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The Commonality of Business:

The economy has uneven impact, independent businesses have their own identity therefore there is no `best way’ or `single fix’ for the commonality of businesses in which no credit means no business.

Not too long ago, anyone on the streets of Wichita might have witnessed dollars raining down on them; dropped from a helicopter as part of a business event, to be swept along like Dorothy and Toto on the Kansas winds, people might have experienced the deciduous effect of the mythical money-tree were it not for Health and Safety issues.

Between March 2009 and January 2010, The BoE took out a financial metaphoric helicopter to make a maiden flight with the little known phrase Quantitative Easing.  The effectiveness of the complex currency (for there are no real bank notes filling briefcases stacked high on pallets ready for the supply chain)  remains out with the jury, presumably for a long time to come, with regard to to any health and safety issues for our economy despite BoE Working Paper Number 443.  Without QE real GDP would have fallen by even more during 2009 and inflation would have reached low or even negative levels, the result that the impact might have been even larger. Overall it was an effective policy option during the financial crisis,  having caveats. 
With no appeal other than the frequent occurrence of math symbols taking on the role of emoticons   (before any after-work drink), the white paper might have easily have read, smile of sarcasm, on the three month treasury bill :->  very angry factored in : -ll add some variable shouting :-V  result maximum wide eyed surprise  8-l  because during that time small business owners spoke with us repeatedly of being pushed to the edge, as their Banks of choice issued notices ‘requesting’ money back, outstanding against the business.

These weren’t Zombie businesses in fear of what was happening around them. They were small-Small Businesses facing every day challenges in an extremely unfavourable economy; how would they cope with their responsibilities towards their customers, their employees, and their business.  The biggest shock to them was the bombshell of their long term custom not being required anymore, the bank’s criteria to risk altering to rescind agreements. Assuming that their Banks had at the helm people who understood that although a business ideally should be in the black, reacting to markets, making impacting decisions (such as reducing staff hours), focusing on areas that would assist in driving the business forward, it was all the more extraordinary for them because business doesn’t always go to plan, those goals aren’t always reached on time and in one piece  ( ….thinks RBS ).

Mimicked onwards to its customers, in knee-jerk response to big banks unexpected attitude, small business would face stagnation if they adopted a similar retrenching response:

bb: ‘Without this facility you cannot survive but to obtain the elixir of life I demand enhanced payment’.

sb: ‘You’ve already got the majority of my net income and fixed business asset. Would you take my home plus my pension because although returns will be a slower than I’d expected, they’ll definitely be there. You do understand about leveraging risk?’

bb: ‘Business, you have been a loyal customer although your growth isn’t as high as expected, however, you’ve had sufficient to maintain a momentum whilst  you’ve had some problems (hey, who hasn’t)  but you’re managing them well, therefore  you’re request is perfectly acceptable.’

sb: *smile* ‘Thank You, bb, you won’t regret this’

bb: ‘No you’re perfectly acceptable, but you no longer fit in the box… no can do!… NEXT!’

The uneven impact of the economy strikes; whether independent business or big bank, without a plan or procedure in place, the circumstances are not dissimilar, there is no best way or single fix although it would be reassuring to think the mantra considerations;  all the cost cutting,  resource conserving,  new products/services investing,  exploiting competitor weakness, focusing on trying all, trying one or trying something new,  that small businesses make aren’t overlooked by when big bank writes  that denying any ongoing, re-position or recall facility letter.

By its very nature, it is unusual for smaller businesses to have unlimited resources, however, when well managed, the ability to analyse and respond to a given situation illustrates a flexibility in a way which big business often can’t.  The responses implemented by market changes and the different measured responses by the small independent aren’t usually taken into account amongst the generic financial headlines, or appreciated by any generic lending criteria. Despite the cliché of lenders not understanding  small business mechanics, there are contrary lending facilities beyond big banks when the approach is one of a well managed business coupled with an attitude for no single strategy being guaranteed in the continuing climate of EU Banks shrinking, more credit being held back and businesses big banks becoming more like debt collectors (as deleveraging of their balance sheets continues), the phrase during the financial crisis (Paper 443), might need adjustment.

