Happy Holidays……

This is a great month to be an employee. Maybe not such a great time to be an employer. Possibly disastrous if you are self employed. Two long weekends in quick succession mean that for some people taking three days annual leave will give themselves eleven days away from work.

Funny things holidays. The Germans love them. The Americans don’t. The Japanese do but don’t take them. It’s often argued that we don’t have enough in the UK and therefore one extra one to celebrate the nuptials of William and Kate should be welcomed.

I have read all the legal bumf about whether a holiday actually has to be given for the Royal Wedding or not but in reality you’d look a really mean employer if you did not give it with the consequent impact on staff morale it would have.

In a salaried office environment such as say a government department holidays can be absorbed and the impact of the extra day minimised. For an SME trying to stay afloat and dependent on every working hour the challenge of coping with that extra day is that much greater.

Fortunately most employees will take the holiday and then work doubly hard to ensure that the business does not suffer. It is this unwritten commitment that is the backbone of many businesses, which is the main reason why the raft of employment regulations tends to grate so much.

Ah well, like it or not, it’s there so make the most of it. For those of you who celebrate it, Happy Easter, for those who don’t have a good break.

You make your own news….

Inflation down. Unemployment down. There you go, this week there has been some good economic news. Last week it was probably bad. To be honest I can’t remember. And as for the week before…..

But then again does it matter? We live in a media age where 24 hour news outlets are desperate for a story. Online, TV, radio, hard copy, everywhere you look. Any snippet of news will be magnified and analysed to the nth degree. Bad news is inevitably given a higher priority than good news. Everything, however trivial, is important for at least a few minutes.  

I am often asked when preparing strategic plans how macroeconomic events should be taken into account. For example should GDP growth forecasts be factored into the numbers? How should inflation or unemployment predictions be accounted for? What should be made of interest or exchange rate trends?  

My answer is always be aware of them and consider them but don’t let them rule your plan. They should form part of your PEST (Political, Economic, Social, Technological) analysis certainly. But when I am dealing with an SME I tend to get them to focus on their SWOT (Strengths, Weaknesses, Opportunities, Threats).I want them to think about what they can influence not about what they can’t.

Because smaller businesses have small market shares there are always opportunities to grow and be successful. It is about knowing your market and using your strengths to develop the right products and services to exploit your niche or expertise. Your strategic planning should focus on the resources and steps necessary to achieve this goal.

Alternatively it is about recognising the inevitable. If your offering is not right or your business is badly run no amount of positive economic news or GDP growth will lead to real success. Indeed positive economic news might lead you down a path that the fundamentals of your business are screaming at you not to follow.

External factors do come into play and it would be silly to pretend they don’t. But it is easy to be seduced by a stream of bad news into negative thinking. Many businesses are thriving at the moment. Concentrating on the basics of running a business well and on what you can control will give you your best chance of success and enable you to create your own headline. One you can control. At the end of the day it is up to you write your own news…..

Education! Education? Who is it that really needs Education……?

Last week I attended meetings at two of my local schools. One was a briefing session for sixth formers considering their future options, the other a business breakfast designed to showcase credentials as a business and enterprise college. Both schools created really positive impressions, leaving me to ponder as to why the UK education system and their products get such a bad press.

It is a frequent moan of employers large and small that the quality of new entrants into the workplace is not high. The CBI reports that companies are being forced to stage remedial lessons to deal with new recruits lacking basic employment skills. No lesser businessman than Sir Terry Leahy, who is no slouch when it comes to management, has bemoaned the fact that businesses have to pick up the pieces of "woefully low education standards.

And yet are we being fair to the young people who are being tarred with this very broad brush. As anybody involved in education will tell you, today’s children do not have an easy ride. They are set regular targets based on identified potential. They put up with a level and frequency of testing and assessment that puts workplace performance evaluations to shame. And they do work extremely hard to deliver the grades that are all too often dismissed.

OK if it is not down to the students then it must be down to the schools. Well, not on the evidence of last week’s meetings where stories of engagement with local businesses, and public/private initiatives in the face of some daunting fund raising challenges showed a real determination and resourcefulness to deliver improvements and results.

All right so there is clearly a general attitude problem. Really? Apparent lack of enthusiasm for basic tasks, cynicism, unreal expectations – are these traits only seen in school or college leavers? Indeed are over embellished CVs that don’t cut the mustard any different to so called inflated exam grades? Maybe it is just that the older generation have had years of practise in disguising this….

