Bosses happier taking control in a recession
Jude Lynch, Business Sales Director, O2
WITH the credit crunch affecting all businesses, owner managers are coming to terms with their own cash-flow problems. However, a recent survey indicates they still feel in control.
Despite the current economic downturn, things are not necessarily so gloomy for owner managers, according to a recent survey by O2. Small to medium-sized enterprise (SME) owner managers feel more secure working for themselves in a downturn rather than for a big company, it found.
The fifth annual survey, conducted on behalf of O2 by market research company TNS mrbi, revealed some telling results.
Despite facing some enormous challenges, almost three quarters of over 300 senior executives in Irish SMEs say they feel more secure working for themselves.
“While SMEs are undoubtedly facing significant challenges in 2009, owner managers like the idea of being in control and taking responsibility, rather than
relying on decisions that have been made for them,” says Jude Lynch, business sales director, O2.
Control over decision-making is the main reason respondents like managing their own company, with 39pc stating this. Some 15pc said they like the fact that they don’t have to report to line managers or bosses. Understandably, financial success was very much down the list of motivations, with just 1pc saying this was their motivation.
As expected, the O2 study found that the global credit crunch is having an impact. Almost a third – 32pc of senior SME executives – said that cash flow will be the biggest challenge in 2009. This is up from just 6pc in 2008.
Almost a third, again 32pc, also said that the credit crunch or slowdown in bank lending has had a big impact on their business, with 31pc saying it had a small effect. According to 36pc, it had no impact.
The same figure (36pc) said the biggest challenge in 2009 will be growing sales, up from 19pc last year.
“The qualitative research and focus groups we have conducted suggest that SMEs are more confident about prospects for their own firms than they are about the economy in general,” says Lynch.
“While they are realistic about the significant challenges they face in 2009, there seems to be a strong ‘business must go on’ attitude out there.”
Avine McNally, assistant director of the Small Firms Association, says cash flow is definitely top of the agenda for small businesses in 2009.
“Many SMEs are facing the situation of customers taking longer creditor days. We have a very bad reputation for creditor payment in Ireland. This leads to huge problems in cash flow,” she says.
Lack of consumer confidence is also having an impact, according to McNally. “People aren’t spending at the same level or are retracting their spending. This is clearly having an effect on all kinds of businesses.”
At the beginning of 2008, the SFA urged small firms to think of cash as king, and McNally believes this has to be the mantra for a lot of businesses going forward. Nonetheless, McNally can see the advantages of being an SME owner in the current economic climate.
“Entrepreneurs tend to be risk takers; people who are willing to take on a challenge and are not risk averse. I’m not saying that what we’re currently facing is easy, but if you’re the type of person who has the motivation and likes the challenge, you could thrive in this environment.”
Likewise, owner managers may feel a sense of pride in contributing to their local economy, says McNally.
She urges SME owners to continue to adapt to the current environment. “They should ensure they have very strict credit control in place. Businesses don’t run out of ideas – they run out of cash.”
Owner managers must also face tough decisions head on, believes McNally.
“Making tough decisions is never pleasant. Small business owners have to do what is best for the team and for the business.”
McNally points out that even in the good times, 40pc of small businesses were failing in the first five years of their existence. A report published by the OECD estimated that the primary reason for this was a lack of management capacity. It also showed that training could reduce the risk of small business failure by 50pc.
Says McNally: “Really, this high rate of failure was down to a lack of capability and owner managers not having the skills. What people need to work on is ensuring they and their management team have these capabilities.”
© Whitespace Ltd 2009
- Linda Daly
