K2's Turnaround Update | Edition 5

Welcome to our Christmas turnaround update for businesses

I very much hope you will sign up to receive this newsletter via LinkedIn by clicking the “+?Subscribe” button above.

I hope this newsletter finds you all well and coping with the cold. Our big news this month is that we’re proud winners of the?Turnaround Firm of the Year at the TRI Awards!?

Not only that, one of our partners, Anton de Leeuw , won Turnaround Practitioner of the year.?

We’ve always been immensely proud of the service we provide our clients but it’s always nice to have that recognised by your peers in the industry.

Here is a link to our LinkedIn post announcing the win.

Unfortunately, the news for businesses is less positive as the reality of a recession begins to set in. It’s likely that?borrowing costs will continue to climb and we can expect further interest rate rises that will adversely impact those struggling to service debts.

We’re also seeing the strain of inflation and a declining economy as an increasing number of sectors are taking strike action. Postal workers, rail workers, highways workers, NHS staff in hospitals and ambulance crews all have strikes planned throughout December. While these don’t directly impact the small businesses we deal with, they are a symptom of general unrest and a decline in disposable income.?

To help businesses through we’re focusing our main article this month on how to protect your supply chain.

In this newsletter:

• How to protect your supply chain in the coming months ??
• Employees want to work for progressive businesses ??
• Times are tough, factors are out of your control, be kinder to yourself ??

Before getting into the articles, I’d like to wish you and your family a wonderful Christmas and best wishes for the New Year.?Although I won’t pretend I’m enjoying the weather, a silver lining has been my family has enjoyed several cosy evenings together in front of the fire. I hope you’re likewise making the best of the season.

What can you do to protect your supply chain in the current economic climate?

UK businesses can use a number of legal tools if faced with a dysfunctional supply chain.

They include:

1. Price adjustment clauses to pass on some additional costs to the customer
2. If a supplier is refusing to supply, the customer can seek to enforce its contractual rights to require ongoing supply
3. If a supplier refuses to supply unless payment above the contract price is made, the customer may agree the price increase under protest, with the option to recover the price increase via a subsequent claim for economic duress
4. A?customer may have the right to terminate for failure to supply

A big caveat to these options are that they could be seen as the “nuclear” option, especially if the business has had a good relationship with the supplier.

If the primary aim is to keep suppliers on board, then I’d always recommend initiating communications with supply chain partners at an early stage once a potential problem is identified.

If all else fails the threat of these remedies can have the effect of bringing parties back to the negotiating table.

Another possibility in dealing with supply chain problems is to focus on short-term, day-to-day actions, such as expedited delivery services to meet demand or speeding up production by purchasing components on an emergency basis.

A cross-functional team to identify and manage supply chain issues is also a good idea. It could be used for testing financial stability under a range of scenarios and for planning for extreme supply-and-demand disruptions by identifying and ordering components earlier than usual and allowing extra time for delivery, accounting for the higher cost of energy, materials, and transportation; and checking inventories of critical materials to reprioritize production should shortages seem inevitable.

It may also be wise to reconsider whether just in time strategies are still appropriate.

Finally, to help mitigate longer-term, more permanent damage from supply chain disruptions is to maintain a strategic priority on customers.

Past economic downturns suggest that customers tend to stick with companies that stay closest to their core offerings.

Employees want to work for progressive businesses

The Harvard Business School definition of business sustainability is twofold.

It says there are two things that should be measured for business sustainability. They are the effect a business has on the environment, and the effect a business has on society, with the goal of sustainable practice being to have a positive impact on at least one of those areas.

At the moment businesses are reporting difficulty in recruiting suitable candidates so anything that can help to increase applications is important.

This is where sustainability comes in.

Adobe recently surveyed its US workforce and found that almost a third of people said they would only work for an employer that prioritised sustainability.

About a third of employees thought it would boost productivity rates (35 percent), position their company as a leader (31 percent), and open more opportunities for innovation (37 percent).?43% thought it would improve workplace culture.

This is a snapshot of employee attitudes in the US, similar sentiments are held by UK workers.

Times are tough, factors are out of your control, be kinder to yourself

Imposter syndrome is when a person doubts their skills, talents and accomplishments despite external evidence that they are in fact perfectly competent in their work.?

It affects both high achieving men and women, particularly in business.

We’d like to remind business owners that if they are struggling to find sales and their business isn’t running as they’d like that they aren’t alone right now.

There are so many headwinds besetting businesses from supply chain issues and shortages, to escalating energy bills and the difficulty of recruiting sufficient staff that conditions are anything but “normal”.

Consequently, many businesses are struggling and it would be understandable if their CEOs and senior management were to doubt themselves.

But many of these factors are outside of their control and lots of other businesses are struggling with the exact same problems right now.

If you would like to talk through any business problems you’re currently facing then please reach out us.

K2's Cash Management Tool

FREE DOWNLOAD

This tool is designed to assist in managing cash on a weekly basis by enabling you to plot your expected cash in and outflows, and then adjust them to manage your cash position.

Its primary function is to ensure you manage cash in a way the prioritises payments for those vital supplies needed to trade so you can generate invoices and get paid.

About the Author?

Tony Groom?is a turnaround and?restructuring professional with?K2 Business Partners,?a firm that invests in companies that have committed boards and assets that others find difficult to value.???

“As a turnaround investor, I back Directors of industrial and manufacturing companies who are facing a crisis. I bring an understanding of business as a Director and Shareholder of the many businesses and turnarounds that I have helped make successful.”

About K2 Business Partners??

K2 Business Partners ?are a small team of turnaround investors who put their money where their mouth is by backing directors and companies with ￡3m-￡20m turnover with assets that other investors find difficult to value.??

K2 don’t generally sell out and are in it for the long haul!?

Contact us if you’d like to know more about our investment process and to book a?free strategy and viability review .