It is not enough for businesses to moan about the system (and voting clearly won’t change things either). What is needed is direct engagement between businesses and schools, a two way process that goes beyond telling schools what business thinks it wants. I think most schools would welcome this.

This is not to say that all in education is right. There are probably too many universities and too many poor quality and failing schools. There are definitely too many bureaucrats and directives. But on the ground, thousands of schools, students and teachers are working extremely hard to deliver results and rounded human beings. This needs to be remembered too.

An economic approach to budgeting…

Poor George. After 57 minutes of huffing and puffing  he sat down to a universal – what? I mean, come on, what could the man do given the hand he’s been dealt? Frankly he should have saved himself the effort and just issued a press release. Shorn of all the political rhetoric it would have run to a page and a half and briefly outlined the key changes that were to be made.

Such an approach would obviously leave messers Flanders , Peston  and Robinson at a bit of a loose end (which is no bad thing) but would have better reflected the true impact of the budget statement on everybody – very little.

To be honest virtually all budget statements in recent years have had little or no economic impact. Either their contents had been leaked in advance, or had already been announced the previous year, or anything of real impact had been tucked away in the forests of press releases that were available from the HM Treasury website within seconds of the chancellor sitting down.

It wasn’t like this in the seventies. Then a packed chamber of MPs (there was no television or even radio broadcasting in those far off times) would hang on the chancellor’s every announcement, which were then relayed to a waiting nation by two of the three television channels available at that time (the children’s programmes being shunted to BBC2 for the day) by studio presenters and guests. 

Invariably booze and fags would go up and incisive questioning would extract from typical “working class” families the viewpoint that they expected to be worse off as a result of the budget. Oh well no change there then…..

It isn’t just politicians and pundits. People do like to make big things of budgets. Big corporates especially do, producing reams of paper incorporating three year visions and MBA techniques to produce a sizeable document that is often out of date by the time it is finished.

There are growing arguments that budgets are a tyranny that stifle business. They either prevent people seizing opportunities because they are not in the budget or encourage needless spending as people adopt a use it or lose it approach and spend what their budget says they should spend.

Rigid budgeting cultures can and do have a negative impact on businesses. However every business, whatever its size, needs a good financial plan both as a route map to where they want to go and as a tool for setting goals and targets. A plan that recognises the key profit and cash drivers of the business, and that can be easily and regularly adjusted to model different scenarios and that can quickly reflect changes in the business environment.

It therefore follows that if you do prepare annual budgets, you should adopt an economical approach in that they should be simple, be prepared with the minimum of fuss, be easy to understand and be able to be quickly updated. George, Ed, Vince or whoever please take note. It would save us all an awful lot of time….

A question of balance….

It was the accountants what done it you know. Pushed the world into recession that is. If they had not forced the banks to value their more esoteric financial assets at market prices they would not have got into the mess that they did. They should have simply let things be.

However accounting standard setters are definitely not letting things be any more. Over the past few weeks I have attended Finance Director briefing sessions from accounting firms Smith and Williamson and Crowe Clark Whitehill, and have been updated on the latest proposals to “improve” financial reporting, proposals which to me as a qualified accountant seem mind blowingly complex. These include a brand new set of accounting standards for SMEs based on international accounting standards (FRSME), and the prospect of short term leases for items such as photocopiers being treated as finance leases and therefore creating additional balance sheet liabilities.

What all this will mean to the average businessman who is just trying to work out how well his business, or that of his competitor, is performing heaven only knows.The government may be trying to operate a “one in one out” policy as regards regulation but the world’s accounting standard setters seem determined to load even more burdens on companies large and small.

And yet it all used to be so simple. When the father of accounting, Franciscan friar Luca Pacioli developed double entry bookkeeping in the fifteenth century, it established a balanced approach to accounting that has served businesses well for centuries. Goethe, no less, described it as "one of the most beautiful discoveries of the human spirit."

Today Pacioli would be spinning in his grave at the horror of what financial reporting has become. For example HSBC’s annual report is now around 400 pages long and frankly there is no way even the most diligent highly paid analyst can grasp everything that is in there let alone distill it into an easily digestible investment note for public consumption. Hence the lazy headlines that tend to accompany most profit reports nowadays as journalists latch onto the number that best illustrates the point they want to make.

Accounting should always aim for simplicity. If double entry cannot handle a transaction without stacks of rules and guidance then one has to question if it is actually an economically worthwhile transaction. Perhaps if this has been the attitude during the boom times some of the economic fall out of the past few years could have been avoided.

