Can we learn from history? That we are in difficult times is obvious to all but apart from policies designed to meet day to day problems as they occur has anyone given much thought to how we will extract ourselves from this recession? We are entering a new world - one far removed from Whitehall and I believe that the ruling classes have misunderstood the prevailing mood "on the street". Even today, from very senior personnel, I have heard predictions that we will all be back "to normal" in 18 months time. But exactly what is normal? Certainly not the unrestricted consumer borrowing and spending of the last 10 years. That was an artificially created boom built on sand and which will take far more than 10 years to correct.
Patterns of behaviour are changing as jobs are lost and more importantly the fear of losing your job increases. This caution and desire to restrict and repay borrowing will - hopefully - lead us back to a more sustainable way of living within our means. But who is it that will lead the comeback; be the driving force for future growth and job creation? Not, in my opinion, the large multi national firms. Many of these resemble the last days of the dinosaurs - large, unwieldy creatures unable or unwilling to adapt to the quickly changing climate. Real growth will occur from the small business sector, new start ups and enterprising individuals with the ideas, passion, belief and knowledge to exploit the rapidly changing market.
So what are we doing to encourage these future "white knights" to ride to our rescue? Not a lot as far as I can see. Central government still fails to understand the significance of this sector of the business community and caves in to sophisticated lobbying by "big business" with handouts remarkable in their size. As usual politicians want an immediate headline, an easy solution and fail to show the leadership and vision necessary to safeguard our future.
History can teach us lessons and help us in determining our future. So let us look back 30 years to the recession of the early 1980's. Then an innocuous, low cost and unheralded scheme had perhaps the largest influence on providing 20 years of prosperity. The Enterprise Allowance Scheme. Much derided, it acted as the catalyst for literally tens of thousands of new businesses to be created, hundreds of thousands of new jobs and lifting millions out of disadvantage.
A simple scheme it offered a meagre allowance of £40pw to unemployed individuals to start up in business. Combined with training and support it spawned an increase in entrepreneurial culture at a rate not seen before or since. Of course some people played the system just to get an increase in benefits but these were a minority and due to the amount of work required to start up in business were soon identified. But it gave just enough support to encourage those who would otherwise have not taken the plunge and started their own business, it allowed the family to survive in those first few crucial months as the business was created and more importantly than ANY other benefit it gave the prospect of helping others with no cost at all as employees were taken on by these fledgling businesses.
The time is right for a new Enterprise Allowance Scheme to combat what may become the worst downturn in living memory. Taking into account inflation since 1980 offer say £100pw to anyone who is unemployed undergoing training to start in business. Guarantee this for 12m and watch the number of starts rocket and revenues increase. Without putting exact figures on the benefit to the UK it can be seen that this is a true "win-win" situation. Jobs are going to be harder to come by and so people will sit on unemployment benefit for longer without this positive action. Whilst the allowance would be c£5k pa extra the number of people coming off benefits will increase as they start up in business, making a positive contribution by paying taxes and creating more jobs via their growth.
The benefit to society would be immense and I would estimate that the cost to the public purse would be negligible. What is there to lose? If no-one starts in business then there is no cost to the exchequer, for every business that does start there is a £5k pa cost but savings on benefits as they come off these quicker than would otherwise be the case and the added benefit of new jobs being created. This is the kind of solution that we need in these troubled times, but who has the vision to make it happen?
Monday, March 16, 2009
Tuesday, March 10, 2009
One for all and all for one.
For many years I have been a part of a small peer review group that meets up a few times each year to assist each other on a variety of different subjects. I rate the importance of these meetings extremely highly and they have proved to be of immense worth to each of the participants.
So how do they work? I would venture that for a successful group to operate there needs to be a few clear ground rules:
1. Each of the participants is from a seperate region to bring differing viewpoints to the debate and ensure that there is no competition issues.
2. The participants need to be of a similar mindset to enable appropriate open discussion.
3. You need to be prepared to be entirely open about all aspects of the business - from finances to people, systems to service.
4. You agree to rotate meetings with the host dictating the agenda as relates to their company and any specific problems they are facing.
5. You meet 3 or 4 times a year.
Our group has consisted of 4 or 5 agencies with a core of three ever present members. As you would expect there are some changes which occur as people move on but the guiding principles remain unchanged - a desire to learn, assist and support without passing judgement. It is no co-incidence that the members of this group are amongst the very best agencies in the country and have grown at a rate far in excess of the average. Where others have declined and failed we have prospered due in no part to the advice and support that we can call upon from each other to make the most of opportunities that are presented to us.
