Ensuring a business remains in top form is not just about seeking out growth opportunities. Ian Greaves, partner at KPMG in Birmingham looks at other areas that count
Achieving sustainable growth is on the agenda for all managers running local businesses.
While I would be the first person to advocate that this should be the case, I would also be the first person to state that so too should be strategies to make the business as resilient to a change in market forces as is possible.
In today’s global business environment there are so many factors that can influence a business. As a result, managers must ensure their organisation is running as efficiently as possible all of the time, and not just at moments of either economic slowdown or other market difficulties.
The best businesses are those that are made resilient through an approach to reducing costs on an ongoing basis.
This approach works better than short term or ad hoc strategies as they take a more holistic and long-term view of the business and its goals.
There is no doubt that some managers are a little wary of implementing cost saving measures as they feel it either involves job losses or creates instability for both employees and customers as it could be an indicator that the business is struggling.
In reality, however, this is not always the case. By ensuring that a business regularly looks at ways in which it can eliminate unnecessary costs, no large-scale plans will need to be implemented.
So far this year, local companies have been hit with a number of external factors that will have an impact upon their bottomline.
Firstly, the credit crunch which followed the sub-prime mortgage crisis in the US, is making debt more expensive and for those companies who cannot access funding from alternative routes, this could have a significant affect on a growth strategy.
Secondly, the global and UK economies are slowing. When you consider this in line with inflation increasing and consumer confidence decreasing, the current business environment is looking difficult.
To preserve bottomline, businesses must look at alternative growth opportunities, but also put in place strategies that can make significant savings for the business.
For example, a business looking to reduce its cost base to gain long term benefit without damaging near-term profitability has a number of options, including a review of their procurement processes, supply chain efficiencies, as well as reducing the cost of employment and a review of their corporate pension scheme.
Alternatively, a business might want to look at improving efficiency by optimising the use of assets, increasing the availability of cash for investment or making the different parts of the group work better together.
In addition to this, managers should also look at how they adapt to new regulation and respond in the most effective and efficient way.
Due to the ongoing nature of factors such as these, corporates cannot look to review on an ad hoc basis.
For any business looking to build and maintain resilience, long-term plans must be made and a culture of ongoing review embedded within the organisation.
A failure to do so will minimise the value that any of these activities can bring.