Stick or Twist?

You’ve probably noticed there’s a bit of uncertainty around at the moment.
No-one seems sure about the outcome of the general election, and the make-up of the government that will result. Some commentators suggest that it could take up to a month from polling day for the deals to be done. This in turn means uncertainty about economic policy, and reaction of the markets.
Uncertainty is hard to handle for businesses and individuals – generally we all feel better when we know what’s coming and can build plans around it. In times of uncertainty, the temptation is to keep our heads down, avoid decisions and wait for certainty to return.
However, the UK economy is in the best shape it has been for many years, and at a Lloyd’s Bank seminar yesterday an economist suggested that for the foreseeable future this could be “as good as it gets”. Inflation is likely to rise again in the second half of the year and interest rates could begin to move up as early as November.
So do we ride out the uncertainty of the next few months or push forward to make the most of the current favourable conditions?
Most business owners I talk to are seeing improvement in their sales and marketing pipeline, and a growing order book. Do they carry on with their drive for growth, consolidate or even take the foot off the sales accelerator for while?
Individual circumstances need to be understood, but some general advice I would offer as a start point is:
Beware of over-trading – rapid growth can put excessive pressure on capacity and working capital. Ensure you can handle the additional business or secure extra resources quickly.
It’s easier and more cost effective to maintain momentum than stop-start. It’s a bit like driving a car; maintaining a smooth, steady flow of new business may not be as exciting, but in the long run it’s more efficient.
ROI – not all opportunities are created equal! If new business is reducing average margin, increasing average debtor days or has a long payback period on the cost of acquisition, it may be too risky. But if it makes better use of fixed costs, has a quick payback and a long lifetime value then it’s worth a lot more than the pure order value.
Of course, it might all be different in your world; some businesses thrive in periods of uncertainty or difficult economic conditions. But for most of us, it’s time to decide.