Businesses Break Up All The Time - Not Always for The Right Reasons
There are some get-togethers of which I’m partial to.
But, unless the invitation is from nearest and dearest, sometimes there can be a palaver of what bottle to take (are these folks wine buffs…?). For those I know better I’m usually safe in the knowledge that providing the label looks interesting, never mind the contents (don’t judge me) and, therefore the opportunity to reconnect at a family gathering is usually safer ground….. Auntie Sue can always be relied on to admonish Uncle Joe for one-too-many beers (in her unique one-too-many wines way)…. and there’s always a younger family member providing general distracting entertainment in demonstrating the latest `how to wriggle away’ from Auntie Sue’s lipstick enhanced hugs.
Over time there’s been a noticeable change synonymous with some gatherings.
There seems to have been less proud moments of proffering re-introduction to offspring last seen in a pushchair and now sporting full exhibit for Movember, and more (when enquiring about other halves) looking to the floor, feet shuffling and announcing ‘…. we’re separated/separating’. Any awkward moments of bringing the wrong bottle or giving flowers to an allergy sufferer are insignificant by comparison to these cues.
A breakdown isn’t always obvious.
Much the same process as a business’s breakdown, when connections no longer work, visible signs aren’t automatically noticeable. Broken connections in long-term life relationships have a commonality with businesses breaking down, easily going unnoticed amongst other pressures, communication is the first to be let go of. Only last week I spoke with a business manager who hasn’t seen the businesses owner on the premises for over two years! With no obvious reason, the manager concluded (and I agree) the ‘relationship’ between owner and business was over (also manifesting as ‘relationship’ with owner and staff straining at the seams).
It’s a shock.
Any business owner drifting away from a ‘relationship’ with their business is like leaving a baby unattended – in short, risk is left unmanaged. A symptom of realisation is anger. And, just as someone might be prepared to spend time looking at the situation, the ball has started rolling. They might be ready to take action but quicker than expected, third parties have entered. Realisation’s anger is fuelled by a compounding realisation of the reduction in informed decision making prospects. Adding frustration fuel to anger, the unwanted third party intervention is necessary as damage limitation, both parties want to take decisions but the anger often gives out confusing and conflicting information. With increased animosity…. a vicious circle starts, to which the only benefactor is ironically all too often the cause: Wasted time.
Is the end is inevitable?
With compromises, adjustments have in their core unsettling processes; some people come through their experience tired, others stronger. Much as looking to the floor, feet shuffling and announcing ‘…. we’re separated/separating’ can be followed by pointing to a baby covered in lipstick kisses ‘and that’s our new offspring!’ The business owner might be re-affirmed that being an employee isn’t an option.
Mitigating the blow.
We’ve all had shocks of one form or another which in hindsight can sound easier to have come through than it actually was. But, by acting upon the realisation of something not working, the blow can be lessened, leaving time for revival. A conclusion usually starts with re-evaluation (and wound licking) – No matter how awful the realisation is that either a relationship within a business is breaking down, or that the relationship with a business is breaking down, the sooner it is acted upon the sooner the effects can be mitigated.
Carry on or act upon the realisation.
Connections in the breakdown of long-term life relationships have a commonality with businesses breaking down.
Image credit: NinaZed Article credit: Copyright SUF © 2013
02 12 2013
To sustain or grow business, owners need to continually invest; However, 2013 has maintained a vein of general turbulence for business… with a finale to the year (unless something else turns up before Big Ben’s midnight striking in the New Year….) on the heels of the Co-Op’s disgraced former Chairman’s scandal, culminating in RBS being accused of deliberately wrecking viable small businesses to make profit.
My concern has always been for those businesses that were indulged by their banks, like spoilt children at a party; overeating and over-excited to the point of bursting. Then, needing support, (often feeling sick) they’d return to the bank for assistance – Only to find themselves overlooked and thrown out of the ‘house’. Good viable businesses and so-called zombie business equally hit – Any who have spoken with me over the last decade will know that the RBS story is very old news. And now, earlier than the 2018 target, the Bank of England has been asked to review its powers over the banks’ balance sheets – the Leverage Ratio – to rein in risk-taking banks.
With access to finance via traditional bank funding still having barriers, businesses have done well to keep their heads above water. So will the 2014 opening of The British Business Bank offer some innovation as an institution? Or will dependence on its infrastructure Velcro it to the various other Government initiatives which have had little impact in their contribution to accessing working capital or asset purchase?
