22 April 2013

Time to review your investment plans and options?

Whilst travelling around the region over the past month, there seems to be more activity, than I have seen in a long time, around companies reviewing their investment plans and options. Technology led software solutions have provided some great options to differentiate a business’s offering and place 'Printing' businesses at the centre of data and graphics communications. Weighing up the cost to benefit advantages of larger scale investment and there are some great benefits if top-line sales can be forecast into reality, is very difficult in  a market where forecasting has become extremely difficult.

I wrote an article over two years ago as part of a survey on investment trends which I think still stands but we have some tangible changes that might help underpin decision making. Regional Growth Funds are being utilised by companies across our sector to underpin and bridge funding gaps and information and access is readily available. There is more training available and flexible staffing arrangements are now the norm as businesses have had to suit market conditions. Capital allowances have increased- something the BPIF lobbied hard for and managed to gain a change to the rate that was originally going to be included in the budget. There are some tangible R&D tax credits available and again Companies across our sector are taking advantage of the original work they are undertaking.  The BPIF can provide you with information across all these areas and a grant finder tool can be seen on our website. Funding Finder

Extract from making better capital investment decisions report:-

Be inclusive and engage your talent
Engage a wider range of staff and teamwork in the identification of opportunities and decision-making process. There is a great amount of enterprise and energy across most teams and harnessing untapped entrepreneurial spirit within your organisation can open up new opportunities and ideas. Around 31% of respondents believed suggested ‘hearing all relevant views’ would improve the capital investment process. Make sure you can verbalise your vision for the future to your workforce but also make it clear that you are open to other ideas. Focus on opportunities rather than problems. Use data from the BPIF and other expert organisations to inform and educate.

Use financially defined investment analysis techniques
Appraise ROI and investment criteria ruthlessly and anticipate a range of different future scenarios as part of your business planning process. Gather marketing intelligence. Seek modelling and investment financial input from outside your organisation if you don’t feel you have the full skills available.

Make sure you are getting the best out of what you have got
Technology advances can provide leaps in productivity of 30% or more but it’s important to ensuring Overall Equipment Effectiveness (OEE) on existing equipment prior to deciding whether you need to commit to any new investment. And you also need to ensure that you have personnel with the skills to achieve the optimum performances required on existing machinery. Vision in Print’s team of process improvement engineers can help with the former, while BPIF Training can enhance the skills of your operatives.

Cash generation is the most important issue
In today’s environment of rapid change and variability, cash creation and cash management is critical to capital investment decisions. A careful assessment should be made as to the amount of cash in compared to the amount of cash that will be returned. And you should review the both the period and pattern of the expected payback. Internal rate of return (IRR) and discounted cash flow techniques take into account the time value of money and both should form part of the decision making process.

Consider alternatives to investment
There are many other options and these should be compared and contrasted in relation to investment in achieving your overall strategy. Review outsourcing, joint ventures and collaborative agreements, mergers or acquisitions, or indeed a trade sale.

Seek help from vendors
Ask vendors for information on market trends and prospects. Can they provide a more flexible financing package? Do they run user groups where operating experience can be shared? What training packages are available to operatives? What technical support is available to help you optimise the OEE of the new kit? BPIF Capital Investment survey report 2011 BPIF Research, www.bpifresearch.com 31

Improving the capital investment process
The survey results show that internal experience and expertise is still the most trusted source of information used in making capital investment decisions. This needs to be tested by using a robust verification process and external challenges to the thinking to ensure a really robust plan is being embarked upon which takes onboard all potential scenarios. Lack of dissent and disagreement among colleagues during the planning process usually means insufficient analysis. Everything has a downside when viewed from certain angles and a broad perspective is needed.

Undertake post-match analysis
Better post investment analysis is the second biggest want from respondents when reviewing improvements to the investment decision-making process. Put post investment evaluation into your management feedback process and ensure ownership across your team for achieving the best outcomes and OEE. Make sure your expectations are being met across a wide range of criteria, including customer satisfaction and customer value, as well as the financial investment criteria. Monitor the capital investment process you embarked upon and use it as a learning process for the whole business for the future.

Post investment questions might cover:
• What are we achieving to what we expected/planned?
• Has it achieved our goals, can we further improve?
• What would we do differently next time?
• What corrective action if any is required?
• Has real competitive advantage been gained?