Opinion

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How do you give an economic outlook?

4 Mins

I was on one of my regular visits to a client I have been involved with since its incorporation. Those of you with very long memories may remember reading about some of the problems I had helping to set up a subsidiary of a German company. That was in late 2002 and the subsequent five years have had their share of ups and downs.

The German owner has shown considerable long-term vision and a large amount of patience. There is always a chance that this will eventually run out. Gunter is extremely sharp and keeps up to date with political and economic matters all round the world. I knew he would have been reading the various articles on the ‘credit crunch’ and its impact on UK plc with considerable interest.

The answer, of course, is far from straightforward. “It’s patchy” hardly did it justice. “Some of my clients have hardly seen any effect at all – at least so far. Those that are in strong banking relationships are well placed. Also those in more niche markets or with excellent customer loyalty seem to be holding up well. I have to admit others are seeing some signs of reduced demand.”

Gunter replied: “So, what you are really saying, Peter, is that the good, well managed businesses are holding up. The less good ones are starting to struggle?” It was perhaps an obvious statement but as a summary it couldn’t be beaten.

His next question was an equally obvious follow-up: “Are we strong enough?”

I had to choose my words carefully. “As we are today, probably not. You know as well as I do that demand has been weaker this year than last. Our current channels are just not delivering the necessary volume. However, I still believe the products are strong and the demand is there for what we are offering. I don’t think price is too much of an issue if we can get to the right customers.”

Gunter looked thoughtful. Had I been too forthright? “I am glad you said that,” he stated. (I breathed a silent sigh of relief.) “Ralf and I were discussing the very same issues on the plane on the way over. We cannot continue as we are. We must find a different way to tap into the demand that we know is there. We get so much good feedback from end users but the distribution channels are just not working.”

We spent the next hour or so going through the plans. It was obviously something that had been planned for some time. It hadn’t been dreamt up on the plane flight that morning. I could see the logic in what was being said but I was also worried.

“Are you sure this is the right time to do this? Don’t forget where this conversation started. There must be a real prospect of some reduction in demand. We can’t afford to lose any of our existing business.”

The reply was immediate: “I really don’t think we have an option.” It was clear the decision had in effect already been taken. “We have to do this. If we don’t we might as well pull the plug now. Otherwise it will just be a slow painful decline.”

He added: “I have been very patient and I am prepared to give it one last shot…..” Gunter didn’t need to say any more. We have to make it work. Keep your fingers crossed and watch this space.

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