I get worried when I read so many stories about the 'credit crunch' affecting small businesses. My business isn't in trouble as such, but we are being increasingly squeezed by customers paying later and poorer credit terms from suppliers. What can we do to help the situation?

This is common question at the moment and, along with my Business Link adviser colleagues, I am devoting far more time to the question of business financial health when I meet with my customers.



This starts with a financial health check which is done by the adviser together with business directors/owners.

The result of the financial health check is an action plan that is specific for the business.

You don't need to be in financial trouble though to benefit from this; remember that prevention is better than cure - so call us!

The Business Link advisers' financial health check is quite detailed, but here is a flavour of some of the things covered:

In addition to compiling a detailed numerical picture of the current financial position we ask some strictly financial questions such as:

Have you:-

  • calculated your break even sales level recently?
  • identified essential versus non-essential expenditure?
  • reviewed all direct debits & standing orders - business and personal if sole trader?
  • identified cost savings from all expenditure - business and personal if sole trader?
  • drawn up a revised cash flow forecast for the next 6 months?
  • a system to review and measure your cash position daily/weekly?
  • a system which tells you what you owe and what you are owed that is reviewed at least weekly?


Other business questions need to be asked because financial problems, actual and potential, spring from short-term operational and longer-term strategic aspects of the business i.e. pricing policy, terms and conditions of trade, the customer portfolio, so we look at these also in this diagnostic.

The important thing is to produce a plan in order to attempt to halt or prevent a financial slide. The art of diagnosing the problem is, in many aspects, the easy part. We then help you to put together a short-term survival plan and support you as you implement it. At the same time we will research to see what other help there is available to you.

After the survival plan comes the longer term plan. An important part of our job as advisers is to understand what your business is aiming for in the longer-term and to make sure that you get the right help and support to achieve it when you need it. So we provide face-to-face advice and support for our customers for as long as it is required.

The financial health check, along with all of our advisory services, is free to all small and medium sized businesses in the East of England. See our website: www.businesslink.gov.uk for more information. Business Link can help you assess the health of your business in a variety of ways. You can conduct your own online business health check at Business Health Check.

If you would prefer to speak to a real person we have a telephone health check just call us.

Running your own business, even one with employees, can be lonely, but there is help and support - and a sympathetic ear - and it's free, so call us.

 That's all for this month.

Peter Mulhall
Business Adviser

Business Link - the place to go for business support

Online: www.businesslink.gov.uk

BUSINESS LINK ANSWERS YOUR QUESTIONS

business link

I met someone at a networking event recently and we have decided that our companies should work together. Do you think that business co-operation or collaboration is a good idea?

In short: you can't be good at everything, so yes it may well be a good idea.

However, let's look at a few of the things that would be involved.

What opportunities do we want to capitalise on?

You will need to identify an opportunity. This might be submitting a joint bid on a tender, or entering another market sector, or a particularly large customer to target which otherwise you would not have the credibility, skill or the resources to convert into a customer. You may not identify a specific opportunity at the early stage, but all parties should have a purpose for wanting to collaborate.

Choose your partners - but choose wisely!

The choice of collaborative partner is critical. Sometimes the criteria for partner selection are woefully inadequate and more suitable to choosing a golf partner than a business partner. Getting on with business partners is essential, but more is needed.

Taking it on trust

Trust; this is a difficult one as it only truly forms with experience. There will be issues possibly, for some, on intellectual property and the need for confidentiality and confidentiality agreements. But ultimately you will need to trust partners, sometimes with sensitive information about your own business as you proceed to collaborate. Not only that, you will need to trust that the other parties will fulfil their responsibilities on the projects or ventures that you undertake; there will inevitably be division of labour and you are unlikely to be in a position to supervise, hands-on, the things that others are accountable for.

Skills match

One of the big advantages of business collaboration is that you gain access to skills and competencies not available in your own business i.e. the other party excels in areas where you are weak and vice versa. This doesn't happen automatically; drawing up a skills map and skills-auditing each potential partner in order to match skills required with skills available is a crucial part of the preparation stage.

Cultural match

If you, as a sole trader, are wanting to collaborate with other sole traders, understanding the other party's style of doing business, vision, view of the world around them, their values and beliefs and behaviours will be important for effective collaboration.

If you are a larger business with staff and even possibly a management team, how you go about understanding each other's business culture will need a lot of careful thought. Each MD spending time at the other's business getting to know people and processes is a good place to start.

Process matching

This is about how you or your company actually works from end to end. How you sell, market your products & services, communicate internally, & externally, deal with suppliers, customer relationship management; how you actually make the products and provide the service, how you run your admin and finance functions etc. Don't assume that because your own business runs effectively and smoothly that there will be no difficulties when you collaborate with others even if they too have a smooth running business.

Legal & structural aspects

Collaborative agreements or even legal entities may be needed depending on the depth of the relationship and complexity of the work being undertaken. Seek specialist advice.

So yes it is definitely an option to consider...

It is widely accepted that business cooperation / collaboration is a valid strategy for growing a business. There are huge benefits to be had from utilising the synergy of complementary businesses as well as potential economies of scale.

...but don't go into it blindfolded

We have only scratched the surface and looked at a few aspects, but even so it should be clear that some form of due diligence is needed before any decision is made. Good advice is essential for each party separately and, if the idea progresses, possibly a facilitator, either internal, or external to mediate and to project manage the formation and early stages of the partnership or joint-venture.

A sobering thought is that the majority of collaborative business relationships fail. So do your groundwork first, be prepared to put the time and effort into making the partnership work and you stand a chance of being one of those businesses that succeed with collaborative cooperative relationships.

In a nutshell:

  • Identify the business opportunity
  • Choose your partner carefully
  • Spend time getting to know them and their business
  • Take advice
  • Be clear about the risks and benefits

If you think that collaborative co-operative working is a possible strategy for you but you're not sure where to start, talk to one of our business advisers.

That's all for this month.

Peter Mulhall
Business Adviser
tel: 07717 290309

This email address is being protected from spambots. You need JavaScript enabled to view it.

Business Link - the place to go for business support

Online: www.businesslink.gov.uk/east

 

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