Market Watch Industry Bulletin – Automotive

The spread of the coronavirus led to an unprecedented collapse of many important car markets in terms of producers, their suppliers and the distribution channels across the globe . Work came to a standstill in almost all countries. But as severe as the slump was initially, the return of production is currently giving the industry hope. A large number of vehicle manufacturers and their suppliers were able to resume operations, albeit only to a limited extent. In addition, stabilization strategies and aid packages have been developed in recent months.

In this latest industry bulletin, Enterprise Ireland has primarily surveyed leading market experts and industry leaders, and collected their views, gathering specific recommendations for companies, to stabilize, reset and recover from the current situation.

Read the full report here.

Industry Bulletin – Agritech & Machinery Dealership view


Reporting from across world markets, Enterprise Ireland’s Agritech Market Advisors have compiled this buyer sentiment update consisting of case studies from importers, distributors and leading dealerships of agricultural equipment.

As part of our Market Watch series, we have interviewed 23 companies to provide first-hand updates of the situation on the ground in key regions across the world.

Read the full report.

Resetting your business model

Resetting your business model in response to Covid-19

In preparing for tomorrow’s world, businesses need to reset their business model to remain relevant to their customers in the new environment

The Covid-19 pandemic has changed the world and transformed the environment and operating rules for business. Last year’s winning formulas have become failed propositions almost overnight, and many of yesterday’s compelling products and services are obsolete in the context of tomorrow’s needs.

This requires businesses to take a long, hard look at their business models in order to remain relevant to their customers in the new environment. They will need to reassess what they sell, who they sell it to, and how they make money from that. They will also have to examine why people buy from them and how that translates into profitability.

According to Business Financial Consultant Brendan Binchy, companies need to focus on four key areas when seeking to reset their business models:

  • Their current product offering and how can it be developed, changed, or delivered differently
  • Who their customers will be in future, both current and new, and if there is a need to drop some existing ones
  • The reasons customers buy from them, their new value proposition, and how they will do something unique; and
  • How they will make money – lower input costs, production efficiencies, premium price or volume increases.

When looking at the product offering, Binchy advises companies to ask the hard questions. “Have you got any inherent future proofing protection for your product or service? What is unique about it? What is its lifecycle in the market? How much of your revenue is dependent on it? What are most profitable products?”

The answers to these questions will help decide what products to retain or drop, as well as inform new product development efforts.

Customers should be subject to a similar analysis, he advises. “Who uses your products? What are their demographics? Who are your most profitable customers? Where are they? What defines your ideal customer and where can you find more of them? Why are you still dealing with unprofitable customers?”

This will assist in defining target customers. “Businesses should categorise customers into groups according to their profitability and different attributes, and then select which ones they want to deal with in future. This may lead them to stop dealing with some of them. Companies shouldn’t be afraid to fire customers who don’t value what you do.”

The next step is to establish why these customers will buy from the business. “Go out and ask your customers,” Binchy advises. “Bring them in and talk to them about it. Find out the defining attributes of your most important customers and find ways of meeting their expectations. This will help you pick the right people to work for; people who value what you do. If a multinational has been buying from you for the past 10 years, you must be doing something right. Find out what that is and build on it.”

Making money is the other and perhaps most critically important part of the jigsaw. This will require the business to look at the key business model drivers of products and services, marketing and sales, and finance, in terms of profitability, cashflow and return on investment. “They are the what, the who and the how of the business model,” Binchy explains. 

“The enablers are your people and systems and processes that support the business. You can’t grow a business without all three drivers, being robust and in balance with each other. You can have great customers and products, but you won’t have a business if you’re not making money.” says Binchy

An analysis of those drivers, along with the enablers, will give you a clear view of the revenue and cost bases of the business, and will help identify how the pathway to profitability can be bridged. “A business might look at reducing materials, labour or other operational costs. It can also look at production efficiencies or seek to increase prices if it can be positioned in a premium segment of the market.”

