adverts that quote an OTE (On Target Earnings i.e. minimal salary plus commission) figure rather than a fixed salary. Or what were once jobs with a wage, such as van drivers, are now “self-employment” opportunities. The business owners who remain are clearly looking to shift the performance risk back onto their employees, much as many big employers have been shifting their pension risks for a number of years.

It seems that now the good times have well and truly gone and the banks are no longer handing out money without due care and attention, the attractions of running and growing your own business for lots of hassle and uncertain reward are diminishing rapidly.

This ought to be of real concern to a Government that is relying on the private sector to take up the slack of job creation now the public sector jobs bonanza is over. Therefore it seems an odd time to focus on the excesses of capitalism, as represented by unjustified executive pay, rather than what can be done to really support those brave enough to take on the responsibility of building a business in a financially responsible way.

At its best capitalism provides motivated imaginative individuals with good sustainable business ideas the freedom to get on and create wealth and jobs. We need to be careful that the justifiable attacks on nasty capitalism that are being indulged in at present do not crowd out the benefits that the nice version provides.

The world outside the office….

When I started my own business back in 2006 one of the first things I was told was that I needed to get out and network. Who me? A meek and mild accountant who barely ever ventured out of the office in corporate life (unless it was to visit another office)? Go out into the wide world and actually talk to…. strangers?

Networking is one of those things that can provoke extreme reactions. It is the old school tie at work. It is a vision of a loud gregarious sales person (it is always a sales person and no I don’t have anything against them). It is schmoozing and glad-handing your way through numerous breakfasts, lunches and evening receptions.

Of course it does not have to be like this and indeed frequently isn’t. At its best it is the building of a string of relationships with people that you may otherwise not come into contact with, sharing ideas and opportunities and genuinely attempting to help move business life forward, even if you do not directly benefit from it.

I think that one of the reasons networking often gets a bad press it that many of the articles on the subject imply that it is primarily for the benefit of the individual. Little seems to be made of how organisations that have skilled networkers within their ranks benefit beyond the commercial returns that result.

I have developed valuable business contacts through networking. But I have also used it as an important tool for self-development. It has increased my business and technical knowledge. It has enabled me to view the business world in a much more rounded way that I would ever have been able to do as a corporate accountant. As regular readers may recall through networking I have even taken part in a competition to race to the top of the Jungfrau in Switzerland.

The business insights that I have gained through networking are valued by my clients and should I go back into corporate life would make me a much better employee than I was when I left.

Sadly too many companies out there just don’t get it. One only has to look at the social media policies industry to realise that it is seen in terms of what it should not be rather than what it can be. We are led to believe that a careless remark on Facebook can cause untold reputational damage to a business. Excessive executive remuneration policies on the other hand…..

Too many organisations are losing out by expecting their staff to keep their noses to the grindstone for every hour they are at work. Letting them out into the outside world to develop their networks can help them think in a different way and pay real dividends. Yes there is a risk but, as any accountant will tell you, you rarely get returns without one.

Follow the money…..

Happy new year to you all! Many writers tend to start their first blog of the year by offering predictions for the coming year but I am going to resist that temptation, not least because 2012 is shaping up to be the most unpredictable year ever!

With the New Year only a few days old we have already had a raft of positive and negative statistics  lending themselves to both optimistic and pessimistic interpretations. Based on this I think it is safe to say that “Old Dogg’s Alamanac” will not be making an appearance in 2012.

Finance Directors as a breed like to know where we and our businesses stand at any one time so this uncertainty does not sit easily with us. Nonetheless, like many of the companies we work with, we have had to change our way of thinking and carrying out scenario planning with copious “what if” analyses is now as regular a part of the FD routine as monthly management accounts and weekly cash flows.

However life and business goes on and there remains a need to find and develop profitable opportunities. We can’t continually keep saying “no” or “wait”. But how do you get them? Moreover how do you evaluate them?

My mind goes back to my days as a naïve young accountant in industry and when I was introduced to a newly appointed business development director. Keen to learn about life beyond the finance function I asked him how he would go about getting new work in. I expected him to say he carefully researched what projects were happening and where, and then worked out which ones he thought the business had the best chance of getting. However his response was short and to the point. “I’ll just follow the money”, he said.

Follow the money. Simple yet obvious. Find out who actually has money to spend and what they intend to spend it on. Then you can focus on what you can do to help them spend it. If you are dealing with a business credit checking, common sense, industry gossip and the past histories of any individuals help. If you are dealing with consumers it’s a question of need to haves and nice to haves.

By following this money trail you can ensure that you don’t waste time on things that clearly are not going to work financially, especially in this climate. People can talk about projects and products that they are working on till the cows come home but unless there is money in the background somewhere there is little point in you as a business chasing them.

