Valuable Advice from Workshop 3: Bulletproofing Your Business & Capitalising on Opportunities Available in Uncertain Times

The penultimate workshop in the 2008 Business Intelligence Series entitled “Bulletproofing your business and Capitalising on Opportunities Available in Uncertain Times” took place at the Stamford Hotel on Wednesday 8 October on a day as uncertain perhaps as any since the Depression.

Introducing the topic and the speakers Mike Whale, a consultant at Lowndes Associates, noted that the credit crunch which had developed as a consequence of the recent turmoil in global financial markets was beginning to affect the New Zealand economy. He commented on the fact that at least two major projects had been postponed in recent days with lack of credit or cost of credit, or both, being given as significant reasons for the postponement.

He also noted that in his experience too few businesses recognised impending insolvency, and that this often led to the loss of any opportunity to put into practice a strategy for recovery.

The three speakers, Ross Verry, John Waller and Wayne Brown provided thoughtful comment and insights from their own experiences on business survival techniques. Each speaker made the point that preparation for the workshop was made more difficult, on a day by day basis, by the changing world financial landscape.

A number of key business survival strategies were discussed including:

Strong Balance Sheet: The need to strengthen balance sheets was identified as critical to survival in uncertain times. One suggestion that resonated with participants was to consider going backwards in order to go forwards by disposing of non core or under performing assets in order to consolidate and to strengthen the balance sheet for future growth.

There was also general agreement that a focus on profitability through careful control of costs and protection of margins made good sense at all times but especially in uncertain times.

There was a suggestion that, as a general rule, New Zealand managers were not nearly aggressive enough in cutting out costs and inefficiencies.

Information: Speakers agreed that having, understanding and acting upon timely accurate and relevant information was key to business survival in uncertain times.

Without the ability to consider such information, business owners and managers cannot know their businesses intimately enough to enable sound commercial decision making.

It was noted that one of the constant features of failed businesses was the reluctance or failure of business owners or managers to take the tough decisions when confronted with unwanted information.

However, outstanding businesses have outstanding leadership who do the simple things well including focusing on strategy, building a strong culture and offering change but none of this could be achieved without a detailed knowledge of the business. In this regard information, particularly information relating to cash flows, is key.

Communication: Recognising that in uncertain times businesses often find themselves under financial stress there was a very clear message to keep open the lines of communication with all stakeholders.

The comment that “bankers hate surprises” surprised no-one, nor did the advice “don’t take a surprise to a banker without also taking a solution”.

Relationships: Aligned to the issue of communication is that of building and protecting business relationships. Uncertain times affect all business sectors and it is therefore perhaps more critical to consider business relationships in uncertain times. It is very hard to replace existing relationships when time are tough.

A number of “golden rules” for dealing with uncertain times were postulated by the speakers one of whom suggested business owners consider an old Chinese proverb “In hurricanes – build windmills” as a guide.

But overall there was general agreement that New Zealand businesses, being part of the world economy, face the most significant financial sector crisis since the Depression.

All agreed that such circumstances offer opportunities, as well as the more obvious dangers, and there were a number of suggestions for positive action including:

On balance the workshop emanated a cautiously optimistic tone. Certainly there was widespread recognition of the extent of the global credit crunch and subsequent share market declines, but each of the speakers offered the hope that in such uncertain times there can often be many winners.

That, of course, remains to be seen.