The remaining question is how to finance the transition between the old and the reset business models. “The money and support are there to help companies bridge between the two. We just have to hope the transition period between them is going to be as short as possible,” Binchy adds. “The Enterprise Ireland Covid-19 Business Financial Planning Grant is there to help businesses start the journey. It offers a 100% grant up to the value of €5,000 to fund the cost of a financial consultant to prepare a financial plan that shows exactly how the company intends to reset and adapt its business model as it emerges from lockdown. The Lean Business Continuity scheme offers vouchers worth up to €2,500 to fund the cost of training and advisory services.”

He points to the €450 million Covid-19 Working Capital Loan scheme and the €200 million Future Growth Loan Scheme available through the Strategic Banking Corporation of Ireland as potential sources of loan finance for companies.

In addition, there are the Enterprise Ireland Sustaining Enterprise Funds which offer funding up to €800,000 to fund the implementation of stabilisation and viability plans. Smaller businesses can also apply for funding of up to €25,000 or €50,000, depending on the size of the business.

Both schemes feature repayment moratoriums for the first three years, a very important consideration according to Binchy. “That is very attractive when the company doesn’t have repayment capacity for the moment. They can’t go to the banks if they are in that position. Businesses have to dance very carefully when seeking funding, and these schemes certainly help with that.”

Learn more about the Enterprise Ireland supports available in our Accessing Liquidity & Managing Cashflow webinar

Food for thought: How small businesses are getting the better of Covid-19

Those in the food and drink industry speak to journalist Clodagh Dooley about how they’ve adapted to the crisis and their future goals

“All food and drink start-up businesses have no doubt been impacted in some way because of the pandemic,” says Louis Eivers, Development Advisor of ‘High Potential Food and Drink Start-ups’ at Enterprise Ireland. “But what has been astounding is the fact that a lot of these entrepreneurs, particularly those on our Food Works Programme, have kept a positive attitude throughout these challenging times. They’ve even managed to grow from the crisis.”

Food Works – run by Enterprise Ireland, Bord Bia and Teagasc – is Ireland’s only dedicated accelerator for food and drink businesses. Each of the three agencies involved with Food Works plays a specific role in taking Irish food to global markets. Enterprise Ireland supports business funding development and this year, offered up to €35,000 in funding for participating food and drink companies. Bord Bia helps with the consumer and market aspects, while Teagasc focuses on the technical side, product development and manufacturing.

The programme brings each of these agencies’ complementary skills together in the one place, as well as providing business advisors of varying expertise, to help companies with their start-up goals.

“It’s a one-stop-shop for start-up food and drink companies,” says Louis. “We typically take on 6-10 companies each year, so it can be competitive to get on the programme. We look for those early-stage companies, that are less than five years old and require support, keeping HPSU (High Potential Start-Up) criteria in mind.”

 

Adapting virtually

And high potential is definitely what this year’s participant companies have shown since the 2020 programme launched in March – despite the disruption of coronavirus.

Craig Grattan, founder of Sweet Potato Pizza Company, says the pandemic has actually been beneficial for his product – a healthier, but equally as tasty, pizza that has a sweet potato base. “March saw a 42% jump in sales from February. In a situation where a lot of companies will unfortunately not see the light of day again, it’s been incredible to see this increase in sales.

“The Food Works Programme definitely has a part to play in that too, as the level of work we have done already over three months has been brilliant. In previous years, mentoring sessions would have been done face-to-face, now it’s all online so we have access to our business advisors instantly.” says Grattan

Louis Eivers of Enterprise Ireland, says that, despite being initially sceptical about moving the programme solely online, companies are, in fact, getting more support than ever. “Now, advisors that would usually travel to Ireland from the likes of the UK or Germany, are able to dedicate more time to the entrepreneurs online.”

 

Venturing forward

Sinéad Crowther, Founder and CEO of Soothing Solutions – unique products which offer all of the benefits a hard-throat lozenge would give, but without the choking hazard – says without Food Works, her company would have made “little to no progress”.

