Entrepreneurs get back to basics to raise cash

The UK's entrepreneurs are responding to the challenges of the tough economic market by focusing on strengthening internal management practices and building sales rather than turning to external support in the form of increased borrowing, according to the latest Grant Thornton Entrepreneurial Insight survey.

The survey, which canvassed the opinions of over 500 owner-managers of independent businesses from a wide range of industries, indicates that seeking additional finance has been put on the back burner for now by entrepreneurial businesses with only 25.4% of them actively making decisions about raising funding and just 3.5% of them placing it at the top of their list of concerns.

Similarly, less than a third (29.3%) of those surveyed said that their relationship with their bank was a major subject for discussion at board level and it was the single most important issue for only 2.9%.

Instead entrepreneurs are turning their attention to basic business principles and the traditional maxim that 'cash is king'. The survey found that 93.5% of UK entrepreneurial businesses cited increasing sales as one of the key areas currently under discussion and this was overwhelmingly the single biggest issue with 43.5% of respondents placing it at the top of their agenda.

The survey reveals that strong working capital management (74.2%) and reducing costs (86.6%) are high on the agenda of most boards. Over the next 12 months more than half of the owner-managers surveyed will consider renegotiating supplier pricing (57.4%) and 54.7% are expecting to exercise legal rights to pursue debts.

Alysoun Stewart, Head of Entrepreneurial Advisory at Grant Thornton, said: “Overall, it seems that the UK's entrepreneurs are working on the assumption that additional funding is not going to be easy to access. There is a clear message in there for the banks and we are now seeing an increasing number of them taking steps to communicate that they are open for business.

"The approach entrepreneurs are taking is to make sure they do everything possible to secure their businesses and emerge from the downturn leaner, fitter and stronger. Arguably some have been slower than they should have been to learn the lessons, but they are picking up the reins very quickly now and adapting rapidly to the new conditions in their competitive environment. Boosting sales to improve cash flow combined with tighter financial management has emerged as the preferred entrepreneurial survival plan in the face of continuing difficulties in accessing additional finance."

The resilience and determination of entrepreneurs again shone through the survey results. 81.6% of respondents concede that their business is placing a fair or great deal of pressure on their personal life and for 35.6% of them the trading profile was either slightly or much worse than they had expected at the time of the last survey six months ago. However, their commitment seems as strong as ever with 67% of the people interviewed remaining totally committed to their company, come what may.

Stewart says, "It is clear that for this sector of the economy times are tough, but entrepreneurs are tough too. Owner-managers realise that they have to get on with running their business despite the downturn so they are looking for opportunities to ensure their viability, and indeed growth, beyond this current crisis."

The easing of bank attitudes towards covenants (82.4%) and government encouragement of greater business lending (76.4%) were high on the list of factors that were felt by the UK's entrepreneurs to have the potential to shorten the recession, although it is improved consumer confidence (90.4%) that is still seen as the most important factor. There is deep concern about the macro-economic climate with over half of respondents (56.6%) expecting the economic climate to get worse or much worse in the next six months.