The Credit Crunch
Is the credit crunch biting you?
Reports in the UK national media indicate that the ‘credit crunch’ will continue to hit economic growth in the UK throughout the rest of 2008.
Is this ‘crunch’ starting to bite and have an effect on business already? We would say yes.
There’s definitely a cautious feeling amongst our clients, who range from single person companies through to multi-million pound turnover organisations. With many of them holding back on ‘non essentials’ such as training or ‘nice to have’ capital equipment and marketing (we would argue that the best time to spend on marketing is when there’s a slowdown – but that’s another story).
It’s times like these when consumer spending drops, fuel prices go up and there’s a reduced availability of money in the pot from the very nervous banking sector; that business that may already be teetering on the edge of collapse, generally do so.
This is something we’ve definitely seen, with some of our smaller clients ceasing to trade altogether over the last few months and a few of our smaller competitors starting to struggle as well.
This week for instance it’s come to our attention that one of our local design agency competitors here in Yorkshire, has filed a winding up petition on their own company. I suspect they are ‘jumping’ before they are ‘pushed’ if you see what I mean given their large borrowings and lack of profit over the last few years. Added to this we were approached recently by another competitor asking us if we wanted to buy them as they we’re ‘bailing out’ (as they described it).
It’s not good for the clients. It’s not good for the region.
Our philosophy when running our business is to run it as debt free as possible.
Yes this means our growth is slower that those companies that may obtain big injections of borrowed money to keep them afloat. But an ‘organic growth’ strategy coupled with a careful eye on the finances and cash-flow is starting to pay-off for us in the current economic climate. For example, we’ve just closed the books on another financial year and both our turnover and profits are up on last year with cash in the bank for the forthcoming rainy days.
Now where’s that cheque book? I can see a business purchase coming on. Roll on year five!
