business with confidence icaew.com a presentation by clive lewis head of enterprise, icaew managing...

BUSINESS WITH CONFIDENCE icaew.com

A presentation by Clive Lewis

Head of Enterprise, ICAEW

Managing the recovery and ensuring growth


Chart 1: Effect of the economic downturn – by size of business

7% 9% 9% 7% 6% 6%

15% 16%13% 14% 16% 15%

78%74%

79% 79% 78% 78%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

All (1,000) Micro (191) Small (119) Medium(160)

Large (175) Very large(355)

Positive Neutral/none Negative Base: All respondents: 1,000

+2 -13 +13

+1 -19 +18

-2 -10 +13

+6 -16 +10

+1 -11 +11

+2 -13 +11


Chart 2: Business seeing a ‘negative’ effect of downturn – 2009 vs 2008 – by industry sector

65%

81%

78%

65%

63%

77%

52%

59%

67%

59%

39%

60%

78%

92%

88%

84%

81%

80%

76%

75%

73%

73%

72%

66%

0% 20% 40% 60% 80% 100%

ALL BUSINESSES

Construction / Housing*

Real Estate / Property

Other Services*

Manufacturing / Engineering

Financial Services*

Business services / Acctg.

Transport / Distribution*

Retail / Hotels / Catering

IT / Communications*

Primary Industries*

Health / Education 2008 2009

Base: All respondents: 2008: 1,020; 2009: 1,000 * Sample base < 100


Chart 3: Effects of the downturn on UK organisations

84%

78%

66%

63%

53%

50%

46%

45%

42%

41%

35%

22%

19%

15%

0% 20% 40% 60% 80% 100%

More difficult to plan ahead

Reduced revenue growth

Weakened competitors

Lower planned staff levels

Less able to invest in capital

More staff w ith skills needed

Less able to finance operations

Less able to finance acquisition

More opportunity for acquisition

Higher short-term borrowing cost

Higher long-term borrowing cost

Lower short-term borrowing cost

Lower long-term borrowing cost

More sales opportunities


Responding to the economic downturn

All staff related

measures - 64%

(decreasing staff numbers,

reducing staff training spend,

staff pay cuts, reducing working

week)

Which of the following helped

your business significantly in

responding to the effects of the

economic downturn? (Prompted)

Base: All respondents (1,000)Mentions of fewer than 5% not shown


Summary of steps already taken

• Fighting for every sale

• Attention to detail

• Tight control of costs

• Total focus on cashflow and access to finance

So now “lean and mean” and better financially managed


Trend of Business ConfidenceUK and regions

Base: All


Some key questions – short-term

• Will the banks increase the supply of credit?

• Will consumers respond by increasing demand for credit or continue saving?

• Will businesses increase investment in capital expenditure, staff and start building up working capital?


Key questions – longer-term

• Public Expenditure cuts take effect in 2011-12

• When will interest rates start increasing and by how much?

• Sterling exchange rate movement

• Inflation /wage costs

• Increased prices of raw materials, energy and fuel.


Managing the recovery and ensuring growth – 1. Be ready for the Upturn• Are you well placed to grow?

• Growing requires a different mentality and skills from cost-cutting and cash conservation

• If you made cuts in “soft” areas, such as marketing, IT, training, you might need to look again at these areas

• Demand is still unpredictable in many sectors, so flexibility the key


Managing the recovery and ensuring growth – 2. Look to new markets• Decide which markets, products and customers are future

growth areas for your business

• Consider overseas markets –likely to grow faster

• Entering overseas markets can be risky – consider alternative entry strategies such as joint ventures

• But be aware of the competition:

In 2009 Enterprise Survey favoured strategies were:

- Develop higher value added products

- Increase number of countries sold to

- Adapt products to foreign markets


Managing the recovery and ensuring growth – 3. Plan ahead• Time to revisit growth plans and strategy

• Do you have a clear vision of how the business should develop?

• How do you build flexibility into your plans?

• What additional resources might be required?

• Consider a number of scenarios


Managing the recovery and ensuring growth – 4. Manage cash, secure funding• Sales growth requires working capital

• Product development and marketing spend might require further equity finance

• Consider total funding requirement:

- What unused facilities do you have?

- Are they any non-core assets or activities you can sell?

• Make sure forecasts are realistic and regularly updated

• Do you have a good relationship with finance providers?

• Consider all forms of finance


Managing the recovery and ensuring growth – 5. Have the right team in place• Growing requires different skills from protecting profits.

• Consider the skills you will need to grow, particularly business development

• Does the current team have sufficient innovation?

• How do you plan to retain and grow talent?

• Never likely to be a better time to recruit staff with the skills you might require

• Are your staff likely to be targeted by your competitors ?

• Loosing key staff identified as a “major risk” in ICAEW survey


Managing the recovery and ensuring growth – 6. build a sustainable business• Sustainability extends beyond effective financial management

• Will there be a place for your business in five or ten years time?

• Are you reliant on a diminishing resource?

• How will measures to enhance sustainability impact your business?

• Is there another, more sustainable way, to meet your customers needs?

• Do you measure and plan reductions in your greenhouse gas emissions?


Managing the recovery and ensuring growth – 7. Manage risk• The business environment has become more risky

• Are you satisfied that your business has established a risk management process and mindset across your business?

• Does your board agenda include the assessment and management of risk?

• Do you have a system such as the traffic light system for highlighting risk?

• How will you respond to the major external events outside your control?

• How do you balance risk management and entrepreneurial activities?

• How up-to-date are your business continuity plans?

• Do you measure how much you spend on risk management?


Managing the recovery and ensuring growth – 8. Information Systems• Current environment requires up-to-date information for

management

• Stakeholders want to be kept informed

• Growing businesses – particularly those trading overseas- require increased visibility

• A good information system can help deliver competitive advantage

• But ICT failure identified as “major risk” in ICAEW survey.


Managing the recovery and ensuring growth – Adjusting to a World with less Debt• Government, consumers and business will have to adjust to a

world with less debt

• Debt has been re-evaluated in terms of risk and price

• What are the implications for your business?

• Can you justify the capital employed in your business in terms of the returns?

• Does the balance between dividends/ rewards for shareholders and retained profit need to change?

• Are you likely to be finance constrained?

• Is a merger or acquisition an alternative



Any Questions?

• Are these your major challenges?

• Has the downturn made the Finance Director more strategic or more of a crisis manager?

• Has financial management improved in your business?

• Is there a greater awareness of the need for good financial management?

• What actions are you taking to facilitate growth of your business?



Clive Lewis

Head of Enterprise, ICAEW

Email: [email protected]

Website: www.icaew.com/enterprise

A world leader of the

accountancy and finance profession


business with confidence icaew.com a presentation by clive lewis head of enterprise, icaew managing...

Documents

growth slide

size of business base

key slide

managed slide

economic downturn

growth plans

staff training

future growth areas