Henry Ford famously said, “If you think you can do a thing or think you can’t do a thing, you’re right”, and over the coming months, a positive attitude will be essential for every entrepreneur.
The turmoil of the Truss premiership has been replaced with some new hope that Rishi Sunak will settle the markets and stabilise the economy. Time will tell, but he faces challenging economic headwinds with rising inflation and the risk of a global recession.
Many of you will be old enough to remember the recessions of 2008 and the early 90s, 80s and 70s. So it’s not the first time we’ve collectively seen volatile markets or a government under pressure.
Our advice to any business owner is to focus on the business essentials.
It’s likely that the higher interest rates and greater market volatility we are seeing will continue for months to come. However, the new chancellor’s statement on 17 October appears to have returned some level of confidence to the market.
For businesses seeking to raise funding, there is good news. Funders are still looking to back businesses with a solid business plan. There is, however, a reduced appetite for risk, and with that in mind, it’s important to be properly prepared before seeking financing.
We advise companies that transparency is everything. Begin by producing forecast information with an accurate, real-time view of the business. Address the big questions such as ‘how it is managing the rising cost of business’.
Companies often go to the market to seek funding without going through the due diligence that funders seek. Financiers are understandably more cautious in the current economy and are looking to back resilient businesses. Some funders have reduced their level of appetite on loan to value by up to 10%.
At Fresh Thinking Advisory, we help clients navigate the markets and find the most appropriate funder. It’s essential to package the company correctly and put it in the best position to secure capital.
Looking forward, the economy is facing a tough time over the short term, but we can expect funders to return to the market in greater numbers in the spring of next year. The base rate will likely be five or six per cent in early 2023 and reduce as the year progresses.
Despite the headwinds most business face, entrepreneurs should pause, take a breath and not panic. Waiting for a more positive environment before making decisions could in itself prove detrimental.
The positive news is that it’s likely over the next 12 months that more funders will return to the market, which will allow firms to negotiate better terms.
Optimism can be challenging to maintain in a society with a 24-hour news cycle. However, optimism is the entrepreneur’s greatest asset in a world that is expected to experience economic difficulties in the months to come.
Perhaps this is the first time in a very long time that you can’t predict what will happen to the economy. So the best advice is to plan for volatility and to make your business as flexible and resilient as possible.