2014 will be interesting to watch as a juncture to continued ‘extreme’ risk aversion. The Banking Reform Bill (in the House of Lords) with its measurements to ‘improve’ bank governance is to come into effect. One element proposed to enter the Bill is the criminal offence of ‘reckless misconduct in the management of a bank’ (should a senior banker’s behaviour fall below that which could be ‘reasonably expected’). That could be an interesting one – We all run our businesses in the belief that we’re doing the right thing at the time (to run our businesses) and, banks being businesses will probably counter the same argument. Which, considering the few spot-the-differences in the 5+ years since the financial carnage, there’s probably plenty of time for those at high levels to haul this one around before any movement is seen in the management culture of those lofty level bankers.
Analysis Paralysis 2014?
Image and Article credit: Copyright SUF © 2013
Once-Upon-A-Time (in the real past) a Builder Developer was in the middle of developing an industrial estate when he came stuck (Historical note: *even in pre-recession days, High Street Banks changed lending rules as deftly as the Academy of Dark Arts). Having cast comfort blanket salaries aside, he and I both were in the early stages of a long crawl into business (Spoiler Alert: this is more a Grimm traditional tale in that there’s no happily ever after).
Being on a razor’s edge, walking through barbed wire, and treading on eggshells are some of the graphic observations I hear from Business Owners about running their businesses (in the good times, and during bad times). Pressure Points are constantly put to the test and when responsibilities intensify; Being a core business element, the finances that fund those responsibilities inevitably can be as sensitive as would any vulnerable area that is subject to sharp objects.
I was to assist Mr D by searching out alternative avenues…… whilst he was out of the country…. But, as is often the way for the Business Goldmine Goblin Worker, the sledgehammer hit a MAJOR challenge soon after setting about the task in hand. The only way through with a stronger attack needed Mr Developer’s authorisation. This meant, in effect, I had to wake a very grumpy team boss who’d turned the emails off.
I was reminded of this incident through a recently found article in which the writer explains how he’d been unnecessarily harsh in his attitude towards someone who’d approached him. Long story short, it got me thinking about the gamut of attitudes I’ve been on the receiving end of. From the humbling experience of being a Guest of Honour at a couple’s wedding because they’d managed to salvage their business and buy a home… to being on the receiving end of Mr Developer’s vocal boxing. He’d underutilised his assets and thought he’d kick off with a predictably un-creative and without reason **** *FF! Following through with a nasty knee-jerk Rot in the Ninth Circle of Hell!
As my tale is the in the tradition of complicated real life, after I walked away there was no Karma. Mr Developer didn’t fail miserably.
I chose to lose a client and for some time he scrabbled like a drowning rat in sinking mud, but…. eventually found a raft (of sorts). We both meant business; we just dealt with it differently.
Business As Normal…
Small firms are on the whole still feeling austerity chomping at their heels from which many are facing heavy additional burdens. Consequently, doing the bare minimum to get the job done means ‘right’ or ‘wrong’ decisions aren’t always considered, and we’re seeing a distinctive two-camp pattern of those who acknowledge that changes continually happen, therefore they have or are prepared to adapt….. and, those who prefer to put their head in the sand.
Notice any parallels with the endless financial headlines?
For example, LIBOR (London Interbank Offered Rate), the wholesale market interest rate for lending between lenders (banks), once perceived as a reliable benchmark, was recently subject to claims of manipulation. Did it adapt or put its head in the sand? Whichever, it’s now being forced to look at change.
Base Rate has current ‘forward guidance’ giving that, providing unemployment remains above 7%, interest rates will not go above the four year static 0.5%. When the MPC (Monetary Policy Committee) make their decisions for setting the Base Rate (BoEBR) to meet inflation rate targets, the objective, based on variables, is to maintain price stability whilst supporting the Chancellor’s objective – In essence to strike a balance between keeping inflation down, yet not pushing up interest rates higher than would be healthy for inflationary pressure. Theoretically, interest rates could stay at the norm 0.5% for the next few years. Dependent on how they are interpreted, dependant on which numbers are used, the shift around could be viewed as ignoring the facts or being ‘forced’ into change.
This Interest rate, for short term money lending by the Bank of England to commercial financial institutions, (who in turn set their own interest rates for their borrowers and savers), was changed between 1997 and 2005 on 30 occasions - 26 came in the form of quarter-point changes in either direction, and the rest were half-point changes - from 1971 to 2013, the average rate of interest was 8.19%…. and, with a potential forced change for mortgage lenders, (consequence of EU rulings); which could have mortgage lenders having to tell borrowers ‘the maximum interest rate they have charged during the past two decades’, this APR could arguably contribute to already confusing information, with both lenders and borrowers wanting to bury their heads as preferable option to advertised loans and their Klingonesque small print : ‘Interest rate of a maximum of a charged during past two decades’.