“Everything in food development for start-ups simply shut down. Food Works has been our lifeline. The programme has opened doors for us and we have been able to scale up our manufacturing capacity with a team of experts that we could not have afforded to pay, had we been approaching them without the programme.” says Crowther

Sinéad’s goals for the future are to have the company’s products rolled out across Ireland in the next 12 months and look to start exporting to their identified channels the following year.

Craig says his business goal is to also expand. He wants his Sweet Potato Pizza, which is currently available in 43 stores including SuperValu, to be available nationwide, in Europe and in America. “Whatever your business goals are, the different levels of ambition are met by the levels of expertise from advisers,” he says of the Food Works Programme.

Sinéad says that Food Works will play a huge part in their business plan. “The programme is critical in guiding us, as we build and develop our brand identity.”

But one of the most important things Sinéad has learned from the whole experience so far? “We have learned to venture forward, no matter what the circumstances.”

Learn how your food business can develop and accelerate its growth with the Food Works program.

 

Bean & Goose founders

The sweet taste of success

When the Covid-19 crisis hit, Irish chocolate company, Bean & Goose, made the most of the lockdown

“The lockdown began right before Easter, which is one of our biggest times of the year,” says Natalie Keane, co-owner of Bean & Goose. “We had finished making and packing our Easter products and we were just about to start shipping them out to our retail customers. But in about two days, we lost about 95% of our customers and our Easter products were sadly left on the shelves.”

Set up in 2016 by sisters Natalie and Karen Keane in Co Wexford, Bean & Goose specialises in making craft chocolate bars, truffles, and chocolate gifts such as their Tasting Club, a subscription service which sends out two bars of chocolate, a once-off bar and one from the core range. They started selling to markets around Dublin until they began getting orders from retail outlets.

But because they were focused on in-person retail through independent retailers, hotels, and cafés to sell their products, the lockdown came as a shock to their business.

“We quickly made the decision that we would have to really ramp up our online campaign because the only way to get these products to our customers was through our online store,” says Natalie. “We were lucky that we invested heavily in our digital marketing in the last couple of years so that when we asked our customers to make the transition to buying online, they were very open to doing that.”

Because of reaching their customers online, the sisters managed to sell out their Easter range, from dark chocolate hares to chocolate goose eggs. In fact, sales figures went up 65% in March, April and May 2020 compared to the same time period in 2019. Within two weeks of online sales, they knew that their customers were loyal to them and would likely continue to buy the products this way.

 

Hard work and support

Natalie and Karen say that a big reason why their business was able to make the leap online and succeed, was due to their hard work over the last few years marketing and building up a solid customer base. This work was helped by being accepted for Food Works in 2015, an Enterprise Ireland, Bord Bia and Teagasc backed accelerator programme for food and drink businesses.

“This was hugely important for us,” says Natalie. “It allowed us to exhibit in bigger markets, secure feasibility funding from Enterprise Ireland, and it really set us up to think of the business as a scalable opportunity. Food Works gave us the roadmap to be able to build the business with the mentoring, advice and contacts they made available to us.”

While this support has helped them achieve success, it was also great timing which helped them during the lockdown. The drive online actually represented an opportunity they didn’t realise they needed.

Natalie says, “We are in a transition stage at the moment as we are changing our core range of chocolate bar flavours for the first time in five years, as well as our packaging. We had always planned to do that at this time, but because we used to deal predominantly with retail customers, we believed we would have to scale back a little and maybe even close the store as we transitioned.”

“Now that we’re trading online for most of our business, we have been able to make the transition and continue trading because our online customers are perfectly fine with the product arriving in the interim packaging and flavours. It’s worked out really well for us.”

As Bean & Goose have managed to keep their business thriving under the lockdown pressures, they also took part in an initiative to highlight the work of frontline workers during these extraordinary times. They were one of 18 Irish designers and makers to give away their products in a hamper to a nominated hero.

“One amazing thing I have noticed through all of this is how very kind and thoughtful people are to each other during this time. So they want to give gifts and there’s no better gift than chocolate. We are definitely selling the right product at the right time!”

