Why the recovery isn't here yet and reasons not to bank on one any time soon.

In 2007 New Century Financial, a sub-prime mortgage specialist, was put into bankruptcy - precipitating the credit crunch.

Economic cycles usually have a peak to peak or trough to trough span of 7 years. So isn't recovery is well overdue?

UK gdp is now 15% below the trend level indicated before the credit crunch. That is a big gap.

So why is this recesssion different to a normal businesss cycle?

Here is my economic analysis.

Banks: There is insufficient credit liquidity in the system.

1. Normally, a recession bites in industry first then hits banks. This time the banks were first in. Because they were so badly damaged and lost capital, the banks were required to build up their capital ratios.  
2. The Government tells the bankers to lend to business but they can't because of the need to repair capital. This is slowing down any recovery. 
3. Quantitative easing has held interest rates low, so banks can't attract the level of savings deposits to repair their balance sheets so they can get lending. 
4. The requirement on the banks to build up capital also means they can't afford to be honest about writing off bad loans to business. This means that there are many businesses being sustained by banks that would normally have gone bust.

The Euro: Almost half of UK exports go to Europe. The euro crisis has depressed UK export sales to Europe.

1. Most of the countries using the Euro should not have been allowed to join as their economies didn't pass the tests.
2. Massive overborrowing and spending (often property led) was undertaken - especially in "poor" economies such as the PIGS.
3. The hapless governments in these countries are struggling to balance public spending with tax receipts...after all they are not used to it.
4. The mainly southern European's are stuck with an exchange rate that does not encourage recovery.
5. Problems in southern Europe mean that Germany's sales to them are now depressed. 

If you want to grow your business in this environment, you really need to expand market share - growing with economic activity won't do the trick.

Equally, as a specialist financial advisor to marketing agencies and professional firms I know how easy it can be for focus on maintaining profitability and managing cash flow to relax and how quickly that can translate into trouble for these people businesses.

If you want to discuss any of the above, as a first step, why not pick the phone up and call John or email him and arrange to meet up.

John's website is: http://www.nomizon.co.uk

His credentials: http://www.linkedin.com/in/johntoppin

John is a Cambridge University economist.

Sunday best for business

The Sunday Times has published its best 100 SME's to work for for 2012 and what a read for the fantastic sectors I'm involved in.

I've scanned the survey and read between the lines for common threads so you don't have to.

Of the top 50, 10 are marketing/creative businesses, 14 are recruitment companies and 5 are professional services firms. If you are in these sectors you might have something to learn from the survey.

In case you think these are tiddlers just because they are SMEs then don't, the largest in sales terms was £60m and the smallest £3.6m and in headcount terms the range was 155 at the top end with 52 people at the smallest.

Not one made a loss and profits were at least £500k.

The biggest single learning is that they all have leadership teams that spend time working on their businesses rather than in them. This means thinking through what will differentiate their businesses from the crowd -from the perspective of clients and existing and potential employees.

How about your business?

As a first step, why not pick the phone up and call John or email him and arrange to meet up. 

John's website is: http://www.nomizon.co.uk 

His credentials: http://www.linkedin.com/in/johntoppin

Are you prepared for the collapse of the Euro?

There is no escape from the Euro in the news. Politicians in the Eurozone are still faffing around. If the Euro collapses, commentators say that it will devalue. It could become Euro A (strong countries) and Euro B (weak countries), or countries could revert to their previous currencies.

Time for you to consider what the impact might be on your business and to start taking preventative measures....remember your "if onlys" when the banks got into trouble only a couple of years ago.

If your business is just dealing with UK clients and suppliers don't think that it will not impact you because many of your clients and suppliers will be exposed...so you will be too.

What to consider:

• Assess where your business is most at risk, plan for it and implement.
• Maintain as little cash as possible in your Euro denominated bank accounts.
• Collect from clients you invoice in Euros as quickly as you can - better still bill them in Sterling.
• If you are drawing up new contracts with Eurozone clients insist on Sterling.
• If you have subsidiaries in the Eurozone, repatriate profits back into the UK where you can.
• Talk to your bank manager about hedging.

As a specialist financial advisor to marketing agencies and professional firms I know how easy it can be for focus on cash flow to relax and how quickly that can translate into trouble for these people businesses.

As a first step, why not pick the phone up and call John or email him and arrange to meet up.

