We have like many UK small businesses now experienced a sharp downturn. And as a lot of our business is to the financial sector which the ecomomic downturn has hit hard, thus impacting on us.
We are however, through efficiency and cost-cutting measures staying in profit even though we have seen a 33% reduction in our forward sales.
This has been achieved by reducing our workforce by 33% through a combination of natural wastage and redundancies, meaning we are a now a very lean outfit, where everyone has taken on new roles and responsibilities and learnt new skills.
We have all become more efficient at the tasks we perform and everyone mucks in helping everyone out.
I have cut back our sales and marketing budget by 80%, leaving us to focus on our core and existing customers, and waiting for an upturn in the economy before agressively marketing again.
I have set our 2010 budget on expecting a 50% drop off in business, meaning that anything better than that means we make a profit.
I don’t believe a word the government tell us about the economy, and think the recover is unlikely to happen before 2011.
Although we have experienced a downturn I am so proud that my staff, most of who have been with me many years have risen to the challenge that the downturn, recession and limited redundancies has brought…
They have come up with lots of new ideas, and that coupled with our software development project which we have boring named www.askgroup.net we are very very confident about the future, even though we all know the next 18 months will be incredibly tough.
In 21 years of business I have never before had to make people redundant, until now.
I have managed to keep it to just 4 members of staff, but it is still a very stressful and depressing thing to do, I just hope I never have to do this again!
However much it feels horible I don’t feel guilty, firstly because it is not of my making, I am just at the mercy of economic circumstances, and secondly by making the redundancies I have when I have which is early rather than too late, I will have protected the jobs of all my other staff, and my job of course!
The last thing I would want to do is go and work for someone else after 21 years being self-employed!!
I may not be a fan of the current Government’s economic strategy, as history has shown us that printing money and getting further into debt normally criples economies, but in a credit crunch where banks have stopped funding small firms, getting a loan for an investment project is the sort of thing that will help the economy in the long term!
We need to continue to invest in systems for the future and I have planned the most amazing Translation Company and Online Print Management Systems, automating much of our Project Management, and giving Clients and Suppliers access to all their work. It will increase our Project Management efficiency by 60% and cut our supplier costs by up to 20%, so it would be madness not to continue with this investment, even though it will cost nearly £200k to develop!
With the help of our Lloyds Bank Relationship Manager I applied for a £100k Small Firms Loan Guarantee Scheme Loan today, that the Government keep mentioning!
With our future orders at a 2 year low do I bury my head in the sand and hope things improve, or take the depressingly big decision and make some staff redundant and streamline the business, in order to be stronger in the long term, and enabling us to invest in the right areas so we come though the recession a stronger, leaner company.
The very fact that the government are having to print money to negate the effects of deflation shows how ill our economy really is.
Sterling could come under emormous pressure, and ultimately hyper inflation.
And if our current economy comes under inflationary pressure in its current state, requiring higher interest rates we could see 10% unemployment, business failures on a scale unseen in our lifetimes and a level of government borrowing that would take decades to sort out.
The problem with politicians from all sides is they are mostly short termist.
Rarely do we see policies that are unpopular and for the greater long term good that probably won’t make an impact until well after the politician has left office or been moved upstairs where they don’t have to answer to us, their constituents!
Some drastic long term action is required to get the economy moving, and some has miraculously been taken.
There is no way a 2.5% interest rate cut will have any meaningful effect, and if it does it is the wrong effect.
We have a severe credit crunch, and loss of credit facilities meaning people and companies cannot obtain funds to spend. A 2.5% VAT decrease is headline grabbing but not a solution.
All a VAT cut does is increase the chance of deflation, then when it is raised again in 13 months effect inflation. Large overnight changes in inflation is not a sensible stable policy.
And how much of the VAT cut is going to actually be spent by consumers on cheap goods imported from China made from oil based products? Our VAT giveaway is probably going to help the Chinese and Middle East economies as much as our own!
I am not a politician and wish my blog and my company to remain non-political with no political agenda. However if I was the CEO of UK plc not a small company and had no need for votes my immediate policies would be:
Scrap the 2.5% VAT increase.
Invest in infrastructure projects that benefit the country long term such as high speed cable internet and communications to the whole country, huge investment in green and carbon neutral energy solutions reducing our energy reliance on oil and gas, investment in flood defences, investment in modern IT equipment in every classroom. Upgrading the railway network. All these projects bring jobs to UK workers and give society as a whole a long term benefit.
I would put a small import tarif tax on all goods manufactured outside the EC and USA, using that money to specifically assist UK businesses and the banking sector.
I would underwrite commercial sector business loans for a period of 3 years with the banks, allowing companies to continue to invest and survive the downturn, and I would also allow companies to borrow up to 90% of their combined property and balance sheet values at 2.5% above Bank of England base rate.
I would scrap stamp duty on property for a period of 12 months and review that in 12 months time.
I would reduce company National Insurance contributions by 3% for 12 months, to encourage companies to employ staff rather than lay them off.
I would underwrite all residential and commercial mortgages for 3 years (rather than just the residential mortgages up to £400k for 2 years).
This way far fewer companies go bust, probably 1 million less people will be made redundant (costing the tax payer much less), less houses would be sold at stupidly low prices at auction helping stop a property market crash, and by putting an import tax on goods from cheap markets EU and US workers are compensated from goods being purchased made with cheap labour, hence the playing field is levelled slightly - if only from the side of a mountain to a hill!
I want to invest in my company and currently require a small additional £250k loan to to this that will ultimately create 20 new jobs and make us more profitable, hence adding hugely to the exchequer. However my bank is cautious and without many of the above measures I fear like many other businesses will have to try to make savings elsewhere if we need to invest.
The ASK Group in Bury St Edmunds is fighting back against the recession and credit crunch by continuing its investment policy and has seen this pay off spectacularly.
October was ASK’s record ever month with over £285,000 of new orders; more than £80,000 higher than their previous record month in 2007.
Celebrating 20 years in business this very month, ASK has invested this year in ISO9001, a 20Mb leased line, 2 new servers and a modern VOIP telephone system.
“Our recent investment and hard work seems to have produced amazing results”, said ASK’s founder and Managing Director earlier today. He continued, “our new clients have included Microsoft, amongst others, which I am very proud about.”
“I am certainly not complacent.The credit crunch has seen the value of my commercial premises drop by 30% and my residential property by 15%, which in turn affects the amount I can borrow to fund our business. However, I believe that real businesses and real people still need real work performing, recession or no recession. So whilst I believe people and companies have a demand or need for our services I will continue to invest all my time and money ensuring we can meet and increase that demand.”
ASK operate in a number of B2B sectors, are one of the UK’s leading translation companies, a leading digital print on demand provider, an ISO9001 website design and development company and run serviced offices in Bury St Edmunds. For further information visit www.askgroup.co.uk or telephone 01284 777900.
Like many others I run what I believe is a successful company.
And as I started it myself with no cash behind me, and have never sought external investors, it is inevitably funded on credit and debt. Again like most other UK small and medium sized companies.
Our balance sheet is obviously positive, so as long as our clients pay us we can pay all our suppliers, all our salaries, all our bank borrowing, and still have some left over.
But my BIG QUESTION is what do we all do if the banks wont fund us?
My late Saturday night after a beer thinking aloud is we could all enter into an exchanging goods and services for some form of equity investment, all becoming investment banks without exchanging cash.
We all then have a vested interest in each others success?
Let me know if you think it is a good idea or yet another thinking aloud silly idea to keep the UK economy lubricated!