A visit typically lasts two days - starting at lunchtime, working right through dinner and finishing in the early afternoon the next day. At our early meetings we learnt about the general position of each agency and the issues which they were facing; this is vital background information which assists as we have moved on to helping solve specific problems identified by the host.
The range of topics discussed over the last 5 years is wide and varied and includes staffing; financial control; service offering; diversification plans; strategic direction and succession planning. In visiting an agency I get as much as I would as host. I learn someting new, get a chance to compare important issues and potential solutions, understand the thinking behind decisions and perhaps most importantly come back keen to implement what I have learned.
Our review group is a source of expert consultancy advice, available free as and when needed and perhaps most importantly it is objective, based on experience and cuts straight to the point! No allowances for ego's or sensitivities made!
Our experience has inspired other such groups to set up, from gender specific to role specific, and it has provided a ready source of help for our staff on any specific issues that they may face. A most useful network to tap into and a real example of collaborative working with no hidden motive.
I would exhort others to follow this example if you are serious about improving yourself and your business. The model can work in any industry and at any level. The most important thing is trust - do you still have the capacity to trust and be trusted?
So how do they work? I would venture that for a successful group to operate there needs to be a few clear ground rules:
1. Each of the participants is from a seperate region to bring differing viewpoints to the debate and ensure that there is no competition issues.
2. The participants need to be of a similar mindset to enable appropriate open discussion.
3. You need to be prepared to be entirely open about all aspects of the business - from finances to people, systems to service.
4. You agree to rotate meetings with the host dictating the agenda as relates to their company and any specific problems they are facing.
5. You meet 3 or 4 times a year.
Our group has consisted of 4 or 5 agencies with a core of three ever present members. As you would expect there are some changes which occur as people move on but the guiding principles remain unchanged - a desire to learn, assist and support without passing judgement. It is no co-incidence that the members of this group are amongst the very best agencies in the country and have grown at a rate far in excess of the average. Where others have declined and failed we have prospered due in no part to the advice and support that we can call upon from each other to make the most of opportunities that are presented to us.
A visit typically lasts two days - starting at lunchtime, working right through dinner and finishing in the early afternoon the next day. At our early meetings we learnt about the general position of each agency and the issues which they were facing; this is vital background information which assists as we have moved on to helping solve specific problems identified by the host.
The range of topics discussed over the last 5 years is wide and varied and includes staffing; financial control; service offering; diversification plans; strategic direction and succession planning. In visiting an agency I get as much as I would as host. I learn someting new, get a chance to compare important issues and potential solutions, understand the thinking behind decisions and perhaps most importantly come back keen to implement what I have learned.
Our review group is a source of expert consultancy advice, available free as and when needed and perhaps most importantly it is objective, based on experience and cuts straight to the point! No allowances for ego's or sensitivities made!
Our experience has inspired other such groups to set up, from gender specific to role specific, and it has provided a ready source of help for our staff on any specific issues that they may face. A most useful network to tap into and a real example of collaborative working with no hidden motive.
I would exhort others to follow this example if you are serious about improving yourself and your business. The model can work in any industry and at any level. The most important thing is trust - do you still have the capacity to trust and be trusted?
Wednesday, February 25, 2009
Can we get back to common sense banking?
Exactly a month ago I wrote about the banking crisis and I was suggesting that we need to rebuild trust between bankers and their clients. Looking over the last four weeks many initiatives have been announced, record losses are in the public domain and we are on the third (I think!) banking bail out. All of this but we do not seem to be learning from the mistakes of the past. This is so frustrating and leads me to believe that some people think that a political solution is more important than a real solution. We have an excellent opportunity to reign back the credit culture fuelled by the "must have now" demands of people who do not know what it is to work and wait for something.
Perhaps I am showing signs of old age but I was brought up to appreciate the need to save and avoid the misery of too much credit. My background is very much blue collar working class but we never lived beyond our means - yet I never felt deprived in any way. The country would have a much sounder platform from which to grow and thrive in the future if we started to choke off the easy credit culture so prevalent.
What frustrates me is that Banks and others are being pushed to maintain historically high levels of lending and, for example, it is made easier to get 100% finance on a new car just when we need to stop and return to normal.
