Posted on Friday 23 April 2010 by Ulster Business

SME meeting

Small and medium sized companies are the lifeblood of Northern Ireland industry, so it stands to reason the health of this sector will give an indication of how the rest of the economy is performing. Symon Ross hears how four companies are coping in the post-recessionary period.

Very few businesses, large or small, have completely avoided the effects of the recession. But while many of Northern Ireland’s biggest firms have announced huge cuts to staff levels and production, it has been in the SME sector where the changing dynamics of the economy have often been most acutely felt. While the wider economy is now showing signs of life, the Federation of Small Business’s policy chair Wilfred Mitchell notes that for many small firms, recovery from such a prolonged downturn will not happen overnight. “Evidence and statistics gathered by the FSB over the last 18 months or so clearly indicates that small business owners in Northern Ireland are feeling the impact of the economic recession more than their counterparts in the rest of the UK,” he said. “While this sector is naturally more flexible and innovative in recessions, there is an urgent need for the government to look to small businesses as the means for building the post-recession economy by helping them employ more people, become more innovative and ease the bureaucracy and tax burdens which many still face.” Among the major issues facing small firms are the recently announced rise in National Insurance Contributions, which could affect employer decisions about staffing levels. FSB says 58% of its members already feel the UK tax system has a negative impact on their ability to grow. Access to finance remains an issue for small firms, many of whom have seen a withdrawal of overdraft facilities or unfavourable changes to business account terms and conditions. Add to that a drop in demand from many external markets, recently introduced water charges and high energy and fuel costs and it is a fairly gloomy picture. John Rooney of seafood processing company Rooney Fish in Kilkeel said his firm is one of many feeling the pressure from all sides. “The problem is we’re getting hit with everything at once. For small-to-medium sized businesses like ourselves it is very tough at the moment, there’s no doubt,” says Mr Rooney. “We all export and we have been cut back a good bit. We export all over Europe and, where before Christmas we should have been putting out three 40ft container loads every fortnight, we are lucky if we’re putting out one. Orders have dropped back,” he said. “We are still going ahead; we are existing, but it is very, very tight.” The company has held its employment steady at just over 40 in the past few years, mostly because the nature of the business means that whenever boats fish it has to be ready to process, either fresh to frozen or fresh to cooked. “We got rates for small businesses cut back but there are still big problems out there. People see the economy rising a bit but all the other costs associated with business are rising, so it is going to take a while before everyone gets back to square one.” “I know companies that are working away and are going behind every week. But they are trying to work their way out of it. I know small company owners that are putting money from their own savings into the company to try and keep them going. But how long does that last?” Siobhan McAleer, founder of multi-million pound business the Mortgage Shop, said the challenging economic conditions and resulting property slump have helped her to focus on how her company operates. “The property crash and recession has been the most testing and challenging for my business,” she said. “That said we are coming out of the recession in better shape. Yes, we’ve had to make very difficult decisions and of course we’ve had to reduce our headcount but I can honestly say it’s made me a better business person and produced a strong and more robust business model. Every difficult decision has been made. We are now dusting ourselves off and continue to build and grow what has always been a profitable business.” To maintain a healthy and productive workforce even during times of adversary, Siobhan says she had to be in front of staff communicating more. “Firstly, it helped to quash any rumours that the company was performing worse than reality. Secondly, it reassured people that the Mortgage Shop was finding a way through the crisis therefore reinforcing its commitment to the branch network. By being visible and communicating with clarity to staff was, from a very practical point of view, assisted by people’s efforts to cut costs and also stopping individuals making rash decisions in response to difficult situations,” she says. To lift morale she organised teambuilding exercises and staff conferences with motivational speakers and formed small networks involving groups of four Mortgage Shops to provide support. “In May 2009, the Mortgage Shop, for the first time in 14 months, turned a modest profit marking a significant turning point for the company. We now aim to build on that by continuing to grow our network across the island of Ireland,” she adds. David Maxwell, founder of Tyrone Timberframes, started his business over three years ago and now has an annual turnover of £1.25m. He said the company’s relative youth has meant it has been to some extent insulated from recession. “We had no outstanding loans bar overdrafts with banks and we will not be overly reliant on bank finance for growth. My background and training as an accountant taught me that cash flow is vital to any business and even before the recession we had put in place the right procedures to try to keep things tight.” he said. “We’ve used the time during the recession to plan for the future. We have invested heavily in creating new technology and intellectual property. This has lead to a breakthrough in the development of a house which doesn’t require a central heating system. We are looking at ways to expand throughout the UK and Ireland. The recession has made us more focused and relentless in our approach to managing the business and searching out new opportunities.” For many firms, the recession has provided an opportunity to take stock of their business and upskill in preparation for the recovery. Keith Turkington from software development company Fluent Technology decided to take part in the Department of Employment and Learning’s Management Analysis Programme. He said: “The recession has presented strong challenges to all businesses regardless of size and inevitably it will result in both winners and losers. In the new economic climate we recognised that without forward thinking and leadership development in our company we would face a bottleneck in our own business growth. We decided to take advantage of the Management Analysis and Planning Programme (MAP) offered through DELNI which is aimed specifically at SMEs. The programme involved an analysis of our company’s management and leadership skills gaps and more importantly set us on a path for developing our people’s management and leadership skills. “It has proved invaluable to our company in two ways. It has enhanced our ability to ride out the recession and, more importantly, has put us in a much better place to take advantage of the inevitable upturn. “At Fluent, our key resource is our staff and through MAP we recognised that if we could do anything to improve their skills and productivity, it meant we could deliver more useful solutions to our clients, guaranteeing the income from today but also from tomorrow.”

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