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Sheer Heart Attack

Notices Of Administration Keep On Comin'...

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Long time, no post. Hope you are all well, protected and solvent.

It's been hectic in my small corner of the world of the SMEs the last nine months.

I'm getting notices of administration of customers twice a week now. It used to be once or twice a year - very, very different now. Companies of all types and sizes too - some going under owing £20K, others owing £500,000 to creditors.

For the very first time in years, we've got multiple court cases going on against bad debtors. It used to be very rare - now, we've got 7 cases totalling over £8,000 worth of debt.

We sell marketing and advertising packages to SMEs. It's carnage. Our average order value is currently around £300 - customers are now planning 4-6 weeks in advance to raise the money for what we do. Companies don't seem to have or to want to pay small bills on credit or debit cards.

I'm hearing left, right and centre from customers that business from the internet has collapsed - ours is down 70% YOY in terms of revenue. New customer acquisition costs are double or treble what they were even this time last year.

My mood about the economic situation has varied greatly over the last two years. I am now convinced we're looking at a 10%+ GDP contraction between 2007 and 2013 - to many, that's a depression.

God knows where business is going to come from. I've had to resort to very unusual and counter-intuitive measures to maintain the company's cash reserves. It's just about working but we're getting hammered by the summer slowdown. I hope it picks up as normal in September.

For those of you running or working for SMEs, how's it been going for you?

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I woek for a small software house.

I was on a four day week for a while and now I'm off without pay for two months. Still waiting to be paid for June and July.

I have seen the numbers, the company might survive, might survive but be much smaller or not survive at all. There is still some hope but the next two months will tell.

Fortunatly I saved when the days were good so I am reasonably sanguine at the moment.

I'm in IT, been a good 30+ years but it could be over for a while / ever.

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My housemate works in consulting and despite having done a great job for his company he is terrified of getting made redundant over the next few weeks. Obviously I've said if he's out of work he doesn't have to pay rent, but I'm not sure how much better that makes it...

The reason for his fear is that he keeps getting dropped from prospective jobs just as they are supposed to be starting - medium to large companies keep just putting off consultancy expenditure either deferring it, downscaling it or just plain cancelling it. Can't say I blame them at all, but it's very much in line with what I am expecting to see in the economy atm.

What is SMEs btw? Thanks for your post v interesting indeed, do you have a sense on how the NE vs the rest of the country?

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Long time, no post. Hope you are all well, protected and solvent.

It's been hectic in my small corner of the world of the SMEs the last nine months.

I'm getting notices of administration of customers twice a week now. It used to be once or twice a year - very, very different now. Companies of all types and sizes too - some going under owing £20K, others owing £500,000 to creditors.

For the very first time in years, we've got multiple court cases going on against bad debtors. It used to be very rare - now, we've got 7 cases totalling over £8,000 worth of debt.

We sell marketing and advertising packages to SMEs. It's carnage. Our average order value is currently around £300 - customers are now planning 4-6 weeks in advance to raise the money for what we do. Companies don't seem to have or to want to pay small bills on credit or debit cards.

I'm hearing left, right and centre from customers that business from the internet has collapsed - ours is down 70% YOY in terms of revenue. New customer acquisition costs are double or treble what they were even this time last year.

My mood about the economic situation has varied greatly over the last two years. I am now convinced we're looking at a 10%+ GDP contraction between 2007 and 2013 - to many, that's a depression.

God knows where business is going to come from. I've had to resort to very unusual and counter-intuitive measures to maintain the company's cash reserves. It's just about working but we're getting hammered by the summer slowdown. I hope it picks up as normal in September.

For those of you running or working for SMEs, how's it been going for you?

Thanks for that very valuable first hand information.

Can you tell if the deterioration accelerated recently or has business been going regularly downhill since the start of this crisis. For info I've been seeing a sharp deterioration in business since May/June that doesn't seem to be reflected in the statistics yet.

I hope you will do OK through this, -10% could be optimistic.

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For those of you running or working for SMEs, how's it been going for you?

I work for/part own a medium-sized software shop. We're trading at or just below break-even. On a £4m pa turnover we lost £3k last month which we funded out of the cash pile from the good times. A few years back our turnover looked like reaching £6m pa, but that's out the window now, business is 30%-40% down.

