Risk, resilience and adaptability — funding and growth
With the right planning and professional support, there are plenty of opportunities to raise finance for growth.
We have previously considered the current economic conditions affecting businesses in the UK.
Although the country is facing considerable uncertainty, spending time with our clients suggests that the unprecedented events of the last three years required many of us to confront challenges and respond decisively and quickly, suggesting that uncertainty brings opportunities for business, as well as challenges.
Currently, the issue raised with us most often is funding.
During the last decade, businesses had become accustomed to low-cost borrowing. They have now found it necessary to adjust to increases to funding costs, as well as increases to interest rates. Added to this, inflation increases the general cost of living. For many businesses, this affects demand, particularly in the case of consumers. The same pressures prompt employees to ask for pay increases (whether through organised industrial action or individually) because wages are not keeping up with increases in market pricing.
Despite this, funding is still available. The cost of borrowing has certainly gone up due to interest rate rises and greater market uncertainty. Funders are also being more cautious and taking more time carrying out due diligence around forecasts and sensitivity analysis. This means that it is necessary to plan further ahead to secure funding packages. There is still plenty of money in the market, whether debt or equity finance, and with the right planning and professional support, there are plenty of opportunities to raise finance for organic and acquisitive growth.
“Trading confidently often means being prepared to do things differently and being open to change.”
For some of us, this is not our first economic downturn. Experience suggests that many businesses adopt a defensive strategy or go into protection mode. The same experience also suggests however that challenging economic conditions also throw up opportunities. Those businesses who are prepared to strategically invest, whilst also keeping an eye on the bottom line, do better in the long term than those who simply cut back. Economic conditions will eventually improve. This needs to be considered, as well as how to continue trading profitably during the downturn.
The next 12 months are likely to bring more change. Successful businesses will adapt, as they have always done, by keeping an open mind and being flexible. Many have already begun to operate differently. This often involves relying upon their existing specialism or expertise to adapt to the demands of different markets. Diversifying, based upon demand is often coupled with changes to the process of production or delivery and consolidating structures to concentrate resources and maximise output.
Most economic forecasts available suggest that current conditions will continue for at least 12 months. If so, we are likely to see a more pragmatic style of business, implementing incremental changes with a focus on their existing and accumulated expertise. Trading confidently often means being prepared to do things differently and being open to change, whether as a management team or even across the organisation. This presents its own challenge but perhaps less so than in the past. Before adjustments to interest rates and inflation, the process of change for many businesses had already begun and is simply continuing. Many of our clients describe how they looked at what they learnt from lockdown and what they did differently in terms of new commercial relationships, projects, and markets. The current process of planning involves a degree of continuity as well as change. However long this downturn lasts, successful businesses will identify and commit to their opportunities, adapting to increases to the costs of borrowing as part of a process of change, which had already begun.
Effectively, challenging economic conditions have changed the process of business planning. Traditionally, thinking would lead to actions, in the form of a new or revised strategy. At the present time, the actions required by challenging economic conditions are requiring a new way of thinking.
At Weightmans, we understand business and how to manage risk, whatever the context or specifics. We can use the law to your commercial advantage. We listen to our clients and can recognise what you really need. We base our solutions on what is important to you. We are used to having business conversations. We are investing for growth and want your business to succeed.
If you want to have a business conversation with us, you can contact one of the Weightmans partners you already know, or you can contact me directly. Whether or not we know each other, I would be pleased to hear from you and to understand your own perspective and experiences. Things are difficult but we understand both the challenges and how others are adapting to unprecedented levels of economic uncertainty.
You will find that we are genuinely interested in how you are adapting to risk and the steps you are taking to become more resilient in the face of challenging market conditions. Please do get in touch.
For guidance on securing funding for your business, contact our corporate solicitors.