Presentation given by Chris Lilly, senior partner Mayfield Business Group (MBG), at Wealden Business Expo in Heathfield, East Sussex, UK on 11th October 2011. It shows how well run businesses can still make a profit even in difficult economic circumstances, such as a double-dip recession and highlights growing sales, increasing margins and controlling costs

1. How to make a profit
during a double dip recession
Chris Lilly
Senior Partner
Mayfield Business Group (MBG)

2. What is a recession?
• A period of general economic decline typically defined as a
decline in Gross Domestic Product (GDP) for two or more
consecutive quarters.
• Typically accompanied by:
– consumers cut back on their spending
– decline in revenues for some businesses
– drop in stock market values
– increase in unemployment
– decline in house prices

3. What is a double dip
recession?
• Initial recession followed quickly by a second one
• Occurs when:
– growth after the first recession is weak
– further bad news e.g. tax rises, ongoing reduction in consumer spending
– weak exports due to slower recovery abroad
% change
in GDP
Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10

4. How recessions affect
businesses
• Customers stop spending
• Customers reduce / defer their spending
• Customers spend elsewhere
– buy cheaper products
– use outsourcing
• Banks
– lend less
– charge more interest
– require more guarantees for loans

5. Successful sectors in a
recession
• Repair firms
– Car repairers, shoe repairers
• Low cost shops
– Pound shops, low cost supermarkets, low cost second hand cars,
low cost clothing shops
• Businesses selling staples
– Food
– Clothing that is not readily repairable eg underwear, socks,
• Businesses offering good value for money
– eg Morrisons
• Up-market restaurants
– Where the wealthy still spend their money!

6. Cash more important than profit
Why is that?
• Can’t pay bills = business failure
But note that profit is important for:
• Shareholders dividends
• Re-investment
• Reserves
In difficult times cash trumps profit!
“Revenue is vanity – profit is sanity!”

7. Definition of profit
£ Typical %
Total revenues 100%
Direct costs
Eg cost of sales
Gross profit 50-75%
Indirect costs eg
Management,
Admin,
Sales & marketing costs etc
Operating profit 20-30%
Other non-operating income,
Interest income etc
Net profit Reserves, Dividends 10-30%

8. How to maximise profits
• Maximise revenues
– Increase prices
– Increase quantities sold to each customer
– Increase number of customers
• Minimise costs
– Direct
• Products bought in
• Raw materials
• Production costs
– Indirect
• Sales and marketing
• Administration and management
• Overheads

9. Increasing sales
• Sell more of same
– volume discounts (also BOGOF, 3 for 2 etc)
– time related eg sales
• Sell more different products
– upselling
– loyalty schemes
• Sell to more customers
– increased visibility
– word of mouth promotion
– introduction schemes
• Increase prices

10. Decrease direct costs
• Negotiate lower prices with suppliers
• Find cheaper sources e.g. China, India
• Reduce production costs
– improve operating efficiencies
– just in time manufacturing
– reduce unit costs
– reduce production staff / part-time working
• Outsourcing
• Insourcing

11. Decrease indirect costs
• Reduce non-production staff
– number
– hours worked
• Pay cuts
• Get best prices for energy, telecoms, insurance, etc
• Downsize
• Smaller / fewer premises

12. Managing marketing costs
• Reduce them?
– Cutting marketing costs reduces cash spent
– But such cost-cutting might reduce sales and revenues?
• Increase them?
– Increased marketing in a recession might increase customers /
revenues
– Maximise cost-effective marketing techniques eg referrals (word of
mouth)

13. Marketing strategies
- word of mouth
– Networking
• Chambers of Commerce
• IoD, etc.
• First Friday
– At networking events you may sell to
• the person you are actually talking to
• the people that they then talk to
• other people they know
– Let customers do the selling for you - ie referrals!

14. Marketing strategies
- B2B
• Direct approaches
– especially by letter
• Email / call / meeting
• Advertising
– trade magazines etc
– ‘A’ boards (trade boards)
• Press releases
• Articles / white papers
– magazines, web-site etc

15. Marketing strategies
- collateral
• Brochures
• Web-site
• Business cards
• Brand
• Logo
• Trade boards

16. Financial strategy
• Improve cashflow
– Cash with order
– 30 day terms
• Charge interest for late payment
• Chase bad debts (use small claims court if necessary)
• Minimise tax (use all allowances, capital / R&D tax credit etc)
• Reduce debt (if appropriate)
• Reduce interest payments (especially if high interest rates apply)
• Change bank (for better terms)

17. Funding in a recession
• Debt finance
– Enterprise loan guarantee scheme
– Banks
– Family & friends
– Grant funding (usually needs to be matched)
• Equity finance
– Angel funding
– Venture capital funding

18. Tips for raising funding
Need a coherent and compelling Business Plan:
– Need to show viability of business eg
• Good growth prospects
• Confirmation of adequate customer
demand at the given prices
• Ability to repay debt with interest
– Explain why extra cash is needed
– If VC or Angel funded then need to show Return on Equity
of >>5 within 3-5 years

19. About MBG
• MBG was established to help small and medium sized businesses be successful.
• The MBG team comprises business experts with over 100 years of combined business
experience and includes qualified business advisors (Business Link / SFEDI approved)
• The MBG team and its associates have expertise in every business functional area
including:
– sales and marketing - finance
– business strategy - human relations
– business development - R&D
– operations - engineering
– manufacturing - health & safety etc
– legal

20. MBG offers:
• Specialised business advice
• Preparation of business plans
• Raising funding
• Mentoring and coaching
• Training
• Business support
• Telephone support service
• Business fact sheets

21. Before you go
MBG is offering a free business clinic today in the hall from
1200 -1600 hrs (30 minute slots available)
Please leave your details if you wish:
• To sign up for a free business clinic session
• To register for future seminars
• To receive future e-mailings from MBG
• To join MBF (free membership)
• To benefit from the services of MBG

22. Contact details
Roger Stone
Mayfield Business Group
Warren Bakery,
Fletching Street,
Mayfield, TN20 6TW
Tel: 05603 44 49 90
Mob: 07776 14 40 56
Email: roger.stone@mayfieldbusinessgroup.com
Website: www.mayfieldbusinessgroup.com
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