When I first asked that question I thought I knew how money worked. And I guess in terms of debits and credits and P&Ls and Balance Sheets I did. But good finance people realise that it works in many other ways as well, and understanding these and working them into our financial management processes is just as important as all those technical skills that we and our clients and employers take for granted.

We wish you…..

Wandering around the shops on Saturday morning it didn’t feel like a last Saturday before Christmas. Then of course I realised that next Saturday was Christmas Eve, and that this weekend was merely the busiest day at our airports for people looking to escape the UK, something that implies that for many the Christmas break has already started.

This year we do have quite a long run up to Christmas which may be just as well (especially for our hard pressed retailers). However that also increases the time available for contemplation, either as to what strategy is right for our businesses in the year ahead, or achieving the targets that we may have already set ourselves for 2012.

At Orchard Growth Partners we have always tried to have a little fun during December by offering business tips with a seasonal theme. We originally called it our advent calendar, inviting people to open up a new tip every day on our website. Last year we decided to use that great Christmas tradition pantomime as the basis for our tips (who do you think we cast as the big bad wolf in Little Red Riding Hood?).

This year we have based our tips around our own top ten of classic Christmas pop hits. These songs have enabled us to pass on information on topics such as the loneliness of leadership, the importance of cultural awareness, the opportunities available through being a green business, and the idea behind one of the world’s best known pension funds.

I hope you have all had time to have a little fun this Christmas. We certainly need it after the barrage of economic gloom that hit us in the second half 2011. However many entrepreneurs and business owners are a breed apart displaying a degree of optimism that is often infectious.

Those of us who work with such people, particularly as their Finance Directors, view this approach with a strange mixture of hope and experience. Experience tells us that not everybody will succeed, but deep down we hope that everybody does.

In spite of everything there is much to look forward to in 2012 and well run businesses with great people who know their market and customers and keep tight control of their finances will find opportunities to develop and prosper.

For those you who celebrate Christmas, we wish you a Merry Christmas, for those of you who don’t we hope you enjoy the festive season in your own particular way. Above all, here is to working together to make 2012 a year that confounds the gloom merchants and typifies the indomitable spirit that is Enterprise Britain.

Not just for Christmas…..

I read at the weekend that post office workers have been given guidance as to whether they should accept tips this Christmas. The excuse given for this is compliance with the Bribery Act although one can’t help but think once again that the HR department have spent too much time attending employment law update courses.

Add this to the news that over half of SMEs are planning to cancel or downsize their Christmas parties and it seems that many employers are doing their best to ensure that their workers have anything but a merry Christmas.

Christmas is a time of year that regularly taxes Finance Directors. Being expected to act like Scrooge throughout the year means that when we actually reach the season of goodwill the words “Bah Humbug” naturally trip off of our tongues. Christmas parties, staff tips and company gifts often provoke heated discussions that leave us tearing our hair our and desperate to get on with more value added activities like keeping the business afloat.

Actually I am fully in favour of Christmas parties (although on cost grounds I may occasionally advance the argument that they should be held at a time other than Christmas) probably for negative reasons rather than positive ones. The impact on staff morale of not having one far outweighs the cost savings.

I am of course aware of all the HR issues that surround such events such as unacceptable behaviour and inclusivity, but I believe that if a business has proper codes as to how employees should conduct themselves at Christmas, or indeed any other time, it should be possible to ensure that the benefits outweigh any risks.

I am less in favour of corporate gifts. Active discussions take place as to which customers (always customers never suppliers – funny that) should receive Christmas gifts, what form they should take, how much should they cost, who should give them etc. etc. If the only consequence of the Bribery Act is that we can finally dispense with this annual ritual it will almost be justification for introducing it in the first place.

In this case I don’t think I am being Scrooge like in my dislike of forced Christmas bonhomie. In the same way that I believe that everyday should be Mother’s Day, customer (and supplier) care should be an ongoing daily process. Good business relationships are not just for Christmas you know.

An autumn statement of the obvious….

I don’t know if George Osborne is on the right track. I am sure that there are things that he could and should be doing that he is not. However I don’t have access to all the information that he has, or have to deal with his pressures and responsibilities, so maybe I am not best placed to criticise.

Taking decisions based on available information and resources. The stark reality of management. The true test of mettle. The real definition of loneliness. A situation that the 4.8 million business owners and managers making up Enterprise Britain find themselves in time after time.

Not so our friends in the fourth estate. As I was following the statement online I was struck by the constant carping, criticising and point scoring that accompanied each announcement. No contemplation, no reflection, just instant negativity.

If ever the phrase “power without authority” had any meaning this would be a prime example of how it works. The media chatterers and twitterers have the power to mock, to criticise, to nit-pick. What we never hear is what would they do if they were in a position to change things. I suspect that put in that position most would run away from such a prospect.

