The King is in the altogether...

[Former Member 1]

In the Friday Thoughts thread I commented...

"It seems to be part of what is almost a 'disease' in management culture these days that negative truths aren't welcomed and rarely faced..."

As if by way of illustration this story popped up through the week...

Sir Alan Sugar blasts 'moaning' small business bosses - The Daily Record

Frankly, I think he's absolutely bang-on the money! And it's a pity his comments haven't been more widely and accurately reported! I'm bemused by the FSB now baying for his blood... NOT the most credible of business organisations even if they are the most vociferous!

Sugar's comments have been contextualised in relation to the banks lending to small businesses. But in fact his criticisms are far more sweeping and wide ranging than that. I wish I could find a transcript of the Manchester speech but (having listened to a recording of it) I seem to recall the main thrust of his arguments were directed against businesses who's needs for cash injections were driven largely by unrealistic business practices and failures to recognise and face the real-life realities of providing a product or service on a professional basis.

Yes; there are WAY too many small businesses operating in a "Disney World" and not just in terms of their persuit of credit. Attitudes to marketing, operational practices, even knowledge of and respect for the laws that affect what they do....

Great Oaks from little Acorns grow and all that jazz... And shoving a peanut into the ground will often produce something; But you can't seriously be too surprised if it's not fit to last the winter!

 

[johnthesearcher]

Hi Matt

You make some really good and relevant points in response to the report re: Alan Sugar's comments.

"It seems to be part of what is almost a 'disease' in management culture these days that negative truths aren't welcomed and rarely faced..."

Total agreement with the reference to the FSB ...... I mean by their very nature it's in their interest to defend any attack as their future membership may depend on it ...... but even they have to accept that negative comments almost always have 'some basis in reality' particularily when delivered by someone with Alan Sugar's experience.

I meet so many 'start ups' (SME's) who provide a lacklustre service and complain that it is 'just too competetive' in their particular sector then try and diversify into a business well outside their area of expertise, can't understand why they are not getting anywhere and look for something/someone other than themselves to blame.

Some others I have spoken to went into business for themselves without a clear understanding that they - having left the security of salaried employment - are now 'the boss' that they spent most of their lives complaining about.

Equally, others have taken the plunge without a business plan or have made the effort to undertake adequate research into their proposed market sector, have no understanding of the systemics required to manage even a small business, no understanding about service provision/ROI, no concept of demographics in respect of target markets or customer value/needs and so on.

The move, whilst commendable, if they have planned the transition carefully, have a good business model, at least 6 months working capital and have identified an underserved niche in the market - has a chance .... if not - no ammount of bank financing will sustain their venture.

It is true ......'that we get paid for bringing VALUE to the marketplace (aka reality) and that it takes time to add value, but we don't get paid for the TIME ..... but rather for the VALUE we put into the time'

I could retire tomorrow if I had a £1.00 note for everytime I've heard the statement that the XYZ company only got where they are because they were LUCKY.

LUCK as we all know only happens when PREPAREDNESS meets Opportunity.

John

 

[Adventurelife]

I agree and disagree if that makes sense

I agree no point in moaning, we are where we are and you just have to get on with it to the best of your ability and try and make your business work.

I disagree because as well as seeing businesses go out of business who have no right to complain as their model/management and finance did not stack up I am also seeing reasonable businesses go under which have existed and employed people for many, many years.

Without doubt they could have done things better and been better prepared but I would argue that I am yet to see of find the perfect business that cannot go under given the right set of circumstances.

What you have to keep in mind is when a business goes down as painful as it is for the owners and investors it is often much more painful for the employees.

I have been unlucky enough over the years to have to make hundreds of people redundant in businesses that were struggling and had to be fixed. Sometimes you would get whole families being laid off at one time.

The failings of us the business community impacts many more than we often like to admit, and the current situation is hurting many more employees than business owners or directors.

There is also a scale of difficulty in each business sector and business. Running a company with several hundred employees and a cash negative business model is a much harder proposition than running a small business with just a few people to look after.

Another sad day this week when the large heavy construction business next door to one of our businesses went under. It had been trading for many years and was a family business and although I am sure it could have managed its business better as all of us can, I wonder if I could have dealt with my market virtually disappearing with huge amounts of heavy plant assets on my books and staff to man them?

As always in business nothing is straight forward as seems.

Peter

 

[Former Member 1]

Well to be fair Peter Sugar did say (or rather imply) that 15% of businesses in this position DID have a point... and that's a way-too-high proportion for my liking...

I have, in fact seen this first hand having had a business partner go down in flames... 20 years ago it was. And about this time of year too; and I find myself at home on a Sunday afternoon, hatches-battened against the cold of the day reflecting on where I was and how I was feeling back then... The fellow was a graphics designer who'd moved into print (as well as operating as an advertising agency). The story goes that he'd been inspired when visiting some big trade show by all the Rolls and Bentleys in the car park. Apparently all belonging to printers (not designers or publicists). So he'd decided to really GO for it! Through sheer front he'd landed a huge contract to write, handle the PR for and typeset the property papers sent out by a large building firm in the far West of Scotland. And re-mortgaged his house et all to the tune of some £150K (the price of three nice Victorian Semis back in 1989) to buy in print machinery so he could print it too...

