Is financial solvency enough in the new millennium?


Is financial solvency enough in the new millennium?

With the 20th Century now well and truly behind us is it time to rethink the way we look at our business models? One of the most important yardsticks when examining a business is whether it is solvent or insolvent. The repercussions for being insolvent are very dire indeed. A business can be cash flow insolvent or balance sheet insolvent. The upshot is however that it is an offence to trade whilst being insolvent. In current insolvency law the area of interest relates strictly to the ability of a business to repay its’ debts as they fall due. As we push further into the new millennium I would suggest that this might no longer be enough.

If we look at our most recent crisis across the globe it was once again sparked off by large financial institutions which were insolvent long before the penny dropped with regulators and governments. If we look at 1929 and the great crash it was again fuelled by large institutions and wealthy individuals such as JP Morgan, Jesse Livermore, William Crapo Durant etc. Our most recent crisis stemmed from a property bubble whilst the 1929 crash stemmed from a stock market bubble. In both cases the causes and outcomes were pretty much the same as people and institutions bought an asset class they couldn’t afford with money they didn’t own. A relatively small group of wealthy individuals and organisations over egged their positions and let their greed run away with themselves and brought the system to its knees. As always there are winners too. Look at Joe Kennedy as he sat idly by and watched the market crash only to pick up the pieces afterward and make a fortune in the process. The transfer of wealth from ordinary citizens across the globe to another relatively small group of individuals and organisations in recent times has been astounding. So can this type of incident be stopped from happening again or are we doomed to repeat the cycle with the arrival of every new generation as they look set to reinvent their very own wheel.

So here’s a thought. What if we had some new and additional insolvency yardsticks? For example what if a company or business was expected to be morally and ethically solvent? Would it be hard to police, could we come up with a set of parameters for such an initiative. Could we write some code to allow for an impartial measure of business moral solvency?

Perhaps we don’t need to. Perhaps we could just get the thought out there to the consumer and allow them to decide which business they think morally solvent. Moral solvency might be a bit of an abstract concept right now as was the idea of breaking up monopolies in the 1800’s but that’s not to say it might not have some merit. If we had a guide for moral insolvency could any of our bankers run riot for the benefit of their own bonus packages. Investors in the main really don’t count for outside of the individual investor by and large the institutional investors primary goal is maximise return largely regardless of where the funds go.

So as you know if you’ve followed previous blog entries I’m all about diversity, the beauty of independent businesses and especially the diverse nature of an independent high street. If we look at the recent corporation tax issues, especially the highly public reaction to Starbucks in the UK and Apple in Ireland, then we might see an opportunity for small businesses in all of this. I would suggest the small independent high street business has much less opportunity to move funds around when compared to the multinational giants. The small business is also highly invested in its locality as opposed to a multinational which views their store as just another cost or profit centre. So could the small locally vested business be more morally solvent than their larger competitors. Again I would suggest yes. I would trust my local credit union more than my local banks, I would trust my local fashion store rather than the larger chains in my town. Why? Because I know them, I see them dropping their children to school, I see them at local sporting events, I see them shopping when I’m shopping. I see them investing in local sponsorship, reinvesting in their businesses and working hard to survive. I don’t believe they are working towards their next bonus but they are working towards getting revenue in to pay their business rates. Rates that pave our roads and keep the street lights on. I’m not altogether sure if Moral solvency would catch the imagination or could be turned from an abstract concept into a business practice. I am sure however that my local high street independents have it in bucket loads when compared to their larger multinational competitors.

Perhaps there’s a thesis or dissertation in this idea or maybe someone has already completed one, if so I’d love to read it. Thanks for reading.


Turn the tables on the downturn.

The news is old and the message repetitive, the high street is under pressure. Perhaps we should take comfort in the knowledge that there’s hardly a sector that is not (misery loves company after all). Sure the high street gets the press, perhaps due to the very real effects both visually and physically on the streets of our towns and cities. But take a drive through many industrial estates and the picture is similar with many units closed and up for sale or lease.

We are certainly in a period of great change but that doesn’t have to mean for the worse. Retail as we all know is about change. Seasonality, product ranges, pricing, merchandising, as retailers we are all about change. Hourly, daily, weekly, it’s what makes our industry so dynamic. So don’t fight it, instead use our capacity for change to turn the tables.

During the Independents Month initiative in Britain why not make a commitment to look at new and innovative ways to cement your business and it’s place on the high street. 

Did you know that just over 26% of UK and 16% of Irish businesses believe that investing in  eCommerce is vital for growth. Now contrast that with a recent finding that 49% of Britain’s smart phone users have made a purchase online within the last 6 months. More interesting yet is the fact that 36% of smartphone users had used a map tool in the 7 days prior to the survey. Would they find your shop if they were looking for it online?

Further data shows that 74% check their mail on their phone and 67% use their phone for search purposes. Both of these trends offer retailers an opportunity to get in front of their customers. How many of us have run email campaigns? How many of us have collected email addresses only to leave them sitting on our laptops or desktops?

How many of us would show up in a search query, for our location or category? None of the these even involve a website let alone an eCommerce enabled site. A simple web listing goes some way towards solving the search issue and a weekly or monthly mail shot gets directly to your customer. If you can find a more cost effective way to get in front of your customer I’d love to hear about it because right now I’d suggest email is still the number 1.

So I suppose this week I’d suggest again that even if your in the trenches and finding it hard to get your head up, if you can you’ll find opportunities do exist. In the words of the Pet Shop Boys “there’s a lot of opportunities if you’ll only take them”, the poetry of Neil Tennant there, can’t beat a bit of poetry. But seriously we love to take a collaborative approach where ever possible and this months Independents initiative is a great example of that approach. Well done to all involved and no doubt it will be a great success. As independents we do enjoy many advantages over the larger competition as I’ve said before. Strength in numbers is certainly one. When taken as a group our range of product, service and pricing leaves the largely homogeneous offering of the multiples for dead. We just need to shout about it and hopefully that’s what this months campaign will do.

Have a great month.