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I think it's basically the people in SMEs who can see the reality, those and the recently unemployed. I was one and now I'm the other, my perception speaking to others who are still in work ( mostly in SMEs ) and trying to find work myself is that the economy has collapsed in a way that the media presented statistics just do not communicate. I'll be surprised if we get away with a 10% contraction.

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I know Pacific State, I'm from the North East as well (Low Fell now, I guess we could be neighbours) and all I see is our SME suppliers begging us to give them ANY work.

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Guest KingCharles1st

Well, my business is down 2/3 on last year- but the good news is, I'm looking at doing something else and going back to my skilled work as and when the orders turn up.

But I reckon a contraction of 10% is very optimistic- I think we could go all the way with this one.

Real growth starts with selling land- building on it- and selling the finished houses, or making things like mobile phones or the internet- when those concepts are all shiny and new. That is no longer happening, the whole ethos of real work and real value has been destroyed by the Government's total and utter willingness to believe in all the shit pumped by the City of London's "financial powerhouse."

People always talk about leveraging with regard to money- however- in truth, it's the labour market's levering that has to be watched so closely. Like the o.p. I jsut do not see how and where a recovereh could possibly be coming from.

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I think it's basically the people in SMEs who can see the reality, those and the recently unemployed. I was one and now I'm the other, my perception speaking to others who are still in work ( mostly in SMEs ) and trying to find work myself is that the economy has collapsed in a way that the media presented statistics just do not communicate. I'll be surprised if we get away with a 10% contraction.

Yep. As a small business, you're below the meeja radar, so you don't get the bailouts. You just get to pay for them.

Not that that's anything new. What's changed now is just the scale of it.

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My housemate...

Forgive me Charterhouse, but... you're in a shared house / take in lodgers?

Not that there is anything wrong with that, but I had formed a somewhat different mental image of your domestic arrangements.

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I was on a four day week for a while and now I'm off without pay for two months. Still waiting to be paid for June and July.

I have seen the numbers, the company might survive, might survive but be much smaller or not survive at all. There is still some hope but the next two months will tell.

Fortunatly I saved when the days were good so I am reasonably sanguine at the moment.

That sounds rough, WGFA. At least you've had the foresight to save for yourself which will hopefully bridge you over this period.

Can you tell if the deterioration accelerated recently or has business been going regularly downhill since the start of this crisis. For info I've been seeing a sharp deterioration in business since May/June that doesn't seem to be reflected in the statistics yet.

I hope you will do OK through this, -10% could be optimistic.

Thank you.

There has been a sharp deteroriation over the summer, however in my trade that's to be expected.

What I am worried about is the strength of the normal Sep-early Dec bounceback. We were caught out waiting for a recovery two years ago which materialise 6 months late and jeopardised the future of the business.

I work for/part own a medium-sized software shop. We're trading at or just below break-even. On a £4m pa turnover we lost £3k last month which we funded out of the cash pile from the good times. A few years back our turnover looked like reaching £6m pa, but that's out the window now, business is 30%-40% down.

30-40% is quite a haircut - managing your cashflow must be a daily nightmare at the moment. I'm really sorry about that - I know the heartache that can cause.

Like you, we've saved a lot during the good times and at current Summer trading levels probably have around 12 months we could survive at this level. A decent bounceback in the later part of the year would heavily insulate us, but that's far from guaranteed.

I know Pacific State, I'm from the North East as well (Low Fell now, I guess we could be neighbours) and all I see is our SME suppliers begging us to give them ANY work.

We are located close to each other and SME work in the NE is slow. We trade across the UK and I have to say that the pattern seems replicated across the nation - it's not just us.

Well, my business is down 2/3 on last year- but the good news is, I'm looking at doing something else and going back to my skilled work as and when the orders turn up.

Very good forward planning, KingCharles1st. You've obviously prepared for this - that puts you ahead of 95% of our countrymen and women.

Here are a couple of anecdotal stories about local commercial property to keep you bears...

• Some leased office space on Tyneside is now going for £1 per square foot, according to one of my local customers. It had previously fetched £10 per square foot

• The same customer has put out feelers on 5 or 6 different locations and, in the words of his solicitor, is getting deals and reductions that have not been seen before.

Very strange days indeed.

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I'm a self-employed commercial property lawyer. Things have been up and down over the last few months but in the last couple of weeks I've sensed a turning of the tide with people looking to do deals again (businesses opening new outlets; developers looking for new sites). I don't know how long it will last but I think it's a case of taking what you can whilst it's there.