If we laid down in law that a deposit of at least 10% was required for a new house and no mortgage lender could exceed these levels then house prices would normalise and people would not be faced with a desperate need to jump on the roller coaster ride for fear of being left behind. It would reduce the numbers of repossessions as people would only take on a mortgage when they have shown an ability to save. Undoubtedly some speculators would be unhappy but we should not base a housing market upon the gamble of potential capital gain. Similarly with say a 25% deposit on any new car.
The same is also true of businesses. Whilst I have sympathy for workers at LDV, the truth is that the company has not made a profit in four years and if it needed cash to stay in business then its owner need only sell one of his yachts - not appeal for a government bail out. Businesses need cash to survive as I have previously pointed out and banks have an important role to play with short and long term lending - but only to viable businesses. The recent story about a pampered celebrity chef left me very annoyed. Here was someone wanting the bank to put in 100% of the money needed to keep his restaurant chain going but refused to place any of his own wealth at risk either in cash or security. Exactly why does anyone think a bank should take this action? If the chef in question was confident of success then he should have backed his feeling like any good entrepreneur with his own cash. Not to do so and then go on a public whingeing session is doing a disservice to real business people.
So I am advocating a return to good old fashioned lending combined with a savings culture. It will mean a perod of decline whilst the markets readjust but in the long term it is the only way forwrad for the country. Whilst we are at it perhaps we could cap the ability of governments to borrow too! It saddens me the levels of debt that our children will inherit through the selfish actions of our generation.
Perhaps I am showing signs of old age but I was brought up to appreciate the need to save and avoid the misery of too much credit. My background is very much blue collar working class but we never lived beyond our means - yet I never felt deprived in any way. The country would have a much sounder platform from which to grow and thrive in the future if we started to choke off the easy credit culture so prevalent.
What frustrates me is that Banks and others are being pushed to maintain historically high levels of lending and, for example, it is made easier to get 100% finance on a new car just when we need to stop and return to normal.
If we laid down in law that a deposit of at least 10% was required for a new house and no mortgage lender could exceed these levels then house prices would normalise and people would not be faced with a desperate need to jump on the roller coaster ride for fear of being left behind. It would reduce the numbers of repossessions as people would only take on a mortgage when they have shown an ability to save. Undoubtedly some speculators would be unhappy but we should not base a housing market upon the gamble of potential capital gain. Similarly with say a 25% deposit on any new car.
The same is also true of businesses. Whilst I have sympathy for workers at LDV, the truth is that the company has not made a profit in four years and if it needed cash to stay in business then its owner need only sell one of his yachts - not appeal for a government bail out. Businesses need cash to survive as I have previously pointed out and banks have an important role to play with short and long term lending - but only to viable businesses. The recent story about a pampered celebrity chef left me very annoyed. Here was someone wanting the bank to put in 100% of the money needed to keep his restaurant chain going but refused to place any of his own wealth at risk either in cash or security. Exactly why does anyone think a bank should take this action? If the chef in question was confident of success then he should have backed his feeling like any good entrepreneur with his own cash. Not to do so and then go on a public whingeing session is doing a disservice to real business people.
So I am advocating a return to good old fashioned lending combined with a savings culture. It will mean a perod of decline whilst the markets readjust but in the long term it is the only way forwrad for the country. Whilst we are at it perhaps we could cap the ability of governments to borrow too! It saddens me the levels of debt that our children will inherit through the selfish actions of our generation.
Friday, February 20, 2009
The lonliness of the long distance runner
Being an entrepreneur, running a business, is inherently a lonely existence. Whilst you are at the centre of everything that is happening in your company and aware of changes within your industry, all too often there is no-one to turn to when making vital decisions. I equate running a business to completing a marathon – it is a long journey; at the start there are high levels of enthusiasm, excitement and anticipation; difficult challenges to encounter and overcome but there is always a goal in sight and the sense of achievement in reaching it is difficult to describe to anyone who has not run the race.
Any serious and dedicated athlete realises the need for a coach and mentor to help them reach their goals and yet in business so few entrepreneurs follow the same path. No doubt without a coach you could run a marathon but will you ever realise your true potential? Why is it, when it has been proved that businesses which take advice and support fare better than those which do not, that there is an inherent reluctance to access these extra “tools” which may give you a competitive advantage?
Perhaps it is the popular hunt for instant success that makes many people treat business like a sprint. I would argue that, in business, long term sustainability is far more important than short term glory. The current example of many banks should highlight the damage that can be done by the lack of long term planning – learn from their mistakes.
