Sunday, November 23, 2008

We simply must help our clients to adjust to the new economic environment

Down at the pointy end of our existence is the necessity for business advisers to deliver assistance to their clients adapting to the new economic climate.
There are 2 matters that we need to discuss with them:
  1. How has the financial crisis affected them to date ?
  2. How do they anticipate that the financial crisis will affect them in the future?

Not only do we need to help them adjust to what has happened but we also need to have them consider how the ongoing developments may effect their businesses in the future.

Usually we will find that our clients are in one of 2 situations:

  1. They will be on the defensive because there will already be some impacts they are dealing with and with a few more to come.
  2. They will be well-positioned because they are cashed up, or possibly they will be in an area that grows during a recession or down-turn, and will be able to take advantage of the situation.

If they are on the defensive then we can wheel out the normal product range that now has excruciating meaning for them:

  • help them to prepare cash flow budgets to understand the scope of the problem they are likely to experience and whether they need to cut down , refinance or whatever
  • undertake a profit planning exercise by product line or enterprise to help them understand how they will fare with reducing sales and possibly margins
  • help them to review their staffing
  • help them to review all their costs and planned capital expenditure
  • help them to review their margins in the light of a falling dollar
  • help them to review their debts and their servicing capacity
  • help them to review their business strategy going forward and fine-tune or totally revamp it to align it with the circumstances
  • get them to an investment adviser to have their investments and superannuation funds reviewed

If however they are well-positioned then we can help them to consider further their plans of attack:

  • how can they exploit the falling real estate and house prices?
  • replacing their vehicles or fleets whilst there is downward pressure on new vehicle prices
  • reviewing their loan facilities whilst interest rates are falling
  • adopting a vulture strategy on their competitors' businesses and snapping them up for reasonable prices now that the private equity players are scarce
  • building up their share portfolios whilst p/e ratios are low and there are some real bargains around
  • having them consider upgrading their residences whilst there are record numbers of mansions on the market in the fancier suburbs( remembering that private residences are exempt from capital gains tax)
  • developing plans for import-replacement businesses now that the dollar has fallen and the cost of imports has risen
  • having them consider lifting their prices and increasing their margins if their main competitors were importers

The critical matter is to recognise that whilst many clients are facing difficult times many of our clients also have been presented with new opportunities.Maintaining the vibrance of our business advisory practices requires that we concentrate on both sides of the coin.

It is also critical that we apply the 80/20 principle.We need to be very vigilant about the 20% of our clients who contribute the 80% of our fees. If we do a good job helping them survive and prosper or helping them to capture new opprtunities then we will come through this period of economic change unscathed and with more robust practices.

That is because we will have stretched ourselves to engage our clients about the matters which are critical to them.And they will repay us handsomely!

No comments:

Post a comment