Yes they say but we have a duty to report the news and to question and hold those in power to account. True, but in business it is drilled into us that criticism should be considered and constructive. And the line between reporting news and creating it is growing ever thinner.

Sympathy for George is somewhat tempered by the fact that he himself is guilty of the sin of soundbite criticism. However for those of us at the coal face attempting to create the wealth necessary to get the economy moving, the constant self-aggrandising negativity of financial and business commentators is annoying. We are under no illusions as regards how tough it is out there. We don’t need it shoved down our throat day after day.

Having said that what was there for businesses in last week’s Autumn statement? Probably not a lot, but let’s face it, whoever stood up in parliament this week was going to struggle. Easier finance for SMEs and incentives to start up entrepreneurs are helpful. The challenge for all involved will be to direct it where it is needed most and where it can be productive. The announcements on fuel duty, infrastructure projects and red tape seem to be moves in the right direction.

The stark truth though is that the one thing business needs at present is confidence. The confidence to invest in the future. The confidence to lend. The confidence to spend. And that is clearly something that the Chancellor cannot deliver on his own….

So who are the real twits….?

A couple of Fridays ago I had a friendly spat on Twitter with Management Today magazine. Well that’s what Friday afternoons are for aren’t they? The issue that sparked our exchange was a gloomy forecast from advertising giant WPP and MT’s assertion that if WPP was having problems then what hope was there for the rest of us.

I admit I took exception to this. Perhaps the tone grated after another week of working with successful businesses. Perhaps it was the frustration of seeing yet another botched attempt by policymakers to resolve the Eurozone crises. Anyway I wasn’t very happy and I let MT know about it.

Of course it all ended amicably with MT retweeting my tongue in cheek reasons to be cheerful comment about the sun shining, the prospect of an extra hour in bed as a result of the clocks going back and news of an increased level of investment in the US. And I do understand that in today’s 24 hour online world, media organisations need regular news and angles to hook readers before this morning’s news becomes this afternoon’s web browsing history. But there is a real danger of a double dip recession becoming a self-fulfilling prophecy.

When asking people at networking events as to how things are going I invariably get a response of “It’s tough out there” coupled with “but we seem to be doing OK”, the latter being seen as a cause for embarrassment rather than a reason for celebration.

The daily flow of conflicting statistics does not help. Based on the first run 3rd quarter numbers GDP was up 0.5% although some commentators said that this was not actually good news and that the figure will be revised in due course anyway. Within this GDP number construction output fell. Bad news then? Well no, Caterpillar have announced that they are on track for a record year. JCB orders are apparently booming. Somebody out there clearly does think that construction in general is moving in the right direction and are investing accordingly.

It would be naïve of me not to recognise the threat to global economic recovery posed by the problems in the Eurozone. But there are many good things happening too which need to be recognised and highlighted. The majority of businesses in the UK and beyond are getting on with their lives and continuing to do their best to create wealth and jobs.

So there you have it. Two points of view for you to consider. False optimism versus unreasonable pessimism. Not facing up to the facts versus accentuating the negative. Who are the real twits in all of this? It is probably too close to call at present.

A shot into the dark……

The gun in my trembling hands felt cold and threatening. Not having indulged in country pursuits or auditioned for a Guy Ritchie movie it was a totally unfamiliar sensation. In short I was terrified.

No this is not the first line of a bad novel about a staid accountant turned underworld hitman. It is in fact the story of my recent corporate day out at the home of British shooting, Bisley in Surrey. Kindly invited by Menzies accountants, I, along with 40 or so other business people spent a morning attempting to shoot down clay pigeons propelled into the air at varying speeds and directions. Once the initial fears were overcome a great deal of fun was had by all and some useful connections made.

Hang on. Corporate entertaining? Hasn’t that just been outlawed by this new Bribery Act? Thanks to an excellent and imaginative presentation by Claus Anderson ,a partner at Royds LLP solicitors, which used actors to play out various scenarios which may or may not have fallen foul of the act, I am pleased to confirm that this is not the case. As long as it is proportionate and reasonable, activities such as jollies to Wimbledon, Lords and the Open, remain available to those lucky enough to be invited.

Sadly real bribery remains a serious business, if you’ll forgive the comparison. According to a recent article in Management Today a trillion dollars a year is paid out in bribes. The business and social impact of bribery on poorer countries is significant and is a cause of real economic deprivation and hardship.

Much of the awareness campaign as regards the Bribery Act has focussed on the compliance aspect and how you can protect yourself and your business. This is fine, but it should not be forgotten that this is as much an ethical and moral issue as a legal one.