Learn how your food business can develop and accelerate its growth with the Food Works program

Creating a buzz in the drinks market

Irish alcoholic beverage brand Beekon Batches are growing as a business and have not let the lockdown be a buzzkill

“When Covid-19 hit we had to get over our two weeks of thinking ‘do we have any business left, most of our sales were in bars, restaurants and hotels’,” says Karen O’Neill, founder of Beekon Batches. “We quickly got over the shock, pulled ourselves together and hatched a plan! “We couldn’t let it pull us down, so we decided to pivot the business online going direct to consumers whilst also strengthening our retail presence.”

Entrepreneur Karen alongside her wife and business partner Helen Kennedy are the brains behind Beekon Batches, an Irish-made honey-based, all-natural alcoholic beverage launched just last year. Karen, having been involved in the drinks trade for 20 years, realised people’s attitudes were changing on what they consumed. All-natural products, free from additives and preservatives, were growing in populatiry  and saw the opportunity to create   something new.

Beekon Batches is a “honey refresher” and is made with the love of all things bees. It’s created from honey infused with natural ingredients such as fresh lime and ginger, and has  an alcohol content of 5%.

Having  just started on the Enterprise Ireland, Bord Bia and Teagasc accelerator programme called Food Works, the Covid-19 crisis hit, and  their business hit a proverbial wall  due to having limited retail presence.

“We are one of the classic, positive pivot online stories as we managed to be successful with our online business and growing our retail footprint.A lot of that is based on the support, the resources and help we received from the Food Works programme.” says Helen

Helen says, “, When Covid hit, Food Works kicked in with a comprehensive, all encompassing program of support tailored to each participating business.  This was facilitated online right after we went into lockdown.  I have gained invaluable business and management insights across the whole business.”

Everyone on the programme is going through the same thing together so Helen says that every week everyone goes out to buy a product from another business on the programme. “There is a lovely level of support and comradery there.”

A hive of activity

Karen says that from being  anxious at the beginning of the crisis, today she is amazed at how phenomenally well their business has taken off .

“The combination of our new store listings such as SuperValu & Molloys Off licence stores, our online direct to consumer sales and our existing listings that have continued to support us means that we are delivering double the revenue than we were pre-Covid, ,” says Karen. “Our customers and members of the trade have really rallied around us and our story in particular. That is the fact that we are women with a brand-new product, trying to break down the gender bias in a very male-dominated drinks industry. Consumers too are responding very positively, they are craving something new, particularly at this time and Beekon offers them just this, something different and exciting.

“Everything we do is different to anything else on offer right now. Our drink is new, our packaging is textured and fun, and the locations where we sell are based on demand. We always ask our community where they want us to stock and we try to make that happen.”

Because of this support, one of the ways Beekon Batches has been able to give back is by supporting the bees. They do this with their bee pollinator programme. Wherever Beekon is sold, the business tries to do something to help the bees. For example, providing wildflower bee bombs to deploy wildflower seeds, and providing bee hotels where bees can make their nests.

“Last summer we partnered with Airfield Estate to allow bar and store staff to undertake full immersive bee experiences to heighten the awareness and effect behaviour changes to help support the bees. I think the trade really loves what we do here as it’s meaningful and impactful with its intention.”

The future looks very bright for Beekon Batches, so what does Karen see for the future of the business?

Karen says, “We want the drink to be universally sold in Ireland and then internationally. Consumers are becoming more conscious about what they’re consuming these days and about their own influence on sustainability, so another goal is for everyone to buy with this in mind. Our product can be the thing people choose to make a difference in the world and that’s an amazing feeling.”

 

Learn how your food business can develop and accelerate its growth with the Food Works program

 

Keep going, keep growing with Keogh’s

Tom Keogh, MD of Keogh’s Crisps – producers of award-winning crisps and potatoes – talks about pivoting his business during the pandemic and giving back to Ireland’s frontline healthcare workers.

Being a family business that sources its ingredients and hires its staff locally, Keogh’s have an ethos that is based around community and support. And this very ethos is what prompted founder Tom Keogh to set up a fundraising initiative during the pandemic called Ireland Thanks You.