So how can you help combat the feeling of isolation and tone your entrepreneurial abilities ready for the marathon ahead? Accessing help is easier than you would expect – finding quality support is slightly harder.
Firstly do not get hung up on the definitions of advice, mentoring, support, incubation etc – let the academics worry about such minutiae – most people want a combination of all of these at different points in their business life. You need your own personal “coach”. Source someone who you can trust; they should be independent, impartial, experienced and most of all approachable.
The next step is to use them effectively. They are not there to run your company but to help you develop your skills, hone your decision making and to bounce ideas off. Their role is essentially passive and most of the effort should be made by you but through their guidance you will develop solutions to business issues.
So being an entrepreneur can be lonely at times but those who seek out help and support along the way will develop faster and most importantly reach their goal before their competitors beat them to it.
How do you start such a search? Scour your networks to find someone who meets the above criteria or contact a leading independent business support organisation such as NWES who can help you.
Any serious and dedicated athlete realises the need for a coach and mentor to help them reach their goals and yet in business so few entrepreneurs follow the same path. No doubt without a coach you could run a marathon but will you ever realise your true potential? Why is it, when it has been proved that businesses which take advice and support fare better than those which do not, that there is an inherent reluctance to access these extra “tools” which may give you a competitive advantage?
Perhaps it is the popular hunt for instant success that makes many people treat business like a sprint. I would argue that, in business, long term sustainability is far more important than short term glory. The current example of many banks should highlight the damage that can be done by the lack of long term planning – learn from their mistakes.
So how can you help combat the feeling of isolation and tone your entrepreneurial abilities ready for the marathon ahead? Accessing help is easier than you would expect – finding quality support is slightly harder.
Firstly do not get hung up on the definitions of advice, mentoring, support, incubation etc – let the academics worry about such minutiae – most people want a combination of all of these at different points in their business life. You need your own personal “coach”. Source someone who you can trust; they should be independent, impartial, experienced and most of all approachable.
The next step is to use them effectively. They are not there to run your company but to help you develop your skills, hone your decision making and to bounce ideas off. Their role is essentially passive and most of the effort should be made by you but through their guidance you will develop solutions to business issues.
So being an entrepreneur can be lonely at times but those who seek out help and support along the way will develop faster and most importantly reach their goal before their competitors beat them to it.
How do you start such a search? Scour your networks to find someone who meets the above criteria or contact a leading independent business support organisation such as NWES who can help you.
Thursday, February 19, 2009
A hive of ACTivity?
I was intrigued to read about the latest initiative from the National Federation of Enterprise Agencies (NFEA) - ACT a network for enterprise support individuals. Drawing from their website ACT is "Especially developed for individuals working within the enterprise sector....... a unique network for like-minded professionals who offer services such as advice, coaching, mentoring and training to those starting and running small businesses".
It is certainly an interesting development from the NFEA which is aiming at the individual rather than the organisation, which it has traditionally represented. I do believe that there is a gap in the market for such a venture. I was an outspoken critic of much of what the old "Institute of Business Advisors" provided but without doubt there was a role there which needed to be filled. From my perspective since the merger of the IBA with the Chartered Management Institute the needs of the sector have taken a back seat.
Anecdotal evidence would suggest that there is some dissatisfaction amongst previous IBA members so perhaps the NFEA has stumbled across a real opportunity. However there is a danger that they are entering a crowded marketplace without the resources to achieve market share.
Again according to the NFEA website - "ACT members will be able to benefit from a full programme of dedicated activities including training events, CPD, locally-based networking as well as an annual conference." Using its organisational member base the NFEA has access to many hundreds of business advisors and so if this is exploited well there is a potential for real momentum.
I have previously expressed my frustration at the lack of bespoke support for my trainers and advisors (c30 at NWES alone) and so if the NFEA can produce a compelling programme of events we will certainly participate. So what would I like to see? I do not want a repeat of what is already out there so relevance is of prime concern. Regular bulletins are of use as would be some form of formal induction for people new to the profession. Local networking is always welcome but again it needs to be appropriate. High quality speakers that can enthuse and impart knowledge are vital at any event. Most importantly I would like to see the standards in the industry raised with some nationally recognised and policed qualifications.