What he hadn't calculated for was the fact that this machinery was fickle and required a skilled hand at the tiller. It wasn't (as it had been sold to him) a 'one touch' process. Nor had he figured for the fact that buying in the (very expensive) skills he needed would destroy the margin he'd calculated on the deal! THEN there was the fact that said building firm was run by two Brothers who must be among the most disagreeable pair of wee sheisters I've ever met. they strung him along for months with late payments and excuses before eventually just stiffing him for what they owed!

To cut a long story short he lost it all. Fortunately I had the capital to buy out his half of the business we had together. But things got as manic as me spending a Sunday afternoon physically bricking up the connecting doors between the adjacent units we had once shared... And watching his Mrs lose not just her home but much of her sanity in the process... (the poor woman had a breakdown). My friend,stoic as ever, bouncing his last bounce...

I learned a lot from that incident.....

I was just in my late-20's then and my friend approaching 50. Naturally at that age you assume the elder has the upper hand in terms of experience and knowledge, sound judgement etc... I'd quelled my internal questioning about putting one's entire worth and more at risk... On machines he didn't know how to work properly! Dismissed my doubts over being so dependant on a single (and in my opinion) less than integruous client...

The real death-knell for that one was the bank pulling their support... I'd to sit and listen to him mourn the loss of his business. And had every sympathy. For he was a friend; there was no point my adding to the agony...

But the grim reality was that my instincts had been right all along. The bank had little choice but to pull the plug. for sadly the game my friend had been playing WAS just that. It was all front. He had simply been apeing the 'playas' he'd seen at these big exhibitions. And funding that fantasy using borrowed money....

His big contract? The one he'd based all his borrowings on? Turns out these two knew a mug when they seen one. The Post Office as it was at the time had frozen £3/4 Mil of their bank account in respect of work they'd billed the P.O. (and been paid) for on various buildings all over Scotland that had never been done.... A huge fraud in other words.

My friend had been too keen to schmooze and be schmoozed... He'd been taken in by their front; enamoured by the plush boardroom and the Brothers' Savile Row Tweeds... He HADN'T done the due diligence on them! Because if he had he'd have discovered (among other things) that the guy supplying them with bricks was doing so on a CASH on delivery basis! wouldn't even accept a cheque off them!

They remain firmly on our blacklist even today!

...As it happens my friend wasn't a bad bloke. Nor even a particularly stupid bloke... He just bought in to a fantasy; a dangerous fantasy as so many did during the 80's. As Dell-boy used to say 'he who dares'.... So desperate was he to live the dream that he'd stepped well beyond his area of expertise. Well beyond his means... and well beyond reason...

Sadly... He wasn't to be the last fellow like that I'd meet. Risks are necessary in business; but they need to be calculated, logical, based on fact, and mitigated by due process and due diligence... Being a risk-taker is one thing. Being a chancer is something else, and I think it's the latter that Sugar is alluding to...

 

[Scottish Business Owner]

I think the "Disney World" comparison is pretty accurate. Like it's been said in the article the last 10 years haven't been the norm in terms of banks attitude to lending and the last 12-18 months should certainly have taught them that that attitude needs to change.

I've read in a few places recently that the Government/HMRC's time to pay system may actually be artificially keeping businesses in business and that when they eventually decide enough is enough that this may well be the time when we feel the biggest impact.

To be fair though (and I work with businesses on a regular basis just now who are exposed to the current environment) the rules have changed drastically in terms of what a bank sees as a safe bet. Ultimately banks need to lend money or they dont make any. People can talk about us coming out of recession but I dont think it's actually over with yet.

I'm genuinely worried about small businesses just now who are dependent on bank lending because I suspect the doors might be getting slammed shut more and more often. It's very easy for these business groups and indeed the media to shout about banks not supporting businesses when they themselves have been bailed out by the tax payer but the reality is alot of these businesses shouldn't be able to borrow more money in the first place.

On the otherhand though should the support be there purely to protect jobs because as Peter rightly points out it's employees that suffer more than anyone else, they pay the ultimate price which on the most part they have nothing to be blamed for.

Matt's experience with his friend above although devastating does highlight some real issues. Never be too dependent on any one customer because it's a recipe for disaster and make sure you know who you are dealing with and do all the diligence you possibly can.

 

[Former Member 1]

I think there's something more fundamental to be learned from my experience though and that's realism...

Too often I happen across people that are living a dream and that dream is to be a businessperson. That or they've hooked on to the 'Howards Way' (yes .. I know you're too young to remember that ) fantasy of what business is all about.... In these circumstances failure is almost guaranteed anyway. Don't get me wrong; I'm not to any extent an apologist for the banks. And yes, the protection of jobs is paramount....

But, as was the case in the late 80's, there has over the past decade been a rise in a 'fantasy football' style of management... THAT's gotta change!

Let's put it this way... what's real business and what's not...

Some lass sitting in her dining room making jewellery maybe turning over an honest-to-God few hundred a month. Or some tube with a website and some front trying to pass himself off as some sort of forensic web guru doing £800K a year....

Sadly the former's too rare and the latter's too common....