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Friday, 19 December 2008

A Welcome Break!

Comes the holiday season and the world will take a break from the doom and gloom of the economy. Am I the only one to feel that there are maybe some very slight signs of relief from the misery or am I the incorrigible optimist?

A large retail client tells me that sales are only minimally down on the same period last year, the shops are heaving with enthusiastic buyers and yesterday's GFK NOP survey of consumer confidence showed an improvement albeit from a generally low level. Inflation is declining and certainly lower prices are beginning to show up, led to some extent by lower fuel costs. Still, I can't understand why it is that diesel prices are still well over £1.00 a litre when crude prices are down to around $40 a barrrel.

Yes, I know that there is a time lag and that oil prices are in dollars and that sterling has fallen against the dollar but even so, pump prices went up immediately crude prices escalated without reference to the lag and it's about time that pump prices in the UK showed some reaction to crude costs, as they have in the USA.

Finally, a thought about borrowing. Why is it that we have been severely admonished by our leaders for over spending and over extending ourselves during the boom times, and now, when the economy is, or has been, in free fall, we are exhorted to spend rather than save, and our Government seems to think that it can climb out of the trough simply by borrowing more? Am I missing something or merely being cynical?

Have a wonderful and happy Festive season and let's have a successful, peaceful and healthy 2009.

For more information check out www.maa-uk.co.uk nd www.vistage.co.uk.
You can contact us at ivan@maa-uk.co.uk

Monday, 8 December 2008

The "L" Shaped Recession and the New Normality

During the last recession in the 1990s, I coined the phrase - the "L" shaped recession - simply because the economy seemed to fall vertically off a cliff and then go bumping along in an "L" shape.

What has happened now is exactly the same although possibly more severe. However, the next and possibly the more important point is - what do we do about it? There is no doubt that there are opportunities out there for the brave and perhaps for the risk takers. Acquisition possibilities are numerous, there are some very good people now available through redundancies or companies closing, and here and there there is some money available for interesting opportunities.

However, if what is required is to hunker down, batten down the hatches (or any other cliche you can think of) and wait for things to improve, you may be waiting for a long time and, worse, it may be too late to do anything.

The "L" shaped recession says that the economy has fallen off the cliff over a very short space of time and is now bumbling along in the New Normality! What is really needed now is to accept that what we are experiencing will be normal for the foreseeable future so we now need to reconstruct the business to suit.

Try the five line P&L - sales minus cost of sales equals gross profit less fixed costs equals net profit. Sales is comprised of price and volume, cost of sales is (generally) labour and materials so it is a matter of adjusting all these components until you are either break even or better still, in profit. It will take a lot of courage to reconstruct your business but unless you do, there may be little opportunity to do so in the future.

Try also the five point recession action plan:
  • Know your numbers
  • Cut or defer expenses
  • Accumulate cash
  • Go for opportunities
  • JFDI (Just do it!)
To find out more take a look at www.maa-uk.co.uk or contact us
at ivan@maa-uk.co.uk

Wednesday, 19 November 2008

Mentoring in the Downturn

One of the most important issues for anyone at times like this, is to have someone to talk to, in a confidential environment, someone who is a good listener and who isn't judgemental.

Difficult to find? It certainly is! Talking to friends usually means having to listen yourself to their problems and generally the family members aren't the best listeners. Friends and family are too close to you to be able to be dispassionate about you and your issues and usually are quick to dive in and solve all your problems at one go, even if they get that far.

Mentoring is a highly specialised practice these days and I believe offers a real solution to the isolation problem which many of us experience. Because we have gone through a long period of economic prosperity many of us have never experienced the sinking feelings that a recession can bring, those feelings of being out of control of one's destiny and feeling that the future is both unpredictable and, worse, threatening.

A good mentor will listen, will discuss with the individual what their options are, work with them to decide what is the best option for them and then help them to take any necessary action.

Experience is everything in mentoring. Having spent the past 16 years or so working with a vast number of business executives covering more than 3,000 sessions, I know the value of the practice.

Don't feel isolated - find a mentor!

Check out our website at www.maa-uk.co.uk
or give me call at ivan@maa-uk.co.uk

Wednesday, 5 November 2008

The Downturn Scenario

Even if the dread R word is still technically in the future, nevertheless we need to be looking at every possible approach which will help us through the downturn.

So - ask youself a few questions such as:

What did you experience in the last downturn in your business? What was going on in the economy? How did it affect you? How did you handle it? In hindsight, what would you have done differently? My advice in a time of economic downturn is …”If your sales drop dramatically … up to 50% … you will need to focus on saving the company.”

What will you do if you start experiencing margin squeeze, as your long term customers begin looking for a lower price?

Project your revenues out 6 months. What do you see?

Cash (the MOST important factor bar none!) – how much will it take to get through a prolonged downturn of 18-36 months? What are your cash reserves now?

Consider your debt load and reduce it if at all possible. What will you do if interest rates double? What will you do if your bank calls in loans or is unwilling to loan more money? What needs to change in your banking relationship(s)?

What opportunities will be available in your industry as weaker players are eliminated? What niche services or products can you begin to develop now? How might you take advantage of the economic downturn:

1. As things go bad, can I increase market share, if so how?
2. What products or services can I acquire, expand or enhance that will improve margin?
3. Can acquisitions be made during a downturn at less than market value?
4. A downturn usually means more people are available, how can I improve my talent pool during this time?

For further information take a look at http://www.maa-uk.co.uk/
Email: ivan@maa-uk.co.uk

Monday, 3 November 2008

It's the KISS Principle of Business Management

In my life as a Chairman of Vistage International groups, I have the advantage of hearing wonderful speakers from all over the world, and from talking on a one-to-one basis with a number of Chief Executives of a very wide range of businesses covering manufacturing, wholesaling, retailing and services. It has become apparent to me that far too much time is devoted to trivia, irrelevancies and inconsequentialities. On the other hand, far too little time is spent in assessing the real priorities in the business and devoting time and effort to them.

Too much time is spent on the urgent rather than the important. If major effort is put into solely that which is urgent, then the consequences are, almost inevitably, fire fighting. A side issue is that emphasis on the urgent invariably begets upwards delegation. In other words, no decisions are taken at any level other than the top.

It seems to me that managers of businesses need to take time out to decide on what is truly important and then to ensure that all other matters are delegated. However, if that freedom is to be given to managers then the quid pro quo is that they become accountable for their performance. Top management can then assess performance and work out ways in which it can be improved, perhaps incrementally, and how they (top management) can assist.

All of this takes a great leap of faith but the results can be startling. The basis is that of simplicity, elimination of complexity and emphasis on the important.
Use the KISS Principle - Keep It Short and Simple!