Big banks will continue to re-assess their clients; re-writing more rigid agreements, with additional or more costs added because the economy has uneven impact. Independent businesses create their own identity, therefore there is no single fix for the commonality of businesses in which no credit means no business.

Image credits: Vectorportal,  Somegeekintn,  Horia Varlan  Article credit: Copyright SUF)

Apologies to any polar bears coming out of hibernation, as you rub your eyes against the bright lights of headline glare, don’t panic you haven’t overslept and the hunting season isn’t for you. No, far more fun…  it’s the bankers’ bonus season, that time of year when the headlines have their sights firmly fixed on the numbers  coming out of the big names in banking.

This year so far, Stephen Hester has been bagged, along with Fred Goodwin (minus the Sir), like clay pigeons from the trap on a clear day, with no headwind, as the 2011 bonus-pot announcements get underway.  Apparently last year (2010 pot) an average of £1.2 million was paid to 323 of RBS’s top staff, with their 2011 pot for investment staff being about a half of it payments last year (£950 million). As bonus-bagging continues, the mix of lack of Euro growth, financial stress, rising funding costs to banks creating renewed squeezes on banks and credit supply will mean the economy will maintain its gloomy popularity for headline grabbing contradictions whilst corroding the elusive silver bullet.

The ECB has provided €489bn  in loans as a three year refinancing operation to eurozone banks, with `retrenchment’ the banking bingo word-of-the-month and bolstering working capital buffers the way to go, even if costs are higher.

Inflation could drop  further as prices lower  with the BoE predicting falls to as low as 1.5% by 2013  ( 2011 inflation report), whilst the BoE Monetary Policy Committee’s minutes (January) showed a split amongst its members, about whether the Bank should expand QE in 2012.

The UK isn’t alone in weak recovery and financial stress; the rate of growth in all of the major advanced economies has been sharply below their respective long-term averages.

Cash preservation, cost control and strengthening balance sheets will be the slow burn to melt the ice of uncertainty, so, for any polar bears coming out of hibernation, there’s no immediate financial climate change.

(Image and Article credit: Copyright SUF)

Business X-Ray 

Why fix something that isn’t broken?

It’s always been done this way. What we do works.

So, indeed, why fix something that isn’t broken?

Who can blame a business with responsibilities vying for attention, choosing to put self-examination on the to-do list in favour of dealing with the more pragmatic matters such as keeping the wolves from the door?

Checking for profit gaps, leaks in expenditure or squeezes can all be dealt with later. That’s for businesses that measure their risk of breaking, for those that aren’t working as efficiently as expected, for those that are aware improvement translates as beneficial, for any who feel constrained, restricted, muffled away from attainment and for those that use plan-strategy-review because shift happens;  introspection is a preventative measure.

The evolution of a business dictates that to ignore the financial oil keeping the wheels turning is tantamount to a part of it becoming dysfunctional and potentially breaking

The business production is con-nected to… pro-ducts

The pro-ducts connected to the … s-ales

The s-ales connected to the …turnover

The turnover connected to… mor-ale

The morale connected to … customers

The customers connected to … satisfaction

Satisfaction is the heart of a business.  Therefore dried-out business bones need a strong leap of faith, willing to bring  them back to condition and once again able to wrap around the heart of the business… and strong leaps of faith working favourably towards a business’s stress testing are a bit thin on the ground.

Not a good situation for a business to be in and one which is frustratingly, so often, preventable.

The cashflow through a business might not be broken but as it’s frequently not on the surface, visible, only when quality controlling or internal audits show up any areas of breakage or potential breakage the relevance and importance or such an audit is apparent. Identifying gaps to efficiency and profit, aiming to save money, spend less money, pay off/get out of debt should be part of the businesses regular routine primarily as specific introspection therefore any problem areas can be addressed, implemented straight away and completed within a reasonable time; leaving nothing overhanging to add to a to-do list.

No amount of marketing can turnaround a business in decline, new products or services are restricted  and value for and within the business is subject to being the root cause at the heart of a ‘broken’ business.

