Seated (left to right) Debbie Greenwood, Luke Fribbens, Hannah Mazrae. Standing (left to right) Simon Morgan, Matt Fretten, Matt Williams, Daniel Smith. Picture Dorset Biz News.
Published: January 8, 2023 | Updated: 6th September 2023
How, and when, to pass on ever-rising costs to your customers and making sure you get paid – and on time.
Just two of the hot business issues discussed at our latest quarterly Biz Round Table.
We invited seven leading lights from the Dorset business world to chew over some of the current issues facing businesses.
And also throw in a handy business tip for good measure.
Taking part this time were:
Daniel, pictured left, raised the issue facing businesses in every sector.
He said: “Prices increase, wages increase, you may be chasing for money from clients so do you automatically pass the increases onto the customer?”
Yes, said Simon from REIDsteel.
He said: “We have a 30 per cent increase in business rates coming down the hill and a 400 per cent increase in energy costs.
“That’s adding a quarter to my factory overhead, just those two items alone, and it all gets passed on.”
And if you don’t?
Simon said: “If you allow your customers to get used to the idea that there is no inflation in your costs then that’s what they will expect.
“If you effectively train your customers that they will get changes in rates then now is the time to do it.
“They’re in business as well so if you come along and each year you’re saying it’s ten per cent this year because of inflation they’ll say ‘OK, I get that.’”
Hannah, pictured right, said: “Inflation has been extremely high over the last year.
“The impact on all businesses is increasing overheads which, in turn, reduces profits or could turn a business into a loss-making entity.
“A few areas to consider are budgets and cashflow forecasts.
“This will help a business to identify if there are any particular areas of strain and whether product or service line prices should increase.
“Reviewing fees is essential to remain competitive and still offer value for money.
“If prices are not reviewed and a business makes continual losses year after to year how long can a business continue to trade?
“Some may even say that it’s not really a business, does it make good business sense to invest hard earned cash into a failing business?”
Luke said: “Now is the perfect time to review your rates because everyone is probably doing it.”
But Daniel pointed out: “The challenge comes if you pass on [the extra costs] but are in a market where the people buying are also driven by price, although not solely by price.
“Then you’re counteracting the value you’re offering versus the price they’re prepared to pay.”
Matt (Fretten), pictured left, concluded this particular part of the discussion.
He said: “I am naturally an optimist, and my glass is normally half full.
“What we’re going through is not the new reality.
“Inflation at ten per cent, or more, is not going to be here forever.
“If you’re in a strong financial position going in, then hopefully you can ride it out in terms of not doubling your prices.”
Then another key issue facing businesses – getting paid.
Matt warned: “We’re going to see companies fail in greater numbers in 2023 and that starts by people not paying their suppliers.
“We don’t have big, bad debt problems but then we’re solicitors.
“I would be advising my client base to look at that carefully.”
Luke said: “We’ve never chased our clients.
“It’s only been in the last couple of months that we’ve made a concerted effort to bring down our debtor days.
“We know they’ll pay but generally 60 days rather than 30 day terms, for example.
“All it takes is a couple of chases and suddenly they’re paying on time.”
Debbie, pictured right, said: “From a small business perspective, we tend to come further down the pecking order so that rather than pay our bills they try and pay their bigger suppliers.
“I’m just changing my terms in as much as they pay half up front and half after I’ve delivered.
“Having been through this kind of cycle before, not when I was self-employed but when I was in business, I’ve seen what happens.”
Matt (Williams), pictured left, who chaired the Round Table debate, said: “We have long-standing clients who’ve been clients for five, six, ten decades.
“You think ‘John is always going to pay, he’s going to pay late but he’s fine for money’.
“Then all of a sudden he’s not fine.”
“Insurers are looking at bringing in ‘if you pay us the full premium on the day of the inception of the cover or the renewal date, you will get a 0.5 per cent, or one per cent, discount from the premium’.
“Insurers are now looking at underwriting their policies based on having cashflow coming in quickly and they will reward the client by doing so.
“If you have the cash sitting in your bank and you have a one per cent discount on a half million pound premium, you might as well as do it.”
