Why Capita can be a lesson to us all…
Capita shares plunged by 50% yesterday, in the wake of an announcement from it’s new Chief Executive, Jonathan Lewis. He said the company, employing 70,000 people, had become “too complex” and “driven by a short-term focus” and needed to change its approach. A review had found that, essentially, the company was spread too thin, relied too much on making growth through acquisitions and that new contracts were weak.
Thankfully, there is some good news, as Capita has £1bn in cash and credit it can call on, is more profitable than Carillion and has already been taking steps to tackle its high level of debt.
So where’s the lesson?
- Well, we hear a lot from business owners that they are supporting areas of their business that aren’t profitable, (If they know how different areas are performing, which many don’t.)
- They’re grabbing new business from anywhere, rather than being strategic and focusing on the type of customer that is absolutely right for them.
- They’re also juggling cash flow way more often than is comfortable.
The problem is that none of this is generally spoken about.
I would imagine there were a lot of business owners who heard about Capita yesterday and felt a spark of recognition for the fact that a company of that size has been brutally honest and held up their hand, saying ‘something needs to change’.
It’s something that business owners don’t do often enough.
As a nation us Brits tend to be reserved, and only admit to what we perceive as our shortcomings when we really, really have to.
Until then, we lay awake at night wondering how on earth we are going to juggle the next set of challenges, yet put on the big smile when we’re asked ‘How’s business?’ and bluster our way through the conversation, all the while expecting a hand on our shoulder from someone who knows what’s really going on…
How do I know?
Because we have heard the same story SO many times, from business owners who have finally got to the point where they HAVE to make a change. They can’t play the ‘smoke and mirrors’ game any longer, so they come along to see us and ask for help.
And they get it.
- They get the reassurance they need that they AREN’T the only ones in this situation.
- That they AREN’T fundamentally flawed
- That they ARE capable, if they get the right support and knowledge.
Once the true position is out in the open, it so often looks so much better; certainly much better than it feels at 3am when it’s a HUGE, insurmountable issue. Sadly, the position could have been improved so much earlier, if that initial conversation had taken place weeks, months or, in some cases, years before.
I can only imagine what Jonathan Lewis and his team went through to decide to make the announcements that they did, given that there had already been profit warnings prior to yesterday’s announcement. They have shareholders, the Government and 70,000 employees to answer to.
Yet small business owners have their own people they answer to, whether family, friends, customers or suppliers. These are people who they feel responsible for, and whose trust, and future in many cases is vested in the very business that is struggling.
The difference is really just one of scale, and not really that marked.
I really hope that the Capita announcement will give more business owners the confidence to realise that if this can happen to such a large business, it happening in smaller ones isn’t a failure.
What’s important is that the issues are addressed, a plan is put in place to make the key changes that will strengthen the business, and knowledge and experience is gained to prevent a repeat.
Capita have said that they will be cost-cutting, disposing of unprofitable businesses and reducing its dividend to shareholders. Those steps can be adopted by any business thats feeling the pressure, but the very best step to take is to get specific advice from someone with relevant knowledge and experience. You can be sure that’s what Jonathan Lewis will have lined up…
For more information about the Capita situation: http://www.bbc.co.uk/news/business-42885211
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If you’d like to speak to one of us about your specific business problems, contact us now.