With the advent of BSSP some industry focus is welcome and so we will be at the inaugural conference in Nottingham on 28 April. Perhaps we are seeing the beginning of a major new force in the industry. Sign up for the conference and you will find out!
www.nfea.com
It is certainly an interesting development from the NFEA which is aiming at the individual rather than the organisation, which it has traditionally represented. I do believe that there is a gap in the market for such a venture. I was an outspoken critic of much of what the old "Institute of Business Advisors" provided but without doubt there was a role there which needed to be filled. From my perspective since the merger of the IBA with the Chartered Management Institute the needs of the sector have taken a back seat.
Anecdotal evidence would suggest that there is some dissatisfaction amongst previous IBA members so perhaps the NFEA has stumbled across a real opportunity. However there is a danger that they are entering a crowded marketplace without the resources to achieve market share.
Again according to the NFEA website - "ACT members will be able to benefit from a full programme of dedicated activities including training events, CPD, locally-based networking as well as an annual conference." Using its organisational member base the NFEA has access to many hundreds of business advisors and so if this is exploited well there is a potential for real momentum.
I have previously expressed my frustration at the lack of bespoke support for my trainers and advisors (c30 at NWES alone) and so if the NFEA can produce a compelling programme of events we will certainly participate. So what would I like to see? I do not want a repeat of what is already out there so relevance is of prime concern. Regular bulletins are of use as would be some form of formal induction for people new to the profession. Local networking is always welcome but again it needs to be appropriate. High quality speakers that can enthuse and impart knowledge are vital at any event. Most importantly I would like to see the standards in the industry raised with some nationally recognised and policed qualifications.
With the advent of BSSP some industry focus is welcome and so we will be at the inaugural conference in Nottingham on 28 April. Perhaps we are seeing the beginning of a major new force in the industry. Sign up for the conference and you will find out!
www.nfea.com
Where has all the cash gone?
Cash Flow - two simple words but they are probably the most important to any business wanting to succeed. In dealing with hundreds of aspiring entrepreneurs every year we see many who are passionate about their product, the exemplary service to their clients or the impact that their idea will have on the community. Few, if any, ever talk about cash flow and yet it is the single most important reason why businesses fail.
Too many people confuse cash with profit and they most definitely are not the same thing. There are many profitable companies who have gone into insolvency through lack of cash flow. If your customers start to delay the flow, through late payment or bad debts, then the money that you have available to pay your creditors is of course reduced. If the creditors will not wait for their money then you may have to enter insolvency if your bank will not step in to inject funds via an overdraft.
Whilst some businesses will produce budgets few compile a cash flow forecast (CFF) and yet in most cases this is just as important. We hear many stories about banks not providing short term finance but this is sometimes due to any lack of information provided by the borrower in the form of a CFF or budget - you have to at least give the impression that you will pay the bank back at some point!
By comparing what actually happens with cash flow against the forecasts it is a useful tool for business owners and can aid planning decisions. It also acts as an early warning system for potentially difficult times ahead. When combined with an analysis of debtor and creditor control it should enable a business to overcome any temporary constriction in cash coming in to the company.
So far, so easy! So why do businesses continually fall into the cash trap? I believe that it is poor planning; effective financial control should provide time to address the issue at hand - too often the first time that a business takes it seriously is when the cheques are being bounced i.e. when the cash has run out. Cash is the oxygen which allows a company to breathe; restrict this and the company will suffer and eventually die.
The old adage that "Cash is King" will always remain true. Perhaps in our credit obsessed culture we have forgotten this but it will be those businesses which adapt quickest that will survive. There are many ways in getting cash to flow. We see it every year in the shops when the sales start - this is merely a cash generating activity designed to overcome traditionally quiet periods. Much stock will be sold at a "loss" but this can be acceptable if margins overall are maintained and it frees up much needed cash.
The High Street is very adept in understanding the importance of cash flow and always quick to react (unmoving stock is "dead" money) but some other sectors have been caught cold by the sudden slum into recession. A good example is the car manufacturers. All have huge stock piles of cars which they cannot sell, expensive work forces to maintain and yet none has taken the bold step of really seeking to reduce this stock level and promote demand by vicious price cuts. There are bargains to be had if you know where to look and how to negotiate but each manufacturer wishes to maintain a price position and yet asks for government help to ease their cash flow!
We need to protect a quality manufacturing industry but if I was in power then I would want to see what the companies are doing to help themselves. Cutting costs is one side of the equation but cutting prices is the other side. Profitability may stall for a year or two with this approach but better that than shutting down completely or saddling the general public with debt for generations to come. I know that if say Land Rover, Jaguar or Nissan were to offer a new car at 50% off then I would be in the queue to buy!