John's website is: http://www.nomizon.co.uk/

His credentials: http://www.linkedin.com/in/johntoppin

Finding free cash for your business

As a specialist financial advisor to marketing agencies and professional firms I know how easy it can be for focus on cash flow to relax and how quickly that can translate into trouble for these people businesses.

I've been asked to look at this by my regular followers.

So, for the next few blogs, I shall be looking at what you should be doing to ensure that your cash flow stays healthy.This applies equally to lawyers, headhunters, advertising agencies, architects etc etc...

Watch this space.....add yourself as a follower.

As a first step, why not pick the phone up and call John or email him and arrange to meet up.

More on cash: http://www.nomizon.co.uk/cash.htm

His credentials: http://www.linkedin.com/in/johntoppin

Preparing for outside investors?

Raising outside investment for your firm requires careful planning.

You will be familiar with the horse trading that goes on in the Dragons' Den..."I will offer you £500k for 30% of the equity" etc....all very much off-the-cuff sounding stuff.

Most business sectors have been used to involving outside investors and in 2011 outsiders will even be able to buy into firms of Solicitors .

You will doubtless want to raise the most money for the equity in your firm. Getting the best value depends on:

1. Managing the timing of when you are looking to get the money

2. Ensuring the firm is professionally run well before you want to ask for money

3. Making the right strategic choices along the way so that your firm's profile attracts a premium rather than a discounted price.

So what should you be thinking about and planning to improve in your firm?

Which features will set your firm apart from your competitors and increase the value and salability of your equity?

There are various rules of thumb used to value equity in people businesses - in terms of multiples of fees or profits. These give a range of values which are then flexed up or down depending on the state of market and the relative strengths and weaknesses of your firm.

As a specialist financial advisor to marketing agencies and professional firms I am aware that it usually takes months and years to make the sort of lasting difference to your business that will increase the value of your equity so you should start working on this now - even if you are a long way from needing to offer equity to outsiders.

As a first step, why not pick the phone up and call John or email him and arrange to meet up.

More on cash: http://www.nomizon.co.uk/cash.htm

His credentials: http://www.linkedin.com/in/johntoppin

Do company share schemes work?

Retaining and motivating key employees is one of the most important issues I have dealt with as a specialist financial advisor to marketing agencies and professional firms.

One of the most useful tools, when used properly and balanced with bonus schemes and non financial techniques is some form of equity participation.

Do employees who participate in company equity work harder than those who don't and are they more loyal?

There are plenty of studies that show that staff retention is improved where employees have some form of equity participation but until recently there has been no research demonstrating that equity participation increases motivation.

However,the London School of Economics has now published research that shows that employees with equity participation do work harder and not only that, they are also less likely to tolerate underperformance by their colleagues.

If you already have an equity participation scheme in your business then congratulations. If not then maybe you should be considering introducing one.

Tax approved schemes include:

• SAYE linked share option schemes
• Company share option plans
• Enterprise management incentive share option schemes
• Share incentive plans 

These schemes need to be implemented carefully so that your position as owner is protected, the company can achieve its objectives and so that the tax requirements are met.

As a first step, why not pick the phone up and call John or email him and arrange to meet up.

More on people: http://www.nomizon.co.uk/people.htm

His credentials: http://www.linkedin.com/in/johntoppin

As a first step, why not pick the phone up and call John or email him and arrange to meet up.

Is your business a winner?

The creative, marketing and professional services sectors are full of similar businesses with virtually identical offerings, people, technologies and ways of doing things. Despite claims to the contrary.Choosing your attitude will set you apart from the rest of the field.

As a specialist financial advisor to marketing agencies and professional firms my observation is that winners add to shareholder value all the time by:

Thinking from their clients' perspective not their own

Being proactive not reactive

Thinking and acting consistently not add hoc

Being flexible not dogmatic

Focusing on what they do best rather than trying to do everything

Understanding the difference between value and price

For example, when tendering for new business, winners take time to understand how buying decisions are made at that prospect and they structure their proposals around the client's needs and the selection criteria. A successful business allocates resources to the tenders they want to win so that their bid stands out from the start.

In a level playing field, it is all about attitude.

Know what is important and spend your time doing that.

As a first step, why not pick the phone up and call John or email him and arrange to meet up.

More on profits: http://www.nomizon.co.uk/profits.htm

His credentials: http://www.linkedin.com/in/johntoppin