“My wife, and many other family members, work as nurses,” he explains. “So I got a real insight into the day-to-day risks their roles involve. We started doing food drops around hospitals but we wanted to do something bigger, especially as we couldn’t find a charity for frontline healthcare workers that put something directly in the hands of healthcare workers.”

The fundraiser guarantees that 100% of every donation goes directly to healthcare workers. Those in facilities that were most greatly impacted by Covid-19 will receive a €100 voucher.

“We have raised about €80,000 so far and are on track to reach €100,000 by the end of the month, which is fantastic.”

 

Challenges and positives

Impressively, Tom and his team put in long days and nights over a period of three weeks to develop the campaign, even though there were a lot of changes happening within their business due to the pandemic. However, he feels fortunate that business continues to boom.

“Two-thirds of food in Ireland is consumed in the home and one-third is outside of the home. Two-thirds of our sales were in the multiple retail sectors, in Tesco, Dunnes Stores, and Musgrave, for example, and one-third of our sales were in the food service sector.

“We saw one-third of the sales of our crisps completely disappear overnight. Then there was the uncertainty with exports. The pandemic has naturally had a negative impact on any development we had been working on overseas.”

But on the positive side, Tom says the increase in top retailers in Ireland was dramatic.

“Some weeks, we saw a 70% increase in demand. The extra demand more than accounted for the loss we saw in the food service sector.”

“We were also lucky enough that we had a huge amount of products on the sea when Covid-19 struck, which meant they were pulled in quickly to overseas markets. The States have seen the same big demand in multiple retail, that we have seen in Ireland.”

 

Helping hand

Indeed, Keogh’s are no stranger to trying times, having seen a 10-year decline in fresh potato consumption in Ireland in 2011.

“Our market was disappearing for fresh potatoes in Ireland and being potato growers for over 200 years, we needed to do something about it,” says Tom. “We were part of the Food Works Programme, an accelerator programme for high potential food businesses, for our potatoes at the time, and the idea for crisps actually spun off towards the end of this.”

Tom says Enterprise Ireland played a huge role in helping them get the business off the ground. “We had fantastic help from the Local Enterprise Office in Fingal, who provided us with a small repayable grant to get the business up-and-running. Bord Bia were a help too.

“We have seen considerable growth in the business since and we continue to have strong links with Enterprise Ireland.” said Tom

What has Tom learned from the pandemic?

“The world is a small place! We never imagined coronavirus would impact Ireland as much as it has, so it has opened my eyes. One of the things that has worked well for us is the fact we sell products in different sectors in many different countries. We had some areas that performed extremely well and some were poor, but because we had that spread of business, it allowed us to continue trading.”

During the pandemic, the Keogh’s Crisps team was also able to focus on the e-commerce side of things and launch an online shop section on their site.

“We turned it around in about nine days. A big thing I’ve learned is that, as a business, we can keep focused, adapt, and do anything when we need to.”

 

Visit Keogh’s to see their story and full product range

Adapting your business model

Adapting your business operations in response to Covid-19

As businesses reset and recover, every aspect of a business’s operations should be examined and analysed to identify efficiencies and better ways of doing things

Having identified a pathway out of the crisis, made required changes to the business model and developed a cash conservation strategy, businesses need to turn their attention to operational matters if they are to adapt quickly to the changed environment.

Every aspect of a business’s operations should be examined and analysed to identify efficiencies, better ways of doing things, or things which shouldn’t be done at all. Companies around the world are already engaged in this process and those that delay will find themselves at a competitive disadvantage, according to Business Transition Consultant Brendan Binchy.

He points to a survey of 3,000 CEOs carried out by the Economist Intelligence Unit which found that almost all of them are going to implement operational agility measures as a result of the Covid-19 crisis. “That train has already left the station as far as they are concerned,” he says. “Every company should take a quick and hard look through the whole functional side of its business.”

He offers a checklist of the five core functional areas of the business which require attention – products and services, marketing and sales, finance, people, and systems and processes.

