The following article has just been published in the June edition of Suffolk Business Magazine. You can view the magazine online at www.eadt.co.uk/business.

At every business gathering or networking lunch over the past few months, managers and owners of Suffolk companies have been heard commenting that the ones left at the end of this recession will be the strong ones who can take the economy forward.

However, Ian Perry, business adviser from Remedy (previously IDP Consultancy Services Ltd), expresses caution regarding the cyclical nature of recession,

“Companies have been hanging on and it will be a while until they see signs of recovery. They have trimmed themselves back and a lot of them have run everything right down, they’ve not laid staff off but have cut the working week, reduced hours, or cut the packages for staff. It’s a good short term way of retaining the skills in the business and for a smaller company that’s essential”.

“As the recession drags on it becomes harder for those companies and there comes a point when will have to let people go. I think you will find that this year unemployment will start to pick up as they can’t hang on any longer and have to reduce their cost bases.”

Steve Britt, the Managing Director of Anchor Storage Ltd, an established family business, has had to make some difficult decisions,

“It has been a tough year. I put all the staff onto a four-day week (a 20% pay cut) and slashed ALL extras (pensions, occupational health, life insurance, keyman, health cover etc) when business slowed this time last year. It was very hard but it got us through a difficult time”, he remembers. “Last June we went back onto full time but with only a 10% reduction in pay for all staff. We’ve been operating like that since then … but have also lost two ‘Top 10’ customers in that period – one to administration and the other to shrinkage/consolidation.”

“In the last recession, employment law allowed businesses to reduce staff by redundancy quite easily and I think current laws have kept this and subsequent unemployment low. Not only that, the shortage of skilled/trained staff makes businesses reluctant to shed workers.”

Keith Ferguson, partner at the Ipswich office of national accountants PKF (UK) LLP, has some words of encouragement though,

“Overall, I believe that the next two years will be far more positive for businesses than the previous two years.  East Anglia has not suffered as many casualties as other parts of the country and a large proportion of companies are now in a position to take full advantage of opportunities over the next few years.”

“I believe that one of the biggest issues for businesses will be a lack of funding for working capital as many have rightly focussed on getting through the recession, perhaps exhausting all available funding options already, without considering their working capital requirement as they seek future growth. This may, unfortunately, result in further casualties unless businesses continue to speak to their funders and plan effectively.”

So what advice would they all pass on to other businesses to help them with what lay ahead?

Think of ways to offer customers added value:

“We picked up on the idea of “fulfilment,” a natural extension to our business, a while back,” says Steve Britt. “We store, pick, pack and dispatch items for traders on internet auction sites. We store a huge range of goods including massage tables, electric horse clippers and party tents, to name just three!  The traders who use our storage facilities have an E-bay shop and have too much stock to keep in their spare bedroom. The items are imported to us and when orders come, we pick and label the item and it is delivered to the buyer the next day.”

Ask for help early:

“Usually people ask for help too late”, according to Ian Perry. “It can be hard for someone who has been in business for years to accept that they need some guidance. They need to feel comfortable that they can tell you things that possibly even their husband or wife doesn’t know about. A failing business is like a sick patient – the sooner you can identify the illness and start the treatment, the better chance you have of a successful outcome.”

Don’t put off the tough decisions over finance:

“Although the majority of businesses with credit customers apply credit limits on accounts, these are often not stringently applied and customer accounts are allowed to slip more and more into debt, which can be very dangerous,” reminds Keith Ferguson.  “Businesses may also consider seeking an investor.  Although equity funding is more expensive than debt, as it means that the business owners dilute their existing shareholdings, it does offer an alternative option if debt funding is unavailable.  In addition, equity will strengthen the company’s balance sheet and if an investor has industry experience, this can benefit the business in other ways.”

Three experienced businessmen offer their advice….now it is up to Suffolk businesses to make it happen.