The recession hokey cokey…

You know how it goes. Last week we were in a recession, this week we’re out. In, out, in, out, shake it all about. What’s a poor business to do? In a nutshell, what it does best, as well as it can, and a darn sight better than its competitors.

Working on strategies and budgets with various clients at present, I have been presented with statistics which show this GDP growth or that consumer confidence. It is all valuable stuff but at the end of the day for most small and medium sized businesses it is about developing opportunities and growth based on your strengths and your efforts. It is no longer possible to rely on economic growth to deliver business growth.

That is why understanding your numbers and what they mean for profits and cash flow is so important. If you can do this, you can use your market awareness to put together realistic action plans, targeting potential new clients that are creditworthy and that can deliver real growth. You can also assess current clients and the opportunities that they can present. Of course there are threats to take into account. However strategic financial planning involves understanding and managing risks so you can reap the benefits.

How you view the economy is often dependent on your own personal attitude to life. Do you see the Olympics as a disruption or opportunity? As regards the stock market are you a bear or bull? Do you think an extra day’s holiday for the Queen’s Jubilee is a headache or a chance to create a feel good factor? In short is your glass half empty or half full? Entrepreneurs are inherently optimistic. Finance Directors are less so. This is a good mix for a sustainable future.

The “good times” of the last decade are long gone. The likelihood is that the only economic certainty over the coming months will be uncertainty. We’ve all had to learn how to deal with that over the past few years haven’t we? It is now time for us to put what we have learned into practice to move our businesses forward. Whatever your mood, whatever your disposition, whatever your religion, have a good Easter break and then get stuck into doing what you do better than anyone else.

Too small to succeed…..?

So that’s that then. Tesco isn’t. Too big to fail that is. Britain’s mightiest retail steamroller has finally come a cropper according to its recent trading figures. Big helpings of schadenfreude all round. Furthermore one of their senior executives managed to (legitimately) offload a batch of shares just prior to the announcement being made and the double digit percentage drop in the Tesco share price that followed. You can almost feel sorry for CEO Philip Clarke. Following a retail superstar like Sir Terry Leahy was never going to be easy, although I suspect he is paid enough not to need our sympathy.

We can ponder endlessly as to what this means for retail as an industry and the British economy in general. However from a company perspective, logic dictated that it had to happen eventually. When you are so dominant in a market place, unless you are a virtual monopoly, there comes a time when real growth is just not possible.  

Sooner or later bigger companies start to believe they can no longer achieve significant organic growth. That is normally when they start looking at cost cutting exercises and/or acquisitions and/or overseas expansion. Good news for executives, corporate finance advisors and travel agents. Often not such good news for shareholders and employees.   

Unless they are in a really niche market, smaller businesses, whatever the economic climate, will always have an opportunity to grow organically. Moving from say 5% market share to 6% market share (i.e 20% growth) is much easier that moving from, say, 30% to 36%. When you only have a minute share of a market the potential is always there to grab more be it through innovation, aggressive selling or weak competition. Of course growth targets must include profit and cash as well as market share but fundamentally the principle is sound.

Too many smaller businesses get into the habit of thinking themselves small. It’s too difficult to grow in this market place. I need this or that or the other. The competition is too tough for us. Tesco have just proved that you can never be too big to fail. Maybe that will convince these smaller businesses to stop thinking that they are too small to succeed.