Turnaround time

OK, things are going downhill, but this is not the time to abandon your planning for the climb back up. COLIN BENJAMIN

By Colin Benjamin

Consumers are sending out a message to all small and medium sized firms that have seen their order books tumble and fear that they will have to close their doors by year’s end. They are saying that they have heard the distant drums from the US market, seen the rise of the BRIC economies and believe that the Liberal Party is getting back into the business of being an alternative government across the nation.

Morgan’s consumer confidence figures for this month will provide the clearest sign that Australian households expect an improving economy to raise the tide for any business that has a longer term perspective, has taken the opportunity to reconstruct the year’s forecasts towards increasing profitability, and moved towards a more competent and cohesive top management team.

The decision of Costello to support Nelson but stay on the backbench until the recovery is in full swing will ensure that the big end of town will now start to concentrate on export development with a more stable price platform, spending more time with turnaround managers and head hunters and less time with insolvency managers.

We can expect that there will be a greater willingness to find independent executives (and even an attack on the glass ceiling at board level) to expand the market and consumer sensitivity of firms that are making the hard decisions to stick to profitable enterprise rather those smart and tricky investments. It is highly likely that the RBA will now try to create a climate of stability while stoking up the engines for export growth outside the commodity boom.

There will be more opportunities to find business partners, angel investors and even the occasional business lender that can see beyond the credit crunch horizon line to the worlds of lost opportunity.

There will be a rash of business consolidation and takeovers as firms with cash boxes and little imagination will seek to gain market share by acquisition, as much for the quality of the marketing and export/import teams as for the tax advantages and customers that will be exposed during the due diligence reviews.

When SMEs really address the parts of their business that is profit critical and jettison the nice-tos and hope-fors, they will be in a better position to capitalise. It’s time to develop restructuring strategies and business growth plans, reward and retain your best team members (and maybe shed a few of the less valuable family contingent) to focus on those customer focused products and services that have maintained the business while others were forced out of the market.

You will find that your terms of trade have to be further tightened, links with suppliers become closer and the search for off-shore customers become more important as you can once again get finance against firm contracts and strong business performance.

SMEs may even find that there are investors who are looking for equity in the company as they move out of the sharemarket and instead look for solid business investments, preserving your corporate cash reserves for working capital and growth. At worst this can provide a tax effective exit strategy for those thinking it’s time to get a life outside the business.

With the gold and oil speculators deserting their market manipulative stance and looking for genuine business opportunities, expect the bottom feeders to be prepared to develop venture capital funds that support innovation (provided they can get tax credits).

Now that households have begun to lower their credit risk, invest in Buffett style smaller, well managed family firms, and manage their cash flows more effectively, we can really say that it is time to bring everyone together to think more strategically about business development.

Dr Colin Benjamin is Entrepreneurship and Strategic Thinking Consultant at Marshall Place Associates, which offers a range of strategic thinking tools that open up possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship. Contact: CEO Dr Jane Shelton. 

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