A time for discipline to be fit for the future

Businesses are tightening their financial discipline, producing better information so they can keep funders and team members informed at all times about their relative position, and thus enabling them to make more agile business decisions.

That was the conclusion of a webinar TheBusinessDesk.com held with Shawbrook Bank, aimed at getting some insights to help businesses be more resilient.

What has been the gamechanger for your business during the current environment “slowflation”?

Richard Godsland

Richard Godsland, finance director of inprova, funded by NVM and a procurement platform for housing associations, understandably has data analytics and price information built into its systems already, but he said discipline is essential.

“For us it’s about having real-time insight really. We’ve developed a suite of reports on a weekly and monthly basis that can give us revenue flashes, cash flow, and credit control. So, there is throughout the senior leadership team and the wider business that increased visibility of key performance indicators,” he said.

Scott Thornton, managing director of Carnaby Caravans said: “It’s really about that communication, having that visibility and being able to plan ahead and react and adapt quickly to changes. We’ve gone through a few years of variables and volatility and we’ve got to be able to see that coming with our eyes wide open and adapt very quickly. So it’s working closely with customers, suppliers and being able to have a clear line of sight in advance basically.”

Scott Thornton, Carnaby Caravans

Businesses considering M&A or other key transactions are faced with greater due diligence nowadays, what helps prepare for this requirement?

When it comes to valuing businesses, especially ahead of a significant transaction, or even a merger, Nicola Merritt, the chief executive of Cortus Advisory was keen to highlight how well many businesses are doing, notwithstanding the turbulent trading conditions. 

But she also agreed that the need for flexibility from everyone involved in a complex process was important, especially to understand what’s going on and to analyse data about a business. Inevitably this requires more time to get more data, she explained. 

Nicola Merritt, Cortus Advisory

“I think flexibility would sum it up for me; flexibility with the team, where we work,” Merritt argued. “But also flexibility and working with our clients. Going back 10 years, a due diligence process and a mergers and acquisition process would be very defined, there would be a timetable with a number of expected milestones along the way and we’d all try and hit that timetable. But at the moment, the economy is uncertain. And I think lenders, such as Shawbrook, want that extra period of time to see how things have developed and to sense check against the forecasts that the management team have put to them.”

Daniel Martin, Shawbrook  outlined their take: “We back good management teams that operate in sectors that we think are attractive. Financial disciplines and foresight are important. Being forewarned is forearmed, isn’t it? You have to get the right information to analyse the market and have a view on what could realistically happen. If you’re doing that well in advance, it gives the lender significantly more comfort than if you’re not, it’s better to be proactive than reactive in these situations.” 

Daniel Martin

How is staff resourcing impacting on business resilience and what are some options available for SMEs?

One of the pressures at the moment is on staff seeing living costs going up, seeing their need to secure higher salaries on one hand, balanced with a lack of skilled people also creating a ‘candidates market’ and yet a need for businesses to be tough on costs.

James Groot

Nicola Merritt’s Cortus colleague, James Groot said: “We work with a variety of businesses going through transitions, through to some who are underperforming, or who need to think about what other options they have. One of the key themes that I’ve seen in the businesses that I’ve worked with in the last two years is the impact of the unexpected  like Covid, then the war in Ukraine, then the shocks to the UK economy, after a steady state growth environment for the last 10 to 15 years. What a lot of businesses are grappling with now is what is the new normal? Some will have had a Covid bounce where they’ve had some real exceptional performance in that period. Now they’re trying to understand when is that going to level off, and what effect it will have on supply chain issues.” 

He also thinks the tightness in the labour market has created “a new and challenging dynamic”.

His point was appreciated by recruiter Victoria Bond, a director of Ten Space who said she has made a number of changes to her business, but also reflected on how she interprets information about the markets she is seeking to operate in as a recruiter. “As a business, we’ve had to be all over the numbers to build some additional resilience. One of the big things that we did was to move entirely to remote working, we knocked the office on the head. It’s opened up some more options for us in terms of cost. And culturally that’s improved us as a business.”

Victoria Bond

All in all, businesses are adapting to the turbulent market, enhancing their technology for better forecasting, assessing their suppliers and upskilling their employees. Alongside this, SMEs are more focused on cashflow management than ever, many considering asset based lending and other debt facilities to enable further growth. Working with a  lender who understands the sectors and the current demands on businesses, can make the difference and provide support with releasing the value in business assets.