Dig for victory
Ernest Hemingway’s 1926 novel The Sun Also Rises contains an apt quote that I’ve used a lot recently
Bill : How did you go bankrupt?
?Mike: Two ways.? Gradually, and then suddenly.
?The perfect storm of well-documented circumstances has driven many media businesses beyond their own tipping point. And it’s interesting / sad that so many of them are long-established businesses. In the past 12 months, these include Televideo which was founded in 1976, Video Europe in 1973, Presteigne in 1983, Anna Valley/Shooting Partners in 1989, and Shift 4 in 1989.
And this takes no account of the huge numbers of freelancers on whom the media sector is built, who have been driven away by the lack of work. In most cases the fallout of job losses and personal turmoil for the staff and management is a tragedy, and will leave its mark on everyone involved. We wish them well.
?Some of the businesses named above still had the founders managing them when they fell into administration, and each will have had their own specific issues that contributed to their demise, but the quote above is an apposite reminder to pay close attention to what’s going on in your business, and outside of your business.
?Returning to the original quote above, I’d encourage regular SWOT analysis on your business. Seemingly minor weaknesses or threats that are left untended in good times could come back to bite you when circumstances change.?
Adamantean has worked with many of these businesses at some point and, where there have been active finance agreements, we’ve been assisting some of the Banks recover their kit and minimise their losses. If you’ve ever taken out a finance agreement as a customer, or been paid by a Bank as a supplier, you’ll hopefully understand that having funders enthusiastic and positive about lending to the sector is vital for its recovery. Whilst the Banks accept that customers going bust is part of the cost of doing business, the damage of them suffering unmitigated losses will most likely lead to a tightening of their lending criteria. It’s already happening.
?I’m sure that there will be more casualties as the slowdown in shooting that has so far been painfully felt by all companies involved in production inevitably feeds through to post-production-land.
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But we do see a recovery coming. I speak to a lot of rental companies, and whilst it’s not a Lazarus-like recovery to boom time, bookings are being taken and shooting is happening. I’ve heard first-hand accounts of a film lab booking record months as major features are back filming. This positivity needs to continue for many months and the sun needs to keep shining into late Autumn to give everyone the buffer over the quieter dark months. But it does show cause for some optimism.
?And just in case you didn’t notice this the last time we went through a major downturn (was Covid only 4 years ago?) cash is vital ! Another trite truism that also appears in my top three quotes of 2024 is that businesses don’t fail because they run out of customers. They fail because they run out of cash. Most of the companies named above had pretty good order books. But as businesses grow, the cash demands grow too, and an unforeseen blip in sales can take a business down if it doesn’t have that cash buffer.
?Often when I mention Invoice Discounting to my clients, it’s quickly dismissed. “too expensive”, or “it’s a sign to my clients that I’m short of cash”. It may have been both of these things in the past, but now, arguably, it’s neither. If you also factor in that your debt can be insured – so if your customer goes bust you’ll still get paid – then suddenly that sounds like something that you should be exploring. We’ve been arranging ID lines for our clients who are already seeing the cashflow benefits.
?It's also notable that we’re arranging more office and warehouse fitout finance than previously. This type of expenditure is necessary, but can be tougher to justify because it does not feed directly to increased revenues in the same way as a new piece of hardware would for a rental or post-production company. We have lenders who are experts in fit-out funding, and we’ve recently successfully managed several of these projects for our clients.
?Over recent years our core asset finance business has expanded into different areas. Whilst we have a specialism in the media sector, our asset finance skills extend to a much broader and varied mix of equipment and vehicles. This can be cameras and LED walls, and it can also be robotic arms, lorries, cranes, 3D printers, lathes, vans, or even giant excavators, as our recent visit to the astonishing Hillhead quarrying, construction and recycling exhibition demonstrated.
?Sam, Gareth and I are proud to be founding members of the Guild of Business Finance Professionals, a body set up to promote the skills of independent finance brokers to the wider SME community. The logo is a mark of integrity, professionalism and trustworthiness.? This podcast on Spotify will tell you more, so give the Business Finance Matters podcast a follow!??
As I write, we’re two days away from the final of the Euros, and Gareth Southgate’s stock is riding sky high. Yet less than a week ago he was having cups thrown at him by disgruntled fans ?when we were 90 seconds away from losing to Slovakia (or was it Slovenia?). His forward planning, and thinking a couple of steps ahead, has put the England team where it is today, which is what business owners should be doing. Us included.
?You’ll be reading this knowing the score. I’m hopeful, but that could just be paella in the sky.
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