Birmingham Post Article - July 2011

By Lucas Markou, partner at Solihull-based accountants and business advisors Jerroms LLP

UK business news remains mixed, with high profile retail difficulties, such as Habitat, Thorntons and Jane Norman being reported in tandem with improvements in profits for some manufacturing businesses such as Jaguar Land Rover.

Consumer businesses continue to be hit by reduced spending power while manufacturers have benefitted from immproved efficiency and favourable exchange rates.

There are common factors among the success stories, and perhaps the most fundamental is that business strategy needs to be formalised and communicated properly.

Markets should be at the top of the agenda including monitoring of product demand and price. Marketing itself has never been more important though resources for it have been reduced in many companies.

At the heart of a good business is the motivation and drive of top managers, who need to be carefully selected and empowered. Ideally, they should have an equity stake in appropriate circumstances, so their interests are aligned with the majority stakeholders.

It is good to concentrate on the exisitng business and methods because every business needs to be committed to continuous improvement. To their credit, many West Midlands businesses have delivered fully in these aspects.

However, many neglect shifts in the market place at their cost. The internet, for example, has changed markets to the extent that a whole lot of winners have resulted. The winners are often those entrepreneurs and businesses which looked at the impact of the internet on their businesses at an early stage.

The early recognition of the need to partner manufacturing businesses in low cost labour countries is another example of the benefits of looking forward.

In summary, growing businesses must have a forward looking strategy but this has to be flexible. Leadership and teamwork are central to such flexibility, but so are people skills and attributes generally.

Staff appraisal processes should instigate and reinforce the 'listening' approach of managers who should welcome ideas from those at the 'sharp end'. Such performance review procedures are a central part of lining up the actions of individuals with the company's aims through target setting and improvement.

Carefully planned bonus schemes and share option plans can make a huge difference in reinforcing strategic decision. This is an area where professional advice can be invaluable, especially in relation to tax efficient share options and rewards.

In terms of business operations, the necessary finance needs to be put in place. Beyond this, most companies benefit from a focus on gross margins and on strong cash management.

Effective budgeting and accurate management accounting are also essential tools, providing early signs of the need for remedial action or even a change in direction. It has never been more important to be 'ahead of the game' in business.