The laws of cash flow and supply and demand are closely linked so why have these basic rules been forgotten in so many struggling companies?
Too many people confuse cash with profit and they most definitely are not the same thing. There are many profitable companies who have gone into insolvency through lack of cash flow. If your customers start to delay the flow, through late payment or bad debts, then the money that you have available to pay your creditors is of course reduced. If the creditors will not wait for their money then you may have to enter insolvency if your bank will not step in to inject funds via an overdraft.
Whilst some businesses will produce budgets few compile a cash flow forecast (CFF) and yet in most cases this is just as important. We hear many stories about banks not providing short term finance but this is sometimes due to any lack of information provided by the borrower in the form of a CFF or budget - you have to at least give the impression that you will pay the bank back at some point!
By comparing what actually happens with cash flow against the forecasts it is a useful tool for business owners and can aid planning decisions. It also acts as an early warning system for potentially difficult times ahead. When combined with an analysis of debtor and creditor control it should enable a business to overcome any temporary constriction in cash coming in to the company.
So far, so easy! So why do businesses continually fall into the cash trap? I believe that it is poor planning; effective financial control should provide time to address the issue at hand - too often the first time that a business takes it seriously is when the cheques are being bounced i.e. when the cash has run out. Cash is the oxygen which allows a company to breathe; restrict this and the company will suffer and eventually die.
The old adage that "Cash is King" will always remain true. Perhaps in our credit obsessed culture we have forgotten this but it will be those businesses which adapt quickest that will survive. There are many ways in getting cash to flow. We see it every year in the shops when the sales start - this is merely a cash generating activity designed to overcome traditionally quiet periods. Much stock will be sold at a "loss" but this can be acceptable if margins overall are maintained and it frees up much needed cash.
The High Street is very adept in understanding the importance of cash flow and always quick to react (unmoving stock is "dead" money) but some other sectors have been caught cold by the sudden slum into recession. A good example is the car manufacturers. All have huge stock piles of cars which they cannot sell, expensive work forces to maintain and yet none has taken the bold step of really seeking to reduce this stock level and promote demand by vicious price cuts. There are bargains to be had if you know where to look and how to negotiate but each manufacturer wishes to maintain a price position and yet asks for government help to ease their cash flow!
We need to protect a quality manufacturing industry but if I was in power then I would want to see what the companies are doing to help themselves. Cutting costs is one side of the equation but cutting prices is the other side. Profitability may stall for a year or two with this approach but better that than shutting down completely or saddling the general public with debt for generations to come. I know that if say Land Rover, Jaguar or Nissan were to offer a new car at 50% off then I would be in the queue to buy!
The laws of cash flow and supply and demand are closely linked so why have these basic rules been forgotten in so many struggling companies?
Monday, February 9, 2009
Can you work with the public sector?
I am often asked if it is worth - as a small business - trying to gain business from the public sector. It is not an easy question to answer as it comes with many caveats. I thought that I would outline a few of the main considerations:
- Are you credible? The public sector is very conservative in its procurement and you will not even stand a chance of winning a contract unless you have a credible story to tell. A sole trader is unlikely to make it past the first sift of tenders for say the cleaning of a hospital if they have only ever cleaned domestic properties.
- Why is the tender being publicised? Do your research and find out why the work is being put out to tender. Is it merely a cosmetic exercise done every two years where the existing contractor has been continuously employed for say 10 years. If so you need to carefully work out your chances of succeeding before spending a lot of time on drawing up your bid.
- Is TUPE involved? This element is often overlooked when bidding for a contract. It is a vital consideration as you could end up with a huge extra overhead which is not needed. The rules on TUPE are reasonably clear but do not forget to include this contingent liability in your calculations.
- What is the history of the tendering organisation? Not all public sector organisations are the same and they certainly do not all work in the same way. Has the tenderer a good reputation for working with its chosen contractors or are they constantly re -tendering as business finds it difficult to work with them? This is no different to working with the private sector - there are good and bad people to work with!