Lenders don’t transform businesses; change comes from within a business.

(Image credits:  ralphbijkerPaolomastrangelo,  SUF.    Article credit: Copyright SUF)


It is becoming prohibitively expensive for the lenders, who rely on cheap short-term financing to fund a part of their balance sheet, to fund for more than 3-5 years, hence, traditional banking, which supports the wider corporate client, is facing further shrinkage  in the corporate banking world.

Businesses and motorists are bracing themselves after the wholesale price of petrol is set to rise. With the steepest and fastest rise in wholesale costs happening over the festive period; almost 4.50ppl and 5.00ppl + 20% VAT in addition. With such rapid increases retailers have had little time to react over the holiday period therefore pump prices may still be set to increase.

The 50p tax rate, levied on incomes of more than £150K,  is unlikely to be scrapped  during the course of parliament.  NFFF  is to step up their campaign Fair Play on VAT  to secure zero rating for sales of hot takeaway food and change the current ruling on VAT; with a principle of equality of treatment applied to sales of cold takeaway for hot takeaway food.

To improve the rate of return on patents, the Government has a ‘patent box’  scheme. Due for launch in April 2013, patents filed from late 2010 are affected. Income from patents will be taxed at corporation tax rate of 10% rather than usual SME rate of 21%.

Encouraging consumers to reduce home food and packaging waste beyond plastic bags, WRAP  ( Waste & Resources Action Programme) cite an estimated  food avoidable food waste of £724m (2009) and is working towards a voluntary agreement with the hospitality and food service industries for reductions.

The hospitality  and leisure industries suffered from a 30% increase in business failures in the last quarter of 2011 compared to the same period in the previous year, with 19 collapses of travel and tourism businesses in the final three months of last year. The worst affected sectors in the final quarter of 2011 continued to include construction (656), manufacturing (394), retail (447), hospitality and leisure (375) and real estate (123), with London having the highest number, up by 8%, to 941 in total.

According to NHS Future Forum, patients should be told to cut down on alcohol by their pharmacist and routine appointments to the dentist or optician could have a similar line of conversation. In the USA the future of pharmacy  has taken a turn with new offerings. Once passed the sushi-makers, a beauty-machine digital editing facilities, a fresh yoghurt machine, coffee machine, smoothie bar, ready meals, wines, fruits and nail bars of the downstairs department of the store, a pharmacist walks around with an iPad to help answer customers questions, offers a Take Care clinic, express prescription-pick up machine and two screens to assist customers, via a series of questions, to products of their liking.

(Image and Article credit: Copyright SUF)




Economic Advantage to Hibernation

Amassing goodies, storing up supplies and generally expending any remaining energy, exemplifies the wind-down to the end of a year,  a time that can be used for potential hibernation.

With predictions of a winter with Britain in recession, due to economic roller-coasting, the squeezes on budgets and employment, plus additional interruptions for small business from unpredictable weather conditions, or sickness, a slothful existence and keeping warm by sleeping becomes a tempting way to see the winter through.

A report by the British Medical Journal, in 1900, claimed that Russian peasants, where food was scanty, and not having provisions to carry them through the whole year, were economically expedient by spending half of it in sleep; `lotska’.  Reserved bread was eaten once a day with water and a fire was kept alight all the way through winter until summer-o-clock, when they went back to work in the fields.

Before that, 18th and 19th century French peasants would also spent their winter months in bed for as long as possible to save food for survival.

Irrelevant of exponential growth, stagnation, linear growth or a decrease in profit, being content with a business and ignoring it is as good as `sleeping on the job’.  Commercial business is always moving, with its financial foundations always shifting because interest in products and services alters.

Sleeping through any winter period, without someone on watch can mean worrying signs are overlooked or obstacles become too difficult to face. What might be a blip could become a trend.

As long ago as the early 1700’s small business showed there was an alternative to sleeping through a winter. The Germans kept warm by labouring in their lederhosen, which wasn’t such a cuckoo idea as they emerged to their Bavarian summer with literally time to sell.

