8 ways to: be your own company doctor.
| Author | Bartram, Peter |
While the economy may be gaining in health, many smaller firms are still on the critical list. In the UK alone, 207,000 SMEs face 'significant financial distress', according to restructuring specialist Begbies Traynor. They would be wise to take the following curative advice
1 Re-examine your business model
The world is changing rapidly--stimulated by technology and globalisation--but too many firms still hanker after the good old days.
"You must revisit your business model to ensure that customers are still buying the same quantity and type of products," says Mike Smith, MD of insolvency adviser Jameson Smith. "Ask yourself whether customers are buying in the same way as before. What impact would it have if they were buying in a different way? Would you need the same number of employees with the same skills? Do you need a shop, or can it be done online with a warehouse? In some cases, you'll find that your business model is past its sell-by date."
2 Review the board of directors
"When a business is coming unstuck, the underlying cause is often its directors' failure to understand their market," says Brian Johnson, insolvency partner at chartered accountants H W Fisher. "Their judgement can be clouded if they have fixed thoughts about the market and their firm's place in it."
He continues: "For this reason, a fresh pair of eyes can help when times are tough. Just because a board has been in place for many years or is made up of family members, it doesn't mean that they're the right people for the job. It can be a difficult subject to broach, but getting the right senior management team can fundamentally improve the prospects of the business."
3 Develop an effective financial model
It's easy to view managing a business as a simple matter of looking at three sets of figures: turnover, profit and cash flow. But these elements are linked to other important functions, stresses Peter Andrew, head of innovation at the Alba Innovation Centre, which incubates new tech firms.
"Everything--from marketing, selling and management to pricing, purchases and payments--must feed into the financial management model to ensure that the business succeeds." he says. "Too many owners try to use a financial model or forecasting tool that they cannot operate to any great extent. Sometimes a simple Excel spreadsheet is all that's needed. As your skills improve, you can move to more sophisticated models."
Andrew says it's important to tie the financial model into the...
To continue reading
Request your trialCOPYRIGHT GALE, Cengage Learning. All rights reserved.