- Can I deal with the bureaucracy? Do not underestimate this element. There is no doubt that the public sector has a different way of working which is definitely different to the private sector! It is dangerous to generalise and again good research should help you to determine the reputation of the tenderer. Be aware that decision making is often slow, unclear (try and get someone to admit to being a decision maker!) and frustrating! If you are successful in winning a tender the documentation will be onerous. Before signing any contract ensure that you have had the best advice possible to understand your rights and obligations. Be prepared for interference! Do not expect to get a contract, deliver it accordingly and then get paid! The public sector is notorious for "monitoring", "reporting", "liaison meetings", "interim reviews", "steering group meetings" etc. Factor this into your bid. It will happen so you need to be prepared for it.
- The effect on your cash flow. This is a vital element for any small business. However with a few notable exceptions the public sector is notorious for taking a long time to pay. We have several contracts paid quarterly in arrears which can mean up to 5 months before receiving funds due. Whilst there may be profit in a contract can your business afford the cash implications? Try and negotiate more regular payments. We have found some organisations to be excellent in realising the impact on small businesses and if they trust you there can often be payments in advance or at least "profile payments".
- What is the impact on the remainder of your business? Do not put all of your eggs in the public sector basket. Political changes can mean radical rethinks and so you must retain a balanced portfolio to minimise potential risk. I have seen several companies "crash and burn" due to over reliance on one income stream. Spread your risk!
It can be very rewarding to work with public sector bodies but you need to be aware of the potential impact on your business. As I mentioned it is wrong to generalise but the above points are things that you should consider when an opportunity presents itself. If the conclusions are that it is still worth it then go for it with all you have as it can be a great boost for your business. NWES has many contracts with the public sector and we are delighted with how it has worked for our business. We have had one or two issues with some bodies but the overwhelming majority have been and are a pleasure to work with.
So do your homework and the risk is reduced.
- Are you credible? The public sector is very conservative in its procurement and you will not even stand a chance of winning a contract unless you have a credible story to tell. A sole trader is unlikely to make it past the first sift of tenders for say the cleaning of a hospital if they have only ever cleaned domestic properties.
- Why is the tender being publicised? Do your research and find out why the work is being put out to tender. Is it merely a cosmetic exercise done every two years where the existing contractor has been continuously employed for say 10 years. If so you need to carefully work out your chances of succeeding before spending a lot of time on drawing up your bid.
- Is TUPE involved? This element is often overlooked when bidding for a contract. It is a vital consideration as you could end up with a huge extra overhead which is not needed. The rules on TUPE are reasonably clear but do not forget to include this contingent liability in your calculations.
- What is the history of the tendering organisation? Not all public sector organisations are the same and they certainly do not all work in the same way. Has the tenderer a good reputation for working with its chosen contractors or are they constantly re -tendering as business finds it difficult to work with them? This is no different to working with the private sector - there are good and bad people to work with!
- Can I deal with the bureaucracy? Do not underestimate this element. There is no doubt that the public sector has a different way of working which is definitely different to the private sector! It is dangerous to generalise and again good research should help you to determine the reputation of the tenderer. Be aware that decision making is often slow, unclear (try and get someone to admit to being a decision maker!) and frustrating! If you are successful in winning a tender the documentation will be onerous. Before signing any contract ensure that you have had the best advice possible to understand your rights and obligations. Be prepared for interference! Do not expect to get a contract, deliver it accordingly and then get paid! The public sector is notorious for "monitoring", "reporting", "liaison meetings", "interim reviews", "steering group meetings" etc. Factor this into your bid. It will happen so you need to be prepared for it.
- The effect on your cash flow. This is a vital element for any small business. However with a few notable exceptions the public sector is notorious for taking a long time to pay. We have several contracts paid quarterly in arrears which can mean up to 5 months before receiving funds due. Whilst there may be profit in a contract can your business afford the cash implications? Try and negotiate more regular payments. We have found some organisations to be excellent in realising the impact on small businesses and if they trust you there can often be payments in advance or at least "profile payments".
- What is the impact on the remainder of your business? Do not put all of your eggs in the public sector basket. Political changes can mean radical rethinks and so you must retain a balanced portfolio to minimise potential risk. I have seen several companies "crash and burn" due to over reliance on one income stream. Spread your risk!
It can be very rewarding to work with public sector bodies but you need to be aware of the potential impact on your business. As I mentioned it is wrong to generalise but the above points are things that you should consider when an opportunity presents itself. If the conclusions are that it is still worth it then go for it with all you have as it can be a great boost for your business. NWES has many contracts with the public sector and we are delighted with how it has worked for our business. We have had one or two issues with some bodies but the overwhelming majority have been and are a pleasure to work with.
So do your homework and the risk is reduced.
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