“They need to take a walk through that checklist and identify areas where they can improve effectiveness and efficiency,” he adds. “For example, when looking at the operational model they should ask if it is possible to morph to online, or if product and service delivery modes can be changed.”

On products and services, he advises careful management of stock levels as a starting point. 

“New product development should also be reviewed, you have to look at the cost to bring it to market and how quickly it can generate new revenues streams or if you need to do it at all at the moment.” says Binchy

Similarly, expansion plans should be subject to reappraisal and put on hold if not justified by a clear payback. Supplier relationships are also important, and discussions should be held with a view to reducing costs and achieving efficiencies.

“With international supply chains, some companies are moving away from “just in time” policies to making sure there is “enough in time” to meet demand,” Binchy adds. “There is risk associated with internationalisation, and companies could consider moving to a portfolio of multiple suppliers to deal with this.”

Other considerations relate to the production process itself. “If the company is starting up again, what needs to happen in the production flow? Does everyone need protective screening measures? Will you sub-contract some things out which had been done internally?”

Turning to marketing and sales, he recommends a selective appraisal of investment, but with targeted reductions based on return on investment rather than wholesale cuts which could cut off the market cycle.

Another area to look at is pricing strategy and the potential impact of discounting. Care should be taken to avoid a situation where discounts lead to volume increases which in turn may cause problems in the production process and perhaps divert resources from more profitable lines. It’s a classic case of weighing up the price volume trade off.

The finance function should become more fully integrated into the management of the business, he advises. “The finance team should be a core part of the overall management team. This means you will know all the things you need to know about the business and its finances as they happen, rather than find out about them in a report two or three months later.”

Binchy says communication is vital when dealing with people in your business. “You have to remember that you’re dealing with human beings and you should support them in the same way as you support your customers. When you are faced with implementing inevitable pay rationalisation measures you should segment your employees carefully to ensure that those people who are adding most value are rewarded appropriately.”

The final item on the checklist is systems and processes. Along with people, these are the underlying enablers of the business and every element should be assessed to ensure it is delivering value to the business either in terms of revenue generation, service improvement, or efficiency and productivity gains. Regardless of how good a process can appear there is always a better way, Binchy notes.

Businesses seeking to adapt and modify their operations to meet the changed environment created in the wake of the Covid-19 pandemic can avail of support in the form of Enterprise Ireland Lean Business Continuity Voucher and the Covid-19 Business Financial Planning Grant.

The Financial Planning Grant is worth up to €5,000 to pay up to 100% of the costs of an approved financial  consultant to work with the company on the development of a business and financial  plan, while the Lean Business Continuity Voucher is worth €2,500 and can be used for training or advisory services to help them identify and implement the measures needed to ensure they can continue to operate during the current period.

Where additional finance is required to fund new initiatives Binchy points to the Enterprise Ireland Sustaining Enterprise Fund which offers funding of up to €800,000 to eligible companies. There is also a fund for smaller companies which offers funding of up to €25,000 and €50,000 depending on the size of the business.

Learn more about the Enterprise Ireland supports available in our Accessing Liquidity & Managing Cashflow webinar

Market Watch – Spain

Overview

  • Spain has begun to officially open up again, but some restrictions will remain in place for the coming weeks.

  • Challenges around transportation and quarantine still exist, but supply chains are moving.

  • Irish businesses should continue to communicate with their existing clients as the country is very much open for business.

Like the rest of Europe, Spain was badly impacted by the global pandemic but Alberto Cisterna from the Enterprise Ireland office in Madrid, says restrictions have begun to be lifted and businesses are easing towards a new normality.

“The Spanish healthcare system was overwhelmed by Covid-19 and Spain was one of the first countries to enact a total lockdown,” he says. “But we are very happy to see that the number of cases has fallen sharply, and this has enabled the government to start easing some of the measures which have been in place since March.

“This plan for a Transition Towards a New Normality was announced at the end of April and consists of four phases which are intended to relax the restrictions in a gradual, flexible and adaptive way. And although it started officially on the 4th of May and will last for eight weeks until the end of June, we are still in a state of alarm.”

