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“Should we fear Brexit?”
It has been several weeks now since the “surprising” result of the UK’s Brexit vote, things are settling down and we are starting to see a clearer path on where it will go.
The leave campaign always prompted that UK businesses will thrive outside Europe. Whilst the retainers talked about doom & gloom.
As consumers prices did increase during July but this was brought on by rising fuel, alcohol and hotel rooms, there was also a fall in food prices, albeit smaller than that of a year ago 1.4% to 1.3%, but none the less a fall.
Small Businesses being hailed as the engine room of the economy I am skeptical of that Brexit was a good idea. If your customer base is only in the UK and your a service provider, you are unlikely to see any dramatic change, in-fact you could see increased interest from overseas due to the devaluation against USD & Euro. This is also the same for exporters, but the potential downside is that raw materials whether supplied direct or as part of the supply chain has become more expensive for the very same reason and this will raise prices for products for the domestic market leading to an increase on core inflation in early 2017 and possibly a slowdown in the economy.
Is it a “Batten down the Hatches” event that’s on the way? We don’t really know.
According to Mike Cherry, national chairman at the Federation of Small Businesses (FSB) “Nearly a quarter of FSB members export, with the majority exporting to the single market. Access to the single market means access to 500 million potential consumers, more than 26m businesses and is worth €11tn”.
Pointing your finger at the government and saying you need to help us somewhat ridicules the free market economy. The people, for good or bad have voted democratically and we have to move on with the decision and stop the bleating. What business owners often forget as a small business it’s imperative to capitalise quickly on export opportunities because as we move into next year the business landscape is going to be much different and those opportunities may no longer exist. So you have to act now, and if we are to be honest, there will be casualties. I am sure there will be exceptions, but in the main these failed businesses were in either working on extremely thin margins and have insufficient financial reservers, or they are just poorly managed and unable to adapt to the new market economy. Brutal as it may seem, but survival of the fittest becomes relevant.
According to the office of national statistics recent consumer pricing report and I have included link below to the report
The July lift in consumer prices was brought about by the rising cost of fuel, alcoholic drinks and hotel rooms. There was also, tellingly, a smaller fall in food prices than a year ago.
However, core inflation – the measure when you strip out items prone to volatility, such as the exchange rate, energy prices and the cost of food – dropped from 1.4% to 1.3%.
When core inflation starts to rise, we will need to take note. Economists predict this will begin in early 2017.The true breakout headline in the ONS data was producer prices.It showed a dramatic turnaround in fortunes and was where the record depreciation of the pound really came to bear.
Manufacturers faced a huge jump in the prices of the inputs needed to make their goods but for those business who have properly prepared this will be rough as core inflation is expected to rise in early 2017.
So how do you prepare?
There are many aspects to this but cash is king. A strong balance sheet will minimise the impact, but say you don’t have a whole lot of funds available. If your debtors are high and or overdue then you need to be reaching out to your customers urgently. Remember it is not just you in this situation, it may be them also and if they go under, so long to any monies due. Sure you might get 10p in the £1 if your lucky, that won’t happen for at least 18 months. I hear you, but I’m a small business I can’t force them to pay the overdue. Rubbish you can, and it does not cost a lot of money. There are collection agencies out there that will issue a letter before action and they costs in the region of £1 per letter. It gives the company 7 days to make a payment before the next stage of taking them to court. Again depending on the value it will likely be small claims, which cost in the region of £35 to action. In the UK you will find that they make the payment immediately rather than go to court, but non the less be prepared. If your customer is overseas, then these companies can still issue letters, but they are not as effective. To give you an example, I had the same situation and in this case the customer was in the UAE. I nearly advised the customer that continued non payment would result me placing an advert in the Gulf News about there default. This will draw unwanted attention to the company and guess what, they paid immediately.
Other ways to manage your cashflow is to use “Factors”. There is a charge for this and it varies from company to company, for example they will pay you 90% within a couple of days of invoice issue and then chase the outstanding debt. This is called invoice factoring and as I said many companies out there providing this service, including the banks. It is not a service I use, but have seen it being used successfully by other businesses and if keeps the cash flowing and lets them concentrate on running their business. If you choose not to use these organisations, then a good credit controller is a must. There are many freelancers out there that will do this for you, find a link in the show notes.
But back to the matter at hand, whilst experts say that Brexit is too complex and that the UK will never leave as a small business we cannot wait and see what will happen, after all we have foot to put on the table & Mortgages to pay. “Carpe Diem” Seize the day this is an important time for our country and as a small businesses we be proactive in grabbing those opportunities where ever they exist. You got to fight fight fight for every piece of business, don’t just accept if I build it they will come, it won’t happen folks, unless you have an absolute golden nugget of a product or service, which if it is the case you won’t be listening to me. For the rest of us, we hustle every day.
In closing today’s show, we don’t really know where it will end my friends, by realising you are not alone, we as an SME community can help each other, so if you want to share your thoughts & comments or ideas, please do and lets get a conversation going and support each other during this extraordinary time.
Final, final & to be absolutely clear, I have not been paid to endorse any of the organisations mentioned below and they are given only as examples.
Rachel Pells – The Independent
Mentions in this Podcast:
Wild Haggis – Helping You Get Stuff Done
Office for National Statistics – Consumer Pricing Report July 2016
Letter Before Action
Freelance Credit Controller
Brexit Too Complex (Rachel Pells)
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