The darkest days of the recession following the financial crisis in late 2008 may be behind us but for Britain's small firms it's not safe to relax quite yet.
As the economy recovers, orders start flowing in once more and businesses start expanding again. Tempering the feelings of relief at this healthy return of business is the worry about the strain it puts on cash flow as you order more supplies and perhaps take on more staff. The riskiest time for many who managed to weather the worst of the storm could actually be the recovery phase.
Debt worry
The signs of this stress are already there. According to insolvency trade body R3*, 46% of Britain’s small firms worried about their ability to repay their debts in the first quarter of 2011, up sharply on last year. Up to a quarter of Britain’s small firms also remain vulnerable in the event of a ‘double dip recession’, according to research from the firm.
Accountant RSM Tennon** meanwhile has revealed its own research, which shows the number of UK companies in danger of insolvency increased for each of the first three months of 2011 and those facing a high risk of insolvency grew 4% compared to last year.
The uncertain nature of the current recovery and the risk of a dip back into recession further tempers business owners’ grounds for optimism. In May 2011 the British Chamber of Commerce published its quarterly report an predicted that growth would be slower in 2011 than forecast, in part due to the Royal Wedding and the bank holidays in April and May***.
Good advice
There’s no need to despair, however. Finding the right small business advice to help you navigate the perils of today’s uncertain economy can help keep you in business and give you the right information to expand safely.
Talking to someone who knows first hand the way that growth eats spare cash and magnifies risks may help you come up with an effective strategy for recovery. A mentor, an experienced hand who has steered a business through prior downturns perhaps, will help you to understand the pressures your business will face as competitors price aggressively, tempting you to follow suit.
They will also give you the courage you need to take the right steps to recovery, some of them counterintuitive. Raising your prices, for example, might seem foolhardy when others are pricing keenly, but if you have the right products, raising prices means you need to sell fewer of them to get by each month. This in turn cuts the need to find as much cash to expand production as much as you might otherwise have had to do.
Your bank can also help. The best banks offer more than just business accounts. They should be able to discuss the options you have to free up cash and maintain business growth, perhaps by freeing cash tied up in outstanding invoices, equipment or plant.
When choosing a business bank account consider the support on offer. Does your bank offer free business advice and your own dedicated member of the bank team to help guide you? Can they help you stay on top of your business, avoid over trading and support you with appropriate facilities to ensure you can continue to pursue sustainable growth? Some banks do all these things. Why not take advantage of the free support?
Links:
* http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1073791122&type=RESOURCES
** http://www.corporate-funding-solutions.co.uk/newshttp://www.tfmcentre.co.uk/news.asp?articleid=300
*** http://www.guardian.co.uk/business/2011/may/30/economicgrowth-economics
“This article has been written for information and interest purposes only. The information contained within this article is the opinion of the author only, and should not be construed as advice or used to make financial decisions. Expert financial advice should always be sought and any links contained within this article are included for information purposes only.”
“Barclays is a major global financial services provider engaged in retail banking (bank accounts and instant access savings accounts), credit cards, corporate banking, investment banking, wealth management and investment management services, with an extensive international presence in Europe, the Americas, Africa and Asia. With over 300 years of history and expertise in banking, Barclays operates in over 50 countries and employs over 140,000 people. Barclays moves, invests and protects money and provides competitive savings rates, investment ISA options, children’s savings accounts, home insurance, life insurance, a mortgage calculator, guides on how to buy shares and other services for over 49 million customers and clients worldwide. For further information about Barclays, please visit our website www.barclays.co.uk.”