I know that all of the medium sized lawfirms are really struggling as they all have massive fixed costs which makes them very vulnerable to the drop in income.

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Mrs Loo works for a beauty retreat.

as I have reported before, staff are under pressure to put more hours in and take no pay rises.

this is now under better control after much badgering from Mr Loo, Mrs Loo has ascerted herself, and i do get to see her much more these days.

what is worrying her now, are the number of grumpy customers.

I mean, they go there to relax, unwind, have a massage and so on. A pleasant environment one would hope.

however, she reports that probably twice a day during the week and more at weekends, there are customer flare ups...with each other and at staff. usually over absolutely nothing.

stress seems to be tumbling out now.

My own business is OK, but all customers have cut back and are reticent to spend until stuff really breaks down. The Engineering Company may as well close, but as thats only me. no hassle.

all companies I deal with are going through the holiday period on drift drive only, ALL are praying for something in September, but honestly, i cant and no-one Ive spoken to can see how.

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Just ticking over and finding other things to do.

A friend of mine is hard hit. He's been providing fibre and wireless connectivity to various managed office centres. Nearly of these have gone bust and made a phoenix like recovery thanks to pre-pack administrations and takeovers. In some cases the landlords had an investment in the original managed office service companies and they have taken over the running. One managed office firm went into difficulties when its overdraft was pulled.

Have to be vague. Can't say any more than that.

However the new firms don't have to honour previous debts or contractual committments, hence the worry.

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Profitability down a third, only 10% nowadays. The management team are long-serving so had experience of previous recessions on our business. We've done better than we would have done without the early decision to determinedly cut costs.

If you think about it the unemployment figures took a while to really take off. I suspect some of the companies in dificulties now wish they had been decisive 6+ months earlier.

As for the future, well the summer and autumn are traditionally harder months for us so its a question of how much the seasonal pattern is exacerbated.

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I can confer, my company has sent out a warning about credit worthyness of SME's...

Especially where owners are nearly 60yo's and looking to get out with a tidy sum, rather than try to sell a debt ridden non profit making organisation to someone who can't themselves get finance or MEW to get finance.

interesting topic in the circumstances...

thank you OP.

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I work for a fairly large multinational E (t/o>£2bn) and one part of our business deals pretty much exclusively with SMEs and we are not yet seeing them go in large numbers which has surprised me. I get more and more nervous that there will be a sudden avalanche of bad debts; insurance cover on these debts at anything like a sensible price was withdrawn in 2008.

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My Caribbean online websites/booking software leasing business is bumping along at around 5-10% (monthly profits) compared with peak 2005-6 figures. Down to pocket money levels - covering household bills but no extras. I see this slowing much further and have already noticed that late bookings have got much later and now are so late that they forget to book...

Luckily I work from home and have automated everything so overheads are minimal. And numerous larger competitors are struggling, travel agencies and online portals are losing money hand over fist (interesting observation is that the online portal sales are well down but they are surviving even with losses, wheras agencies with a physical high street office and bigger overheads are dying daily - the future of travel after this depression is going to be almost solely online).

SME agencies and 3rd party travel sales intermediaries are being hit by a severe double whammy, a cruel irony of the recession:

1. Sales are massively down as holidays are a discretionary spend (don't be fooled by the big boys announcing that all packages were sold - they massively reduced inventory to guarantee this, are shedding workers, merging to survive etc)

2. Nobody wants to book with small or medium sized travel brokers or agents or tour operators for fear that they will go belly up - Excel Leisure's failure caused this in large part

There has already been carnage in the SME travel industry but this autumn shoulder season - when even in boom times agents struggle to cover fixed cost overheads - is predicted to be uber-carnage. Even with massive discounting, people are just not buying holidays in sufficient numbers to keep even half of the boom time agents in profit. Margins have been squeezed too until the pips squeek - a fatal combination along with collapsed sales (eg airlines used to pay agents between 10-15% commissions on ticket sales - many airlines now pay nothing at all, forcing agents to add a booking fee onto their ticket sales, rendering the agent instantly dearer than booking direct on the airline's website).

Some of my hotelier clients are facing the wall and finding new clients to lease websites or software to is proving nigh on impossible, even though it saves them money as software is cheaper than humans. The light at the end of the tunnel is that when the recovery comes in a few years there there will be a huge pent up demand to see foreign places (eg my islands in the sun). However, since by then they will all have turned Haiti style into chaotic anarchic muderous drug ghetto hellholes, my light may go out!

