Here's how to weather the storm that's ahead
Michael Battersby, corporate finance consultant, and former business development director for RBS Solent, writes about his last seven days in business.
For most of us the financial crisis is like an earthquake far out at sea.
But less credit for the banks will mean less credit for customers – creating a real tsunami right on our shore.
Most managers and business owners under 40 are unlikely to have managed at senior level during a recession and that goes for bankers as well as their customers.
If you can remember the recession of 1989 to 1996 chances are you are reading this in the clubhouse, meaning many businesses, while aware that economic conditions could worsen, may not know how to prepare their business for a downturn.
So if you're running a business what practical steps can you take now to increase your chances of weathering the storm?
>>> Don't bury your head in the sand – there are few genuinely recession-proof businesses so ask yourself difficult questions: What would I do if my biggest customer went bust? How valuable are we to our suppliers – would they help us with payment terms and would they be able to? How well does my bank understand me and our business strategy?
>>> Remember that as margins are squeezed your credit risk, in the eyes of the bank, increases. Your bank will want you to survive so spend time talking about what might happen.
Demonstrating that you have prepared a rigorous strategy for survival will pay off in both short and long term. If you have to ask for more money be ready to present a very detailed plan as to how the bank will get it back! If cash starts to haemorrhage you will have little time to react and it will be hard to think clearly.
>>> Like any good planner consider diversifying risk by lining up an alternative funder. There are steps you can take to mitigate the worst, so get advice, be proactive and prepare!
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Sunday 12 February 2012
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