Meanwhile back to those poor bankers. Must be tough being blamed for something that isn’t their fault eh? Still at least they have this year’s bonuses to console themselves with……

The customer is not always right…..

The late and very lamented satirist Willie Rushton once suggested that the prerequisite for suggesting that the lady in your life may not be entirely correct was a very stiff drink. At this point I hasten to reassure my fellow Enterprise Britain blogger Colin Perriss that I never need alcohol to suggest to my wife that she is mistaken, mainly on the grounds that she never is.  However for most consultants it does take a certain amount of courage, Dutch or otherwise, to tell a client, the person who let’s face it is paying your bill, that they are er ever so slightly er wrong.

In an ever changing world, where all the old certainties have long gone, and that most businesses are still struggling to come to terms with, it is not easy to tell somebody, who may have done very well in the past that they are no longer doing what is necessary to be successful in the future. There is a particular danger in owner managed firms that any such criticism will be seen as a personal attack.

However it has to be done. When you have been taken on board to add value the worst thing you can do is offer tea and sympathy. You have to be bold and point out where things are going wrong and where they can be changed and improved. That does not mean you go in with all guns blazing. Not everything is bad. Tact and discretion can be just as effective as bluntness. It is OK to call a spade an earth moving implement if it gets the job done. Encouragement is part of the process. Evidence to back up your proposed solution is also necessary.

A recent example of this was an owner managed business that had previously been very successful purely by word of mouth referral. In the good times the phone had just rung and orders had flooded in. It had never actually had to go out and sell. However this was no longer the case. Competing products had provided a viable alternative and customers were ebbing away. There was still a high value niche market to go for but that required a change of approach. A sales function had to be developed. Employees had to be remotivated and refocused. But the owners did not seem to want to change their approach and found it difficult to engage with key members of staff. It took a mixture of persuasive logic and tough talking, coupled with hard work alongside the senior management team to change things around and get the business working on the changes required.     

It was not a pleasant situation and one that could have meant a rapid termination of the engagement. However there comes a time when you have to take that risk. Clients may well be paying your bills but they are paying for your knowledge, experience and expertise not your subservience. There are times when the customer is not always right…..

The art of the impossible….

Last week I attended a public meeting organised by my local chamber of commerce and business forum. The subject matter related to a proposal by our local county council, a remote body that is ironically not even situated in the county itself, to introduce high street parking charges. It is a typical bureaucrat situation. A problem that no-one locally knew existed being resolved by a solution that nobody locally wants.

Like many local high streets our high street is battling the larger town centre shopping centres and supermarkets. It has a core of long established businesses but it has also had its recent casualties. It has suffered from the “closure of Woolworths” effect although that unit, which was empty for a couple of years, now houses a Sainsbury Local.

However its value lies in the fact that it is convenient, has sufficient retail businesses to attract sustainable local trade, and can either be accessed by a leisurely walk or through up to two hours of free parking for those needing to use their car. More importantly it survives and thrives best it can in a world that is not kind to local high streets.

The proposed solution poses a threat to this. Even if the cost of parking ends up being marginal, the inconvenience of paying and displaying when all you want to is pop in for a quick shop it is a big disincentive, and one that may lead many to stop shopping locally and go to the aforementioned shopping centres.  

Clearly the local traders are up in arms. In spite of Sainsbury finally moving in, there are still a number of local units that remain empty and the retail climate in general is challenging. Local residents are also unhappy, not least because one of the side effects of charging is likely to be increased congestion in residential areas around the high street.

Hence the public meeting. Now as many politicians and bureaucrats will tell you, the problem with public meetings is that the public tend to turn up. They are ill informed. They don’t understand the issues. They can’t see the bigger picture. The money to close the deficit has to come from somewhere. In short, leave it to us professionals, we know best. It would help of course if the local council were to share the information that their proposal is based on but we are told that they will not release it until the official consultation period which starts in a month or so.

As a student I was told that government and politics is all about the art of the possible. Some local politicians are already looking at a compromise solution that might allow 30 minutes of free parking. However, as we know, entrepreneurial business is often about the art of the impossible. Making things happen against the odds. Doing what people say can’t be done. The scene is set for an interesting clash of cultures.

Letters and petitions are being prepared as I write. However public opinion rarely counts for much when decisions of this nature are made. We are going to have to work together with all the other affected areas in the county and demolish the council’s case using their own information. Mission impossible? Maybe, but that is what thousands of small businesses in Enterprise Britain cope with every day. Bring it on…..