Hence I bought a 7 seater MPV to launch a local Norfolk taxi service (only driver in my village) and the Mrs will be working p/t as a gym instructor, something she has not done for 12 years. We hope to survive, then clean up if any recovery ever comes.

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I don't see how you can be so specific about credit warnings; you can get stiffed by any type of business, sole trader, SME or PLC.

It is my honest opinion that trading with large PLC's is the biggest risk for any small business owner. Whilst they might be good for the money on paper most PLC's take delight in seeing how far they can spin out the fateful day they actually have to pay you. Loads of small businesses have run out of cashflow long before big PLC's decide they feel like coughing up.

The thing that amazes me is why so many companies give credit when they don't need to. If you shop at Tesco they expect you to pay at the till- you can't waltz out of the store with all your shopping after you have cheerily informed the check out girl you'll pay her invoice in a month or two.

If I go to the bank and ask for an overdraft they want all sorts of guarantees- seeing as trade credit is a soft overdraft facility I'm amazed so many companies offer an account without any kind of checks.

I offer credit to no one and I pay for all raw materials immediately upon delivery- business has increased since switching to this system. My suppliers love being paid in full straight away and give me a better price- I pass this saving on to my customers to sweeten the pill of no credit being available.

If your customers are getting the best price and service possible they will find the money to pay on your terms.

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I don't see how you can be so specific about credit warnings; you can get stiffed by any type of business, sole trader, SME or PLC.

It is my honest opinion that trading with large PLC's is the biggest risk for any small business owner. Whilst they might be good for the money on paper most PLC's take delight in seeing how far they can spin out the fateful day they actually have to pay you. Loads of small businesses have run out of cashflow long before big PLC's decide they feel like coughing up.

The thing that amazes me is why so many companies give credit when they don't need to. If you shop at Tesco they expect you to pay at the till- you can't waltz out of the store with all your shopping after you have cheerily informed the check out girl you'll pay her invoice in a month or two.

If I go to the bank and ask for an overdraft they want all sorts of guarantees- seeing as trade credit is a soft overdraft facility I'm amazed so many companies offer an account without any kind of checks.

I offer credit to no one and I pay for all raw materials immediately upon delivery- business has increased since switching to this system. My suppliers love being paid in full straight away and give me a better price- I pass this saving on to my customers to sweeten the pill of no credit being available.

If your customers are getting the best price and service possible they will find the money to pay on your terms.

basically, we dont supply to sole traders, nor to small partnerships.

the PLC's are heavily backed by the banks, unless there is a problem with the business as a whole, in terms of failed business structures etc.

its basically the about to retire SME's who take out large dividends rather than sell off the company. Some companies making losses, just arnt worth anything at the moment with out large backing of huge working capital, and financing behind them.

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Great thread. It's nice to hear stories from the coalface rather than speculation and spin. Personally, I'm still on my 10 week enforeced summer holiday but like so many other posters, I'm hoping September will start up as normal but there are no guarantees. Fortunately, I have no debt.

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I think it's basically the people in SMEs who can see the reality, those and the recently unemployed. I was one and now I'm the other, my perception speaking to others who are still in work ( mostly in SMEs ) and trying to find work myself is that the economy has collapsed in a way that the media presented statistics just do not communicate. I'll be surprised if we get away with a 10% contraction.

I'm in the same positions as you been made redundant two weeks ago. I don't care what the media say, the real economy as stalled big time, most small construction related businesses I know are living on the edge of bankruptcy on a daily basis. I have been thinking of going self employed, so I went to see a van dealer yesterday, offered me a fantastic cash deal, he was very honest, told me he has not sold a van for the last five weeks.

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The thing that amazes me is why so many companies give credit when they don't need to. If you shop at Tesco they expect you to pay at the till- you can't waltz out of the store with all your shopping after you have cheerily informed the check out girl you'll pay her invoice in a month or two.

If I go to the bank and ask for an overdraft they want all sorts of guarantees- seeing as trade credit is a soft overdraft facility I'm amazed so many companies offer an account without any kind of checks.

Just makes you wonder how well these companies are run in the first place and how viable they are under the circumstance, well any circumstances really apart from a major bubble.

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