What could curb all this confusion? What could possibly give those in business an opening to consider the ramifications of not considering? ….got me to thinking about the derogatory term: Normal for Norfolk.
For any not familiar with this reference to a county, it’s used when describing an action (or less sensitively an individual) which is seen as so ridiculous it could only have been born as a result of inbreeding; the implication being it’s a stupid action. Scratch away at the letters (distraction technique for mounting paperwork) and it takes only the removal of a few consonants before a couple of useful phrases alight.
The new normal (following 2007-2008) for business could utilise these phrases as clarity from many a powerful body: this is ‘Normal for No Folk’ or this is ‘Normal for Folk’. ‘They’ (those who issue the statements) should be able to see clearly each time, by the response they get, that we (those the statements apply to) understand what it is we’re being told. The phrases could help us to understand whether something is a long or short term expectation, or acceptable or unacceptable situation - We’d be able to clarify whether they do or don’t know what they’re doing. They could go about their business realising what they perceive as ‘Normal for Folk’ is anything but normal…. and we could go about ours, understanding ‘Normal for No Folk’ is anything but normal.
01 08 2013
The month opens with the UK Bank’s Interim results being issued. Barclays’ boss had previously suggested it may cut lending if it has to meet new demands (discussed with the BoE/PRA) that plus other updates, including capital-raising is expected to be announced alongside the profits report. Lloyds’ announcement could report a jump in profits which would see it coming out of the red and looking to prepare selling off the taxpayer’s 39% stake. RBS might announce a new boss (Stephen Hester’s replacement). Meanwhile a group of City investors is looking to close in on Project Rainbow (Codename for the 316 RBS Branch Sale EU State Aid requirement – Lloyds 632 branches codename Verde).
The Bank of England will be having its Monetary Policy Committee Meeting and Announcement of effective interest rates on 1st August. These are the actual rates of interest ‘received from borrowers and paid to depositors in various economic sectors’. The Bank’s Quarterly Inflation Report is also due out this month – with an overview of economic developments and the quoted interest rates ‘which are the advertised rates offered to households on a wide range of secured and unsecured lending and deposit products’ will be announced later in the month; this is expected to be the announcement of some kind of ‘forward guidance’.
NS and I have announced they’re to reduce their prize fund to reflect market trends. Premium Bond prize fund rate will reduce by 0.20% to 1.30% on 1 August and odds will change to 26,000 to 1 from 24,000 to 1.
There’s a Bank Holiday this month … Stansted faces a threatened walkout by baggage screening staff and August is the time for holidays and shopping for back to school items, except this year, apparently, some might be focusing on college-bound kids instead of the crayon set. Interesting marketing insight via Bloomberg and how things are happening in the US ( If it can happen in America it can happen here).
Image and Article credit: Copyright SUF 2013
01 07 2013
On July 1, former Bank of Canada Governor Mark Carney will replace Sir Mervyn King as Governor of the Bank of England with a first Monetary Policy Committee (MPC) meeting on July 3 and 4. Mr Carney sees that an important role for Central Banks is to offer “forward guidance” when the economy and monetary policy face exceptional challenges. He’s also said the Bank has has no intention of dropping women from Britain’s bank notes after a decision in April was made to replace Elizabeth Fry with Winston Churchill on the £5 note in 2015 – leaving (not including the Queen) no British women on our banknotes.
Flood Re has seen a deal being reached between Insurers and the Government. Flood insurance premiums will be capped and linked to Council Tax bands. All UK household insurers will pay into a fund that can be used to pay claims for people in high-risk homes. As part of the Water Bill, the SoP (Statement of Principles) was extended from ending 30 June to 1 August which will now continue until the new system comes into force. The cap on the amount households will pay for flood insurance premiums will start at no more than £210 per annum in Bands A and B, rising to £540 per year in Band G. The minister responsible for negotiations between the ABI (Association of British Insurers) and the government will deliver a keynote speech July.
New employment tribunal rules of procedure are to be introduced at the end of the month: 29 July which sees claimants who issue a claim against their employer in an employment tribunal being required to pay a fee to issue a claim and a further fee to proceed to a hearing. The rules have been revised to simplify and streamline the employment tribunal claims process.