Critics of the act have said that bribery is a way of life in some countries and that it is often impossible to get essential tasks done without some sort of facilitation payment. British business will be a loser as a result of the new act. That may be true in the short term but surely the long term winner will be the global economy. The only way that we will be able to change “the way business has always been done” is to stop doing it that way.

The one concern that I do have is that it is invariably the little guys that will get caught while bigger organisations will find more subtle ways to achieve their objectives.

Meanwhile I am proud to say that my honesty and integrity remain intact. As do most of the clay pigeons that I was shooting at unfortunately…

The long haul…..?

“Markets up on hopes of EU deal” screamed the headline on the BBC business news webpage earlier this week. Er no, not from what I could see. It seemed to be 3% down at present. Mind you that headline had probably been written an hour or so before and as we know at present an hour is an awfully long time in the stock market world.

Of course short termism has been a major criticism of Anglo Saxon capitalism. The focus on quarterly or half year earnings apparently meant that anything with a longer term benefit but immediate negative impact was often shelved. As a result we were seemingly left with a world dominating financial industry but not a lot else.

Back in the last century (oh how easily that trips off of the keyboard) we were constantly exhorted to follow the long term view taken by the Japanese and the Germans. Their industrial policies were based around such things as partnerships, local bank support and family businesses. As a result they made a lot of things and sold them around the world.

We have been hearing a lot recently above the drive to create Britain’s own “mittelstand” class, our equivalent of those primarily family owned SMEs that take a long term view of their business and have been the backbone of German economic development for decades.  I suspect that this has met with hollow laughter among Britain’s existing family owned businesses who have been ploughing their own furrow regardless, forgotten and unloved, some for many hundreds of years.

Most businesses that I am involved with manage to work with a variety of short, medium and long term goals. Contrary to popular opinion these goals are not mutually exclusive. The short term focus on cash and liquidity through profitable trading, the drive to find competitive advantage to move the business forward in the coming year, and the desire to exit for a considerable sum of money or hand over the business to their offspring are the core principles that underpin their business planning.

Of course long termism requires a supportive infrastructure and I suspect this is where the government will have most of its problems in its attempts to create the kinds of businesses that they see as the future. Planning, transport and finance, in particular our banks, will all need to be with the programme.

So what should you be trying to create with your business? A company that is targeted on quarterly earnings? An exit in three to five years’ time? A legacy that will last for generations? All of the above I would think. Let’s hope that a business climate develops which allows you to do so…..

Let’s do lunch…..

Recently I had lunch at the Bank of England. I’ll just let that one sink in a moment. Actually it was the day that the Monetary Policy Committee decided on a second round of quantitative easing, although I can’t claim to have influenced the decision even though I visited the room in which they made it. The committee of course were long gone by then, and all efforts to get an inside line on their discussion by looking for indentations on the notepaper left behind were in vain…..

OK, a moment to show off perhaps, but like most things I do it was an opportunity to share knowledge and find out what is really happening in the world of Enterprise Britain. The reason for my lunch was a meeting with Peter Andrews, Greater London Agent for the Bank of England, alongside other members of the London Local Chambers Forum. The Bank uses agents like Peter throughout the UK to gather anecdotal evidence to add to the swathe of numerical and statistical data used to monitor the economy.

As you can imagine, when a dozen or so businessmen committed to success get together in a room strong views and opinions fly out at a rate of knots. Regulation, planning, support for construction, infrastructure and education all came under the spotlight. Unsurprisingly the banks got a bashing for their continuing reluctance to provide the finance required by SMEs in the current climate. There was some concern about inflation and its potential impact on pay settlements which to date have been subdued as employees focused on keeping their jobs.

One of our number asserted that what was happening was more of a restructuring rather than a recession based on a shifting of the economic balance of power from west to east, and that solutions needed to be in place to address this fundamental issue above all else.

As the penultimate contributor I noted that little attention was paid to the level of underemployment in the labour market, particularly amongst older professionals who have become freelancers as a result of being made redundant, which was a tremendous waste of talent. I also made the point that it would be nice if the large corporates who are apparently hoarding £60billion in cash at present could use some of this to pay their smaller suppliers on time. The impact of this on SME working capital would be significant, more I would venture to suggest that any increase in the availability of bank finance.

Throughout all this, the man from the Bank of England took copious notes, smiled, empathised, made fleeting comments, sought clarifications and picked up on points that were consistent with what he was hearing from other sources.

Hopefully what he heard from us will make it back to those with the power to deal with the macro economic issues that appear to be putting recovery at risk. For many people 2011 was shaping up to be a good year until the economic situation started to deteriorate during the summer.

In spite of all the gloom it is clear that companies large and small are getting on with life and trying to grow their businesses. It would be a shame if all these efforts went to waste because the policymakers were unable to do their job. We are playing our part. One hopes they realise this in London, Washington, Brussels, Frankfurt…….