How early adoption of good habits can help SMEs deal with change: Elizabeth Selby
Each New Year, a sizeable proportion of people make a series of resolutions, believing that a fresh calendar will inspire them to make lasting change.
Of course, many of those commitments will have been forgotten by the end of January. Not keeping a promise to oneself rarely has serious consequences.
However, for businesses - and, in particular, owner-managed enterprises - the failure to get into and stick to good habits can greatly affect their prospects.
Small organisations make up the vast majority of companies in the UK. Those with fewer than 10 staff account for 95 per cent of the country's 5.7 million businesses.
With an understandable focus on doing and selling their work, they may view paperwork as something of a necessary evil.
Yet 25 years' experience of advising companies both large and small has demonstrated how establishing good administrative habits can be just as important.
It's not just a case of simply keeping one's house in order on an ongoing basis. Doing so is immensely important when it comes to preparing for change.
Perhaps worryingly, successive recent studies have shown that many owner-managers are ill-prepared because they regard change as a single event rather than a process. That is not necessarily because it isn't in their thoughts.
One piece of research found that a majority of UK owner-managed businesses are considering a so-called 'transition event', such as growth, sale or succession, in the course of the next decade.
Another report, published by HMRC, concluded that 16 per cent of owner-managers are considering the sale of all or part of their shareholding in an even shorter timeframe - within the next five years.
The closer that such a possibility becomes, the more fraught things can be, both for those selling and those buying or investing. That is especially true when it comes to readying important company documents as part of the due diligence process in order to justify value and viability.
Being an SME can mean a somewhat hand-to-mouth existence. But when deadlines for major events are looming, the 'just-in-time' principle is, I would argue, too late.
Instead, it can quite literally pay dividends to sort the administrative structure from the start.
Reviewing and establishing terms of business in robust customer and supplier contracts, for instance, does more than reflect commercial reality: it is vital for prospective new owners and protecting an owner-manager's interests too.
Well away from discussions about exits, it can also avoid those sleepless nights which can impede the running of even an apparently successful company.
Whilst being thorough in this regard can take time and effort, it is a sound investment in the longer term.
The failure to establish good commercial habits early on can lead to conclusions that yours is not a well run business, regardless of whether it is productive.
Scrambling to codify contracts in preparation for a due diligence examination may lead some customers and suppliers to try to renegotiate terms which are more favourable to them.
Interested buyers or funders may downgrade the sums which they are willing to pay - or, in fact, might walk away altogether - if they cannot be reassured about a company's demonstrable potential for the future.
I understand that entrepreneurs enthused about running a business might consider admin as, well, not very sexy. However, the realisation that not taking care of the paperwork can have a tangible, monetary value can be a very useful awakening.
Elizabeth Selby, is a commercial partner at Bexley Beaumont