In Business: Notes To Connect The Dots – February 2013

Attitude Is Everything: Operate Like A Manager

An opinion from a man who’s spent his life determining the making and saving of money in business, nine years from now `the major banks will be worth considerably more money than they are now’. Said Warren Buffett. Putting that aside, businesses of all size or type have their bad days: the determining factor is whether their bottom line is sufficient to bridge the gap to better days.  When businesses experience with their spreadsheets, what might for Donald Trump be the equivalent of a walk through a wind tunnel – the bad hair day – managers are likely to be respond with ‘Where and what are the definable losses?’  Entrepreneurs would possibly consider ‘how can the loss be afforded…. what means will I be left with?’ ‘Tis only the micro and small enterprise owner, balancing both considerations, that’s likely to be the one asking `… can I carry on?’

The supporters i.e. Lenders, seek expected returns and respond varyingly to any given data.  Their differing expectations can mean the smaller enterprise that is coping is perceived, from the outside, as – buzz word alert – a zombie……. dismissed by some business supporters and lenders because the calculated return isn’t there.  At this point the entrepreneur would ponder their uncertainty and return to their business plan; ‘no-one can predict the future….change the means not the goal’.  The manager should have already implemented a strategy from the mantra ‘plan, strategy, review’. The micro and small enterprise owner, balancing both considerations, is likely the one asking `… can I carry on? ‘

Cul-de-sacs are felt when keeping the cash moving and business going is seemingly going nowhere including when an established lender isn’t interested in the business’s plan. The defining management style, which enables supporters to run their business, can feel, to the smaller enterprise owner, as though it’s halting theirs. It’s irksome for me but understandable that each party, under such circumstances, is not in a position to appreciate the others agenda.

Back to keeping the cash flow flowing and business moving:

• Micro and small business are used to taking risks to survive, resourceful is their middle name…. however, the management of any of their cashflow, credit or funding has to strike a balance between matching what is available in the market and what they need it for. For example liquidity might replace borrowing requirements as a priority, or a deposit might replace the necessity for cashflow therefore access to an appropriate funding stream is an imperative resource tool … and for such a tool to work it is anticipated that working capital, when restrained or altered, is responded to in a business’ behaviour -adapting or altering in order that finance options remain viable and the business sustainable.

Meaning…

• Being realistic about funding needs and business practice or models to place business on the right footings. For example, is constantly turning to the credit card a secure solution?  Will small loan added to small loan offer appropriate support – Can the businesses challenges be overcome by compounding one problem on another?

What‘s needed to close those funding gaps?

• A consistent monitoring routine is the enabler in a business to being aware of the different demands placed upon it and its finance… AND the demands that finance is making on the business. There is a truism that smaller businesses, compared to large business, is less likely to achieve a loan from a bank because, in general, there is a lack of security however that doesn’t rule out ability for the smaller enterprise to access finance, including loans, when relevant and current information/data is accessible –  Necessary annual reporting and accounts have their place but being ‘after the event’ they have no prevention mechanism built in for the year that has past.

Worthy of consideration….

• Using more than one funding source as a mechanism – which could potentially allow the working capital needs to remain relatively stable for any business risks to be re-measured. Credit being supplied to a business from one provider has a potential to limit options (all eggs in one basket); i.e. the use of loan with overdraft facility from the same bank.  In such a situation, when the bank begins to place limits or decreases the supply of lending such a business is susceptible to counterbalance the effect.

Fusing entrepreneurial spirit with management mindset attitude is as relevant for clarity as understanding the difference between planned uncertainty and unplanned uncertainty for the micro and small business owner who, constantly adjusting working practice to keep control of their business, can so often feel the sense of herding cats comes into play in the struggle to find a sense of purpose.

Image credits: pheezy, Casey Serin, JOPHIELsmiles, pennuja.    Article credit: Copyright SUF 2013