Things are looking up for business

A strong indicator of GDP growth one quarter ahead, the report points to an annualised growth of 2% for the second half of this year.

Meanwhile, optimism, which has a good relationship with GDP growth two quarters ahead, is at its highest level since July 2000, with small businesses leading the confidence ratings.

Clearly, the businesses that survived the economic ‘annus horribilus’ that was 2001 are now looking forward to increased orders and a return to growth.

Such indicators might appear to translate to the onset of a slack period for those of us in the field of business recovery, after the insolvency boom we have seen in the last couple of years. Sadly, though, this is unlikely to be the case.

Financial difficulties are, after all, much less likely to be caused by general economic conditions than they are by lack of attention to the finances of the business – and this can happen at any time.

In fact, it is particularly easy for managers to take their eye off the finance ball when things appear to be going well in an upturn.

In the rush to keep up with new orders, it is easy to forget growth costs money – buying more stock, extending distribution and taking on new people.

At the same time, sales teams may be tempted to extend more generous terms to new customers, or make extra allowances on unpaid invoices.

As the business increases its focus on sales it should be careful to not trade its soul.

Otherwise, like a supernova, the business can flare brightly as it rapidly consumes all its internal resources – but will soon collapse with no cash to feed its growth.

To play the growth game successfully, entrepreneurs need to step back from the feeding frenzy for a moment and take time to plan for expansion.

This process can be as simple as calling in an adviser to take stock of the situation – but it is crucial to make sure the business does not end up starving in the midst of plenty.

  • Tony Supperstone, head of business recovery services at BDO Stoy.

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