Don't Start a Business in the Recession… Not!
by Startacus Admin
Guest writer Jo Haigh talks up taking opportunities, the recession, making money and the importance of cash...
If Location, Location and Location is vital in identifying and enhancing the value of an asset in the property market then cash, cash and cash remains paramount in any business, but never more so than in a new venture in these cash strapped times.
Starting a business in a recession may not be your first choice as an entrepreneur. Whether through desire or as a result of unforeseen circumstances you find yourself in such a position, an enterprise started in a downturn may not be any less successful than one started in a boom. Whatever the temperature of the economy, the key principles of business management need to be adhered to.
There are thousands of management books out there that include such essential ingredients to success as; a business plan, a budget, a marketing strategy and of course a people management and development process. All of which of course are very worthy, maybe even for some particularly institutional investors, a prerequisite. However, in my 25 years of experience of buying and selling over 300 businesses they are ingredients that, without the recipe, cannot be blended into a meaningful dish.
Anyone can be taught to cook, as indeed Jamie Oliver has proved, but only a few will make truly great chefs. In every recipe one or two special ingredients are what actually help turn the dish from a simple supper into a magnificent dinner. In business this is cash. You simply won’t survive if you;
Can’t make it - Free it up - Access it from alternative sources if your own particular well has dried up. This ingredient has always been particularly special but now it is particularly scarce.
Here is my recipe for cash management:
| Receivables | Trade debtors | x 365 | 1500 | x 365 | = 45 days |
| Sales | 12,000 | ||||
| 1500/45 | = | £33k |
| Inventory | Stock | x 365 | 900 | x 365 | = 41 days |
| Cost of goods sold | 8,000 | ||||
| 900/41 | = | £22k |
| Purchases | Trade creditors | x 365 | 700 | x 365 | = 26days |
| Cost of goods sold | 10,000 | ||||
| 700/26 | = | £27k |
So you now have a recipe and the all important secret ingredients – so it can’t fail… or can it?
Life’s virtues include faith, hope and charity and behaving with such moral fortitude must surely bring its rewards.
Business virtues are, in fact, not too different. Replace faith with belief and enthusiasm in your products and services; it’s seen many a despondent entrepreneur through dark times. Instead of hope how about intuition for the truly talented, this will rarely let you down. Finally there is charity, a new business is very greedy and not just for cash but of your time and energy. Like an athlete training for a marathon, it will sap your strength and bleed you dry. So practice patience, a skill many entrepreneurs sadly lack, but which if harnessed can deliver more than any other business virtue.
Some make millions by putting all their resources on a single play of red or black, but the shrewd wait, judging the market and then seizing the opportunity, watching as the avaricious and foolhardy stand bereft. Being patient doesn’t mean doing nothing, far from it. It means optimising the moment in a downturn. There will be lots of these around for the shrewd and savvy entrepreneur, so your choice should be someone who:
Makes things happen
Watches things happen
Or someone who rather sadly says ‘what just happened then?’
Seen in the right way the recession brings not just problems and disasters, which it certainly does, but also opportunities to be grasped. The question is, are you up for the challenge and the ride of a lifetime?
Jo Haigh – Partner at fdscfs and Cracking Boards
Email - Jo.haigh@fdscfs.com / info@crackingboards.com
Telephone - 01924 376784 / 01484 860501
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Published on: 27th November 2012
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