 

Challenges and opportunities

Cisterna says while businesses in Spain are getting back to normal, some challenges do lie head.

“Firstly the challenge exists regarding transportation options and border restrictions as Spain’s air, land and sea borders have been closed for entry from May 15th and remain so – with limited exceptions,” he says. “And until the 30th of June, passengers arriving in Spain from other countries will be required to quarantine in their place of accommodation for the first 14 days immediately following their arrival.

“It is also important to highlight the fact that the supply chain in the country is fully operational as these measures do not apply to the transport of goods.” Alberto Cisterna, country manager Spain and Portugal

“And also teleworking, or video conferencing, is still the main priority for businesses across the country in response to the pandemic and this will continue to be the same for at least one more month.”

But despite the hurdles which need to be overcome, he is quick to point out that there are also some opportunities to be had, providing clients continue to engage with their counterparts in Spain.

“I would like to remind our client companies that Enterprise Ireland in Madrid is open for business and we are conducting as many engagements as possible,” he says. “In fact we are very happy to say that we have seen some deals confirmed even during the worst phase of the pandemic.

“One important recommendation for our client companies is to stay in touch or to reconnect with their agents, distributors or business partners and also to plan ahead for the Covid-19 post new normality – it really is very important to keep communicating.

“In addition, I would like to remind people that Spain is the fourth biggest economy in the Eurozone, and it represents a great opportunity because of its market size, particularly in sectors such as ICT or digital technologies.

“So my key message today is that we are looking forward to continue working with our Irish client companies as Spain is definitely open for business – and as sale cycles in this country have historically been very long, let’s use this time to plan for the future as Spain is a big economy with a lot more room for new opportunities.”

 

Get key insights on doing business in Spain and the supports available from Enterprise Ireland.

Industry Bulletin – Automotive – New mindset to focus on future solutions

AVL is the world’s largest independent company for the development, simulation and testing of powertrain systems for passenger cars and commercial and industrial vehicles and is directly exposed to the deepest and most rapid business downturn in the history of the automotive industry. Dr. Daniel Kürschner, Head of the Company’s Munich-based advanced driver assistance systems (ADAS) centre, remains optimistic, however.

He points out that AVL is not a traditional Tier 1 supplier to the industry and is not directly connected to the supply chain. It is therefore also not directly affected by vehicle sales as many other companies.

While some projects are subject to renegotiation and delay, there are positives to the current environment, he notes. “We as a German or European car industry need to see this crisis as an opportunity to rethink our traditional mindset and to focus on more sustainable, future-oriented solutions, following the CASE trends (connectivity, autonomous, sharing/subscription and electrification) and also noting different demands of the younger generations.” says Kürschner. “Car makers would have the time now to catch up on delayed technology developments which they have not focused on over the past decade. A lot of companies worldwide, particularly innovative start-ups, have technologies available that could be combined with those of the traditional corporations in order to speed up launching competitive products at the end.”

AVL is already moving into new areas such as e-mobility, fuel cells and ADAS. “We see a big opportunity to grow within these new business fields and it would be great to see a green economy emerge in the near future,” he adds.

As a direct impact of Covid-19, also AVL has successfully switched to remote working. “Like for others, it has affected us in the sense that people can’t come together in person , but that we are currently working in home offices but, luckily, our teams are experienced in digitalisation and web-based communication so that we can keep the productivity levels very high.”

The downstream effect of the industry downturn is being felt, however. “The car industry in general is very cautious at the moment, so capital expenditure is on hold and also AVL – as one player in the industry – has changed over to short-term work,” Kürschner explains. “As a technology and engineering provider we are dependent on the automotive industry reopening, and we will continue to provide our technological expertise as best as possible, trying to overcome all hurdles resulting from the crisis.”