The world’s only conference dedicated to passwords is taking place in Las Vegas in July at which ‘password fatigue’ is being debated and informed solutions in the pipeline are discussed along with the ‘password pill’.
Will July 20 be the day Trafalger Square sees a controversial blue cock installed among the pigeons? The national symbol of France, a cockerel, has been made as a 14ft high representation of ‘regeneration, awakening and strength’ however, for some, placed on the fourth plinth under Admiral Lord Nelson (he of Battle of Trafalger fame) it’s not viewed in the same light.
Image and Article credit: Copyright SUF
01 06 2013
The Bank of England’s Financial Stability Report (second for the year) is published 26 June, under the guidance of the Financial Policy Committee. Doing what it says on the tin, it gives an assessment of the financial sector: stability and resilience, plus any actions that it advises to reduce risks to stability.
Plans by the Co-op Bank to expand (buying Lloyds branches) proved too much too soon as many of their Britannia Building Society acquisition loans went sour, leaving a weakened bank now selling off its Life and General Insurance operations as it tries to fill a black hole. The risk-averse attitude has also been extended to new business customers…the door has been closed. Will this mutual model disappear from the high street?
Google is to retire it’s Meebo bar publishing tool on June 6 (foreign language to us but as it’s aligned with advertising and social networking thought we’d mention it). Web publishers apparently use it to help visitors ‘discover, browse, and share content on their site’. Those in the know can explain
Existing insurance arrangements for home owners in flood risk areas might have altered after this month with changes impacting consumers and, potentially, mortgage lending. SoP (Statement of Principles) between ABI and the Government was to come to an end 30 June but has been extended to 1 August. In essence, ABI members are committed to make flood insurance available for domestic and small business properties as a feature of standard policy, providing the Environment Agency continues to provide flood defence measures (which hasn’t happened). Therefore premiums will potentially be charged and policy terms applied which reflect the level of risk. Mortgaged properties, which require buildings insurance as part of the mortgage for the term of the loan, could become an unaffordable situation for some. Identifying flood risk and mitigating property transaction risk is of great value for many in the process but, to date, no agreement has been made, leaving potential property transactions (buying and selling) uncertain.
The G8 summit is taking place this month, with the UK assuming the one-year Presidency with a priority of the global economy. The high profile event, held in Northern Ireland, will focus on open economies, open governments and open societies to support free trade, tackle tax evasion and encourage greater transparency and accountability.
Image and Article credit: Copyright SUF 2013
02 04 2013
The automatic Escalator Tax (alcohol and cigarettes) which was to be applied this month (by at least 2% over inflation until 2014) was removed for beer in the recent budget. CAMRA had been vocal in pointing out that beer duty has risen 42% since 2008, the beer industry had cited the tax as reason for pubs going out of business and The Chancellor noted 10,000 pubs have closed in the last decade. Although duty for beer in general hasn’t been cut, the escalator stoppage and a duty cut of 1p has been seen as going some way to support the beer and pub industry. Also a planned 3p rise in fuel duty scheduled for September has been scrapped altogether.
Real-time PAYE reporting rolled out this month, seen as an HMRC concession, in that those employing less than 50 people are able to take longer with the increased frequency of PAYE filings until 5 October 2013. During the extended time it’s anticipated that any circumstantial problems for small businesses will be identified.
Research carried out by, in part, the Institute for Family Business with UCG (IFB) has revealed that family business owners don’t feel traditional technical qualifications alone are sufficient for a competent business advisor, and citing the ability to effectively deal with various personalities in a complex family situation as being equally important. Family-owned business ‘face specific challenges that are different from those faced by private individuals, limited companies or PLCs’…… ‘Being highly proficient or highly qualified … is only the baseline starting point.’
Following through the Financial Services Act, Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) take over from the FSA, at ‘Legal Cutover’ 1 April (note this is not a joke). Financial Services (Banking Reform) Bill, the new regulatory framework, was sent to Public Bill Committee for scrutiny in March.
Lonely Planet, BBC’s travel guide business bought in 2007 and 2011 (no taxpayers’ money was used), has been sold on to a US media firm and, with a loss of almost £80m, the BBC Trust has ordered a review of ‘lessons learned’ with the Vice Chair saying “Although this did not prove to be a good commercial investment, Worldwide is a very successful business”.
……Wonder how many small businesses would get away with that comment?
Image and Article credit: Copyright SUF 2013