Let’s face it; Bankers haven’t exactly been top of the popularity list over the last few years. Their part in the economic downturn, outrageous bonuses and a variety of malpractice scandals have been hitting the headlines and eroding public confidence. Add to that a reported reduction in business lending and you’d be forgiven for seeking other routes to finance your business.
But you’d be missing out.
Banks are still one of the best options for low-risk, low-return finance – whether talking about the largest four banks (which account for over 80% of UK SME banking relationships), or increasingly the ‘Challenger Banks’ which are based on a different business model and often willing to lend to businesses that don’t meet the risk profile of the largest banks.
Key to success with getting finance from your bank? – treating your bank manager as one of the management team
By which I mean, firstly that it’s important to have regular contact rather than turning up out of the blue when you want funding. Checking in with your bank manager on your business goals, progress and also challenges helps to establish a strategic relationship and a framework for financial planning.
Secondly, ensure that you provide a full and frank management briefing. Research has shown that unsuccessful funding applications are typically the result of poor preparation; business owners who haven’t properly reviewed financing needs, checked their business credit score, or put appropriate contingency plans in place to withstand business shocks.
OK, so this is all time consuming, but in the end it’s worth it to get the business investment you need to take you to the next level of business growth.
Why the political climate has little impact on the success of your business
Next year (2015), we will see another General Election played out. In the months leading up to the election we’ll listen to a lot of promises from all parties about how they’re the ones to deliver business growth, but when it comes down to it, Government hot air doesn’t run a business – you do.
The fact of the matter is that, despite what politicians might say, the UK is coming out of economic recession because of businesses like ours, business owners like us; the ones who get on with growing a business by staying focused and making the right decisions.
That’s not to say that Government doesn’t have an impact, or that Treasury Budget rounds don’t matter – of course they do. However, the weather often has more impact than the minor changes that a Budget is likely to make to small and medium businesses in the UK. In most cases the budget can be likened to taking all the books off the bookshelf, re-arranging them, and putting them all back on again.
So don’t spend any time worrying about the impact of a change in Government, or a change in policy will have on your bottom line. The reality is, the only one who’s impacting that, is you.
It’s happened…you’ve lost the customer that provides 40%+ of your annual revenue. Many business owners have been in exactly that situation, and I expect to see at least one of my clients facing this every year. When it happens it’s only natural to fear the worst – “This will mean the end of my business?”; “I’m going to have to let all my staff go”; “I’m not going to be able to take enough money out of the business to live on”.
But in my experience it’s not really the end, it’s the beginning of a new chapter in your business that will eventually make it better and stronger. So if you’re currently facing this sort of situation, or fear that you might be at some point soon – I’d encourage you to read on.
Step 1 – Sit down, breathe. Once you get over the shock and possibly the anger, it’s time to sit back and calmly assess the situation. Your accountant can help you to see just how long your finances will sustain the business – and it’s nearly always longer than you think.
Step 2 – Take stock of the situation you were in. Ask yourself the following questions (I think you’ll be surprised by the answers).
- How much of your time has been taken up by this customer?
Often you will find that they actually occupy well in excess of the percentage of income that they bring in. You find yourself going out of your way to spend that ‘little bit of extra time’ to keep them happy.
- Did you charge for ‘the little extras’ that you gave to them? Probably not!
- Have they been taking advantage of the fact that they are your biggest customer by making the time between payments longer and longer? If this is the case, have they really appreciated what you’ve done for them in any case?
- Have you been charging them at a ‘special rate’? The answer is ‘almost certainly’.
Step 3 – Work ‘on your business’ rather than ‘in your business’; with that big client gone you’ll probably have a bit more time to do it. Some areas to consider might be:
- Pricing: are you charging enough for the products/services you provide? Too many small businesses undervalue what they do.
- Products: are there other products/services that I can offer to my existing and new potential customers that will be more profitable?
- Promotion – spend some money on marketing! It might sound odd that an accountant is suggesting you spend more money at a time like this – but trust me it’s important to your recovery. Don’t think of it as a cost but an investment in your future income.
- Firm up your other customer relationships – maybe ask them for feedback to help you improve your products and services. With happy customers you can also ask for referrals; if they are happy with what you are doing for them they should be more than happy to provide a recommendation for you.
Step 4 – Move on! Rather than sitting back and moaning about how your ex-customer has ‘ruined the business’ change your outlook and be grateful for the opportunity (and more importantly the time) to make your business better and more profitable.