Hoover could have carried on making things which the world increasingly didn't need, but was foresighted and brave enough to move into a completely different market with an untested product. For the small business, seizing the opportunity is vital to success. They can never stand still or become complacent.
High tech company Cumana was highly successful in the 1980s. Its chief customer was BBC Acorn which had quickly established itself in UK schools. Of the company's £4 million turnover, £3 million was accounted for by Acorn. In one year this collapsed - the £3 million became less than £1 million. Cumana eventually wrote off nearly £500,000 worth of stock. The lesson must be: look ahead and spread the risk.
Julie Dedman was made redundant, without warning, by the animal feeds producer she worked for. It was a blow made all the more bitter because only weeks before she had turned down a job offer from a rival company - she had been told that her job was safe and her work highly valued. 'It shook me so much I knew that I couldn't let anyone else have control over my life again. I had to work for myself,' she says. Her experiences galvanized her into action. She soon set up her own company, West Riding. Now, eight years on, it employs 13 people and has a turnover of £5 million.
Julie Dedman's idea was to offer dairy farmers a complete milk testing service which identified any infection or adulteration in the milk and come up with a solution. The only competitor was the Ministry of Agriculture. They were set in their ways and weren't giving farmers what they really needed. It was then a question of having the determination to go through with it. Redundancy does affect your confidence but you simply have to rise above it.'
Even when times are hard, there are opportunities - but only if you are prepared to find them. Greg Wong is a man who likes living dangerously. At the height of the recession, when the UK furniture industry in general was at a low and the office furniture sector particularly miserable, he went out shopping. What he and his partner, Dinesh Kanadia, came back with was not a set of office chairs, but a group of companies which they plan to transform into major contenders in the office furniture market. The result was the Mines &West group with a turnover of £8.5 million - an estimated 450 per cent improvement on the previous year's figures. Wong bought the venerable but troubled Mines & West manufacturing company when it was at its lowest ebb. 'Naturally many people would have considered it a rather unusual move to buy up a company in receivership in such a recession,' says Greg Wong. 'But here was an opportunity for an entry into a manufacturing industry that was really low. If I had started up a factory like Mines & West from scratch it would have cost a fortune.'
Wong believes that companies like Mines & West had got into difficulties through becoming carried away when the times were good. 'During the boom time in the '80s when demand for office furniture was high, loads of companies took on higher rents and extra staff. And what happened? The market shrank 20 per cent in a very short time leaving them all stranded with extra unused capacity.'
His solution is to specialize. 'Our strength, unlike other groups which try to be all things to all men and diversify their activities, is that we are solely manufacturers of furniture. That is what we intend to stay doing.' He believes that his strategy of cautious and planned growth with strong management support has already paid off. 'When we bought these companies they were all in receivership, now each one is showing a £2 million turnover. In fact, one had not seen a profit for ten years and in the first three months after acquisition we put it into the black.'
What causes business failures?
The Official Receiver lists the common reason for businesses to fail:
- not enough capital
- not selling enough
- bad management
- taking too much cash out of the business too early
- poor accounting
- lack of experience
- bad debts
- setting prices too low
- growing too quickly and running out of cash
- fraud
- operating costs getting out of hand
- poor supervision
- competition
- health problems of the owner.
Develop and Use Networks
Networking is not just about recognizing the connections we have with others, it is also making the most of these connections. It is something we can all do, all of the time. We have the opportunity to make connections with each other whenever we talk, through face-to-face conversations, meetings or telephone calls, and whenever we write - through letters, internal memos, E-mail, proposals or reports. Networking can add value for us as individuals and also contribute to the results of our organizations. Among networks of particular use to the small business are those with:
- other businesses and business people
- suppliers
- business organizations - such as Chambers of Commerce
- professional bodies - such as the Institute of Engineering.
- Make the most of publicity
Newspapers and magazines have a lot of space to fill and are constantly on the lookout for good stories about innovative business ideas and business successes. Small businesses are poor at taking advantage of this particular marketing channel. Commonly they suppose that publications are simply not interested in the activities of a small company or that publicity costs money, after all larger companies pay huge amounts of money to specialist public relations companies.
The lure of column inches is simply explained. Publicity means that your name becomes known. Favorable publicity may well attract customers. A mention in an article can produce sales leads (particularly if it has a contact number).