Growth in small business isn’t always about expansion; it’s also having the ability to be sustainable through winter periods as well as the summers. Which means that, because expensive financial foundations can ironically  be the downfall of a business, any business which is too reliant on self-funding is as much exposed to limitation with potential for growth, as the business which has unaccountable costs, expensive loans, limiting overdrafts or inflexible mortgage terms attached to it.

Glenmorangie’s, recently enhanced their potential for growth by offering a polished coal piece, sourced from the home of Robert Burns’ Ayrshire, to give out with their whisky at Hogmanay. This add-on product highlights their brand at a time when, due to the effects of economic shrinkage, market saturation is prevalent in most industries.

Credit risk is as applicable to a lender as it is to a borrower; a downgrade for a financial institution adds funding costs as does a credit rating/score for a business.  As government support  recedes from the banking system, the ratings system starts to downgrade, just as when financial support is removed from a small business a financial weakness can be exposed. Without a rescue package strategy, both face higher borrowing costs which potentially mean reduced profits and higher costs passed on.

In Scotland, the end of December is traditionally a time for the Firstfooter with a handsel of food, drink or fuel to bring in the New Year. However, before those ‘bells at midnight’ the traditional Scot’s house would have been fully cleaned and all its debts cleared.

For business, the handsel needed to go forward into a healthy, therefore happy, New Year is having mixed financing; with cash-flow not indebted to repayment. ‘Nuf said.

(Image credits:  dr_XeNo,   jsorbieus,   Matthew J,   LadyDragonflyCC,   rubber bullets     Article credit: Copyright SUF)


It’s no news to describe the current UK economy as ‘abnormal’ therefore, following the OBR’s latest economic forecasts  for growth, the Chancellor’s autumn statement  wasn’t too surprising.  With plenty of commentary around (both winners and losers)  we were able to enjoy a ‘lighter’ viewpoint via The Daily Mash.  Apparently the future of a cutting-edge economy will be all about ‘widening things’, starting with the infrastructure that will become our ‘great national project’;  ‘114 lanes’  being added to the M6.

The objective of credit-easing for small and medium sized businesses is to be met with the taking back, from the Bank of England, a majority of debt guarantees by the Treasury and deploying the amount for small business. The National Loan Guarantee Scheme will, in effect, underwrite bank’s borrowings which are to be passed on to small businesses. With a cut off point of 50 employees, the devil-in-the-details and likely pages of bureaucracy, we’ll let someone else explain how this attempt to increase competition and compete with banks in the market for business loans works.

Banks are also facing a new levy. Designed to protect government revenues, the uncertainty that is hovering around the banks is likely to intensify.

There is potential uncertainty for some 41% of mortgage holders who don’t have life insurance, according to a recent survey. With findings suggesting 7 million people having a collective outstanding balance of £245 billion; with exposure of an average £36,000 debt for dependents.

The mid-line is being focused on by the Treasury as the ‘real engine of growth’ with some 10,000 mid-sized companies being either cherry picked as the best, or identified to ‘professionalise’,  by The Business Department  in support of those who are neither too large or too small and have been ‘neglected’.  Family owned /managed  companies are in particular of concern as underperforming, with the expectation that a wider use of non-executive directors to be encouraged.

The ongoing turmoil and impact of the Euro Zone is evident in real economy indicators, more banks find it harder to access wholesale funding  and the arguments about QE  continue.

With an EU summit  this month, decisive action is being called for as market pressures increase. The FSA has told Britain’s banks to draw up contingency plans  for any ‘disorderly break-up’ of the euro zone or exit of some countries.  Averting growth suppressors are key for companies and managing distress by an ‘assume the worst’ approach is becoming the norm.

With health care, energy and consumer goods among the most exposed industries to the Euro, pharmaceuticals are a sector with limited wiggle room due to ‘ethical obligation to supply life saving medicines, even when payment is uncertain’.  Companies who sell in the Euro Zone, such as Novo Nordisk,  the world’s biggest insulin for diabetes maker, put pricing strategy on their radar for discussion.  Although, as way of perspective, a CEO of one of Europe’s largest manufacturing companies has said ‘We would not die without the Euro’.

(Image and Article credit: Copyright SUF)

Mixing Business Markets
An interested twist to understanding your customer was explained to us via a street market trader who, settled amongst the fruit and veg stalls, was laying out a display of woolly winter gloves, mittens and hats. He told of an extension to his product range during the past summer months; Fruit.

Seasonal clothing plus fresh fruit, how’s that work?
The brain rain started up to the microwave ‘ping’ sound. Of course!  High price inflation has affected prices in this billion pound retail industry, combined with unseasonal weather, rise of supermarket share, high street turbulence, etc. The supply/demand balance became tricky. He USED to sell fruit.  Seeking new market opportunities he’s now set up a winter stall with winter accessories.

Don’t make a simple idea complicated!
He went on to explain…  In summer the woolly hats are caps, the gloves are traded for cotton bags, the earmuffs exchanged for headbands. Amongst fresh fruit stalls he’d decided to try out fake fruit as a stall decoration to add to the retail mix of the market.

When the marketing mix, for promotion, is balanced between product, price and place; with the ‘product’ offering what the customer wants, at the right price in the right market, the blend for marketing can be as sweet as a naturally sweet smoothie.  The core to a business rarely changes; the difference is in the customer’s perception of what your product is, be it, apple seller to zookeeper and anything in between. Understanding the customer mix is the counter balance for the marketing mix. The frequency of a customer, what is purchased, when it’s purchased, applies to all businesses. To understand your business is to understand your customer.

Both this stall holder’s business mix and the street market retail mix might have benefited more if he’d invested in promoting the health benefits of fruit and vegetables and wearing a shade-giving cotton hat or cap through Summer or, the health benefits of fruit and vegetables and keeping warm with gloves and scarf in Winter instead of investing in the unsold plastic fruit he bought following a woman clearing him out of his original stall display. The clue to understanding your customer being her declaration, ‘that should stop them eating the real stuff!’

We can only assume his investment was aimed at the “don’t like brown marks or the supplementary protein known as fruit fly on the goodies in the fruit bowl” market.
(Image credit: markhillary   Article credit: Copyright SUF)


The average private sector pay award given to employees of 2.6% is half the most recent inflation figure, Income Data Services has shown, whilst a snapshot of FTSE 100 Directors showed a 42% rise as average rising to 49% when adding in other Directors.

Any spending bonuses on homes abroad should be aware of  a 200-strong team of investigators and specialists, part of the ‘affluent unit’, who have been charged with identifying well-off individuals who are avoiding and evading taxes and duties as part of an HMRC clamp down on those who have earnings from homes abroad.

An N.I. holiday, exempting employers from contributions for around the first six months for any new member of staff they hire, has been called for in a help to target youth unemployment, as tax incentive  at the same time as a Job Index has shown an 8 point rise during the last month which brought job opportunities back to levels at the start of the year.

Apparently the profits of British banks could be inflated by as much as £4bn due to a bizarre accounting rule that allows them to book a gain on the fall in the value of their debt  although the Eurozone woes continue to distract from domestic challenges  Barclays and RBS are set to announce £2bn profits  and show they are on track to hit targets despite the eurozone crisis.

From November around six million children under 18, who are UK residents and do not have a Child Trust Fund (CTF), will be eligible for a Junior ISA. The limit for Junior ISAs will be set at £3,600, for those who are eligible and able to make the savings.  To ensure that children with a CTF are not disadvantaged, the CTF savings limit will treble from £1,200 to £3,600, aligning it with the new Junior ISA limit. Funds in a Junior ISA will be locked-in until age 18 and roll over into an adult ISA on maturity.  Children will be able to have one cash and one stocks and shares Junior ISA at any time, with an overarching annual contribution limit of £3,600. This is an increase from the previously proposed limit of £3,000.



Healthcare Estates   1-2 November  Manchester Central

Cake International  4 – 6 November NEC Birmingham

World Travel Market  7 – 10 November Excel London

The Landlord and Letting Show  16 – 17 November  NEC Birmingham

Business Start-Up  17 -18 November Earls Court London

(Image and Article credit: Copyright SUF)


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