It has not been an easy time for small and medium size businesses over the last five years. Those that are still standing after the financial crisis that threatened the economies of countries all over the world are breathing a sigh of relief. The problem came about because the banks took too many risks when lending money out of greed. It made their books look healthy, and the executives took massive bonuses as their reward. Little did people expect what was to come. I spoke to many business owners who told me they are not out of the woods yet; there is still a way to go before they can risk borrowing to invest in their company.
How have some businesses weathered the storm while others went to the wall? It is an area of great interest, so I set out to investigate company strategy through tough financial times.
Pc: Smith Greg
The first rule is to sell stock. When the climate was sweet, two of the business owners decided to buy it. Their warehouses were full, and things looked good. When the financial markets took a dive, it is their assets that helped them maintain steady business and keep the wolves from the door. The banks stopped lending to many business owners, so they needed to turn that stock into cash.
Another strategy was to streamline the business to reduce costs. The wise strategists used the services of expense reduction analysts to identify and deal with unnecessary financial drains on the company. That could mean changing its credit card processing company, or finding a different accounting firm to save money. In the worst case, employers would have to lay off staff temporarily until things picked up again. Conditions for the staff changed too. The employee’s benefits were cut to save money. That might mean that the vending machines had to go back to the supplier, or that they had to give up the extra break that the employer gifted them when things were going well. It was a case of pulling together until the storm passed.
Now the economy is starting to bounce back from the battering it took thanks to the unscrupulous behaviour of the banks and politicians who were to blame in equal measure. Many business leaders feel that we should take those responsible to a court of law. Because of their actions, millions of people lost their jobs and firms all over the world had to cease trading. From a bystander’s point of view, it looks as if the leaders and financial heavyweights have got away with it yet again. The poorest in society, particularly in the United Kingdom, are being forced to make the biggest contribution to the recovery. There is something wrong with that. One day I, and many others, hope that justice will prevail. Until then, businesses will do what they must to survive. Will they have confidence to borrow and invest in the future? We will have to wait and see.
Contact us with your opinions. Would you start a business in this climate?