Think twice about expansion plans
In the wake of the US atrocities,Stephen Evans strikes a note of caution for budding businesses everywhere.
In January 1999 I put together a management buy-in team, backed by venture capitalists and a leading bank, to build a bar and restaurant group turning over £100m.
Our first buy, Brannigans, already had a £40m turnover and potential for rapid growth. That was last June, and since then I have spent a lot of my time seeking out further acquisitions. What we wanted was another Brannigans: non-core to its owner, trading well but with potential.
You can imagine the blow when our investors decided in July to put further acquisitions on hold.
Brannigans on its own cannot afford a heavyweight management team. I had quit a top corporate job to build a major group, not to manage 20 late-night bars, so I have decided to leave the business.
All this has happened in the past three months. I wanted to share my news with Caterer readers to sound a warning note. Then, Tuesday 11 September happened.
Before the terrorist outrage in the USA you could have dismissed a decision to put expansion on hold as a stand-alone event. Now, you have to see it as one of the first casualties of the next recession.
The business pages of the nationals don't make good reading, with record profit warnings and share prices falling.
Personal finance writers are talking up property as one of the safer investments, but even that looks doubtful.
Cambridge Econometrics says that the rise in house prices looks like a speculative bubble. It suggests that while the crisis of the late 1980s is unlikely to be repeated, there will be some "correction".
The smart thing to do is to batten down the hatches. Expansion in this economic climate and in the wake of the US tragedy is a high-risk strategy. When times are hard, banks like to hold on to their cash. Any business with an overdraft risks having deposits appropriated by the bank.
Taking steps to reduce your overdraft, and bringing your bank manager up to speed with your business prospects could be a good move.
Richard Branson has been offloading various Virgin offshoots, because he believes it is better to be cash-rich in a recession. Sound advice.
I would also think twice about recruiting extra staff, capital expenditure and expansion plans. If your turnover dropped by a third virtually overnight, as in the early 1990s, you could be left high and dry. I would revisit plans and rework them based on a worst-possible case.
Prior to the US atrocities, I would have been more bullish. I hope I am being overcautious - First! Venues, is putting in a great performance and we are actively seeking properties to redevelop as training centres.
Stephen Evans is chief executive of Food That Delights, non-executive director of Dineline and chairman of First! Venues
