In Ireland, 2012 was an enormously challenging year for those engaged in what is classed as the domestic economy, particularly small and medium enterprises (SMEs) who will be happy to still be around. There is guarded optimism that the economy throughout 2013 – although it continues to be challenging – will see some modest uplift, with sectors such as hospitality and retail seeing improvement in sales.

Some reasons for this guarded optimism are as follows.

  • Continuing strong foreign direct investment into Ireland which will directly and indirectly benefit the domestic economy.
  • Exporting companies recorded net jobs gains of 3,804 in 2012, the highest increase since 2006. Employment losses have stabilised in 2012.
  • Business confidence is showing some signs of improvement. Most businesses that have survived the past three years have carried out significant restructuring and right-sizing of their businesses. Any uplift in revenues will have an immediate impact on their profitability and viability.
  • The property market, particularly the residential market in Dublin, saw increased sales activity in 2012 and market activity is expected to increase significantly.
  • The Government is actively targeting the SME and start- up business sector in 2013 and initiatives such as the credit guarantee scheme and the micro-finance fund will hopefully assist viable SMEs and start-up businesses this year.

This year presents an opportunity for the shareholders/ directors and their management teams to take stock of where they are and how they plan to move their businesses forward, which should include the following.

A strategic review of the business

The directors and key members of the management team should take time out to see where the business currently is and how they can move it forward.

This can be done by having 'away days' in a hotel or conference centre where the management team can avoid the normal day-to-day business interruptions.

The use of an external facilitator can often be of value in these situations. As well as getting clarity on where the business is going, the away days can often re-energise the key members of the management team.

Review of the business plan

Following the strategic review, update your business plan and make it 'fit for purpose'.

Cash flow projections

Remember: 'cash is king', and any business plan needs to be supported by comprehensive cashflows which are prudent and allow headroom for unexpected surprises.

Assessment of the financial and non-financial support available to your business

Enterprise Ireland and the county and city enterprise boards provide considerable financial and non-financial support and guidance to businesses.

Below is a brief listing of some key financial supports available to businesses.

Credit guarantee scheme

The credit guarantee scheme facilitates the lending of a €450m of additional finance to viable SMEs over the next three years. The Government provides the lender with a 75% guarantee for which the borrower pays a 2% premium.

Micro-finance fund

A €90m fund aimed at providing support to start-up, new or growing enterprises with no more than 10 employees.

Seed capital scheme

If you start up and work full-time in your company, you can claim back the income tax you paid in the previous six years to invest equity into the company.

The employment and investment incentive scheme (EIIS)

Company can raise up to €10m in any one company or group of companies subject to a maximum of €2.5m in a 12-month period.

R&D tax credits

A 25% tax credit for qualifying R&D expenditure.

Address short/medium term working capital needs

  • Strengthen credit management procedures.
  • Seek to avail of the credit guarantee scheme or the micro-finance fund.
  • Seek additional equity investment from shareholders or connected parties.
  • Consider availing of the EIIS provision (if you qualify) as a source of equity funding.
  • Conventional overdraft facilities will continue to be difficult to secure this year. I suspect it will be 2014 before we see any significant increase in overdraft lending. As the economy continues – hopefully – to improve, the lack of working capital could become a major impediment to enterprise growth. Enterprises should look to alternative sources of working capital such as invoice discounting or stock finance.

Review the current management team

During the past two to three years, businesses have needed lean management teams and workforces. In some instances, managers who have exited the business have not been replaced. Consideration should now be given to whether there are any management deficits in skillsets and whether individuals with relevant expertise in, for example, sales, marketing or finance need to be brought on board.

The appointment of an interim manager may be a possible solution in these circumstances. Interim managers have been very effective, for example, in the retail, hospitality and motor sectors in the last two to three years.

The above steps will greatly improve the chances of businesses surviving and growing this year.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.