Ireland joins list of countries that sees end of recession
With the Irish Business and Employers Confederation (IBEC) saying recently that Ireland is about to come out of recession, Pegasus questions if Irish companies are now ‘Fit for Business?’. IBEC, in its latest quarterly report, now forecasts shrinkage in the economy of only 0.7% this year, down from an earlier prediction of 1.6%. Moreover, it is now forecasting growth increasing next year from 1.7% to .2.1%.
With this in mind, business solutions provider Pegasus is warning Irish companies not to be left behind when new growth and sales come knocking.
As Charles Alken, business manager for Pegasus in Ireland explains: “During a recession, companies focus on maximising their cash position by reducing debtor days, stock and expenses. Clever SMEs have used the recession to cut down inventories to the lowest level possible, in a bid to save money.
“But whilst cashflow is the core problem for SMEs in a recession, it is actually squeezed even harder in the early stages of a recovery. So beware: when the economy picks up and orders flow in, these SMEs need to invest in fresh supplies to meet the increased demand, be it in stock or staff; and because of the delay in subsequently seeing the revenue from these efforts, some companies could end up dangerously short of cash. Try to maintain a balance between cutbacks and contingencies as this will help sustain the business, ensure it is fighting fit once the recession is over and fund future expansion,” he says.
A lot of things have changed during the last 18 months. Alken calls for companies to undertake an urgent SWOT analysis. He asks: “When was the last time you analysed your business objectively? What are your current strengths, weaknesses, opportunities and threats? Consider the changes you have made to get through the recession: what has changed in your customer base and have your competitors changed their business model to survive?”
Once this SWOT analysis is complete, he then advocates updating the business and marketing plans. Pre recession levels are not expected until at least 2012. In the same way, marketing budgets and plans that were slashed in the cost cutting stages, need to be reviewed. Nature abhors a vacuum but your competitors love it.
The plans should concentrate on the high margin, cash rich products and each activity should be measured and analysed to ensure it is creating opportunities and sales.
Invest in staff
A recovering economy means a more competitive environment and a greater investment in staff. Staff numbers may have been reduced to re-align the business during tough times but now companies have the opportunity to not only invest in the current workforce through training and increased rewards, but also to employ new staff as there are a lot of quality candidates on the market or looking to move to a more secure environment.
Next steps – Are you fit for business?
It’s a difficult thing to do when concerned with the day-to-day running of a business, but managers should take time out to go through their business and take appropriate action where required. Economic recovery is going to return slowly, but looking at all aspects of the company and planning the future direction now, will put the company in the best position possible to take advantage of a recovering market.
Alken recommends Irish companies take a look under the bonnet of their business processes in order to prepare to take full advantage of the economic recovery?
Business Check List
Products/Services
Do you know which of your products or services are most profitable?
Do you know what product lines your customers are buying?
Do you have problems with slow-moving stock?
Customers/Prospects
Can you track a new customer from quote and order through to installation and after-sales service?
Do you know which of your customers are the most profitable?
Do you have a contact programme for customers and prospects?
Financials
Do your financial records provide you with all the information you need to run your business?
Can you check profits, sales, expenses and cash flow at any time?
Do you know how much is owed to you at any one time?
Do you believe your overhead costs are increasing at a greater rate than your
gross profit?
Do you forecast your cashflow on an ongoing basis and take appropriate action?
Performance
Do you have key performance indicators and measures in place that are regularly reviewed and acted upon?
Can you predict trends?
Can you produce management reports quickly and easily?
As Alkens argues, ‘What are you waiting for? Start training now!’