Simon, pictured right, said: “I’ve always insisted on payment on time because I’ve got suppliers to pay – and we pride ourselves on paying our suppliers on time.
“Your cash flow happens at the time you go into the contract.
“You set the right expectations there and then it’s down to your behaviour.
“It’s up to you to enforce the terms but at least you’re starting from a position of strength.
“With my sales guys I say that’s your price for 30 day terms, if you want 60 day terms then it’s a different price and if you want 90 days, it’s another price again.
“I’ve got to carry the interest burden of the staff and the suppliers I’ve paid.
“There’s also the issue that if you allow three months of credit then you end up with three times as much exposure and, therefore, three times as much risk compared to 30 day terms.”
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Other issues covered in our Biz Round Table included:
Recruitment:
Simon: “It’s hard when you have niche skills to recruit people.
“The early retirers are starting to realise they cannot afford to early retire after all.
“That big drain, the big resignation that has been the talk of the town for the last 12 months I think we might start to see reverse a bit.
“With the market activity dropping, those candidates which at the moment are like hen’s teeth will start to see better availability next year.”
Hannah: “When I joined Saffery Champness 13 years ago I was the only graduate in Bournemouth.
“We had eight in our September 2022 intake, compared to two or three in 2019.
“We’re recruiting at school-leaver/graduate level in order to bolster our team for the future, in two or three years’ time we shouldn’t need to recruit externally for seniors.
“We’ve always been a training firm, although with the larger intake over the last few years we’ve started developing our team members earlier and provided opportunities for development at an earlier stage.
“The recruitment market has been tough, although graduate and school leaver recruitment appears to be working really well for us.”
Getting new business:
Daniel: “We used to pitch but don’t tend to any more.
“In our industry, if you look at business acquisition and break it down, then about 50 per cent of what you get is word of mouth, referral and recommendation .
“Where we’ve seen most joy from is carving out a very strong proposition for ourselves and going out very hard on that.
“We’re clear on ‘this is what we stand for and this is how we differentiate ourselves’.”
Luke, pictured right: “We’ve always been word of mouth, referrals and things like that and that probably equates to most of our new business over the last seven years.
“In the last year we felt we couldn’t just rely on that so we are doing more pitches and tenders and it’s changed our mindset and the success factors are much lower.
“We’re super niche and generally the only ones at the table so they do the project or don’t do it. It’s not a case of coming to us or going to another supplier.
“It tends to start as a project and then turns into a long-term client.”
What they’d like to see from the government:
Matt (Fretten): “Stability. As a business responsible for 90 people’s mortgages, I want to know what the interest rate is likely to be over the next 12 months, that inflation is not going to triple in the next quarter and that people who say they’re going to do stuff, actually do it and deliver.”
Debbie: “Credibility and integrity with people you can trust. During Covid I completely lost faith in politicians. I’d like to see politicians who are in power because they want to do a good job for the country and not just for their own advancement.”
Daniel: “I’d love to have a government one day that fulfils the manifesto they were elected on, regardless of what side you’re on.”
And, finally, a handy business tip:
Matt (Fretten): “Cash is king. Get paid on time. Check your terms and conditions. If things get tough then manage it.”
Daniel: “Map out the customer journey for both existing customers and future ones. How they’re dealt with, the communication (and how often) and look at new prospect clients.”
Luke: “We’re doubling down with the relationships we have with our existing clients and making sure it is solid. If there is any downturn in their business which knocks onto us then we know about it in advance.”
Hannah: “If you’re considering selling assets in the future, think about selling sooner rather than later, locking in the current capital gains tax rate.”
Debbie: “Look at the people you’ve got. I’m convinced there are pools of people in larger businesses that are absolutely crying out to be developed but are often overlooked. It’s for the managers and leaders to start delving and find those people and look to give them the opportunities and start building them up. They’ll thrive and also be a huge advocate of the business.”
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Our thanks to Gallagher for hosting the Biz Round Table and to Matt Williams for chairing the session.
The next quarterly round table, in association with our commercial partners Fireworx, Frettens Solicitors, Gallagher and Saffery Champness, will be in March.