 

Addressing future market demands

Many of the challenges the industry is currently facing, already existed before the current crisis, he adds. “The current situation just accelerates the formation of fundamental structural changes within the market. The structural changes basically result from the green trend and because younger generations are demanding greener and more sustainable yet still safe and superior technology. However, they are still willing to spend money for this, so the industry must adapt to these changing circumstances and take measures to understand and accept future market demands.”

This superior technology includes ADAS.

“More and more customers will expect to find ADAS and autonomous driving features within their cars,” says Kürschner. “Moreover, autonomous driving is providing the technical basis for future concepts such as mobility as a service.”

He also mentions the upcoming development of the centralised electronic control unit. “This has a lot of benefits for maintenance and remote updates. It allows the provider to keep the product updated all the time, and will also feature active safety and cybersecurity functions.”

Innovation will continue to play a major role in automotive industry, he believes. “As we had already seen in the e-mobility trend starting over 10 years ago, today, also ADAS and newer trends will cause shifting supply chains, with innovative solutions looking to alter and take over from traditional fields within the industry.”

He takes a positive view of the industry’s future. “Looking at the business perspective, the focus will be on measures over the near term to keep the industry and economy running, which is partially a government responsibility, but also the companies themselves need to sharpen their product portfolio, ready to keep up with the latest customer demands. People will continue to need mobility despite the deep crisis and despite the current uncertainty and therefore, for now I am not concerned that people will stop buying cars. However, in the medium and long term, I would focus on the technologies following the CASE trends in order to maintain our global competitiveness within the future car industry.”

 

 

 

 

businesswoman

Covid-19 Business Supports

From 5,000 to 800,000, Enterprise Ireland has a range of funding supports to help you recover

Enterprise Ireland has put in place a suite of funding supports to help Irish companies adjust to the immediate and future challenges presented by the Covid-19 pandemic. These supports are designed to help businesses stabilise and adapt to the evolving situation, in preparation for getting back on the road to recovery.

 

The Business Financial Planning Grant

The Covid-19 Business Financial Planning Grant is designed to help companies develop a robust financial plan and secure their viability in the short to medium term. The grant, worth up to €5,000, can be used by companies to pay up to 100% of the cost of engaging an approved financial consultant to prepare a plan which can encompass the documentation required to support applications for finance from banks or other providers such as Enterprise Ireland.

The plan will establish the company’s current financial position; examine the negative Covid-19 impacts on the business; establish where the company wants to be in three years’ time; identify a series of actions to be undertaken by the company to mitigate the effects of the current crisis; provide a framework to manage costs and identify funding gaps; and enable management to identify the finance required to sustain the business through the crisis and beyond.

The plan should also include a complete set of financial forecasts for three years.

Eligibility: The grant is open to all Enterprise Ireland clients as well as companies employing 10 or more in the manufacturing and internationally traded services sectors.

How to apply: Contact our  Covid-19 Business Response Unit at businessresponse@enterprise-ireland.com or your Enterprise Ireland Development Advisor.

 

Sustaining Enterprise Fund – funding of up to €800,000

Aimed at giving manufacturing and internationally traded businesses the liquidity and cash resources required to make it through the Covid-19 crisis, the Sustaining Enterprise Fund offers funding of up to €800,000 to eligible companies.

The purpose of the funding is to support the implementation of a Sustaining Enterprise Project Plan which will lead to the eventual stabilisation of the business and a return to viability. The Sustaining Enterprise Project Plan must outline the company’s liquidity needs and explain how the funding will remedy its immediate problems.

Businesses can use the Covid-19 Business Financial Planning Grant to pay for the development of the Sustaining Enterprise Project Plan.

Subject to an annual administration fee of 4% (with 0% fee for the first six months) there is a three-year grace period for repayments on funding, which must be repaid in full by the end of year 5, and the achievement of the objectives originally set by the company

Eligibility: To be eligible for the fund, companies must have experienced a reduction in actual or projected turnover or profit of 15% or more, and/or a significant increase in costs as a result of the Covid-19 outbreak.

In addition, eligible applicants must be unable to raise sufficient capital from the market (or other sources) to meet the funding needs of a Sustaining Enterprise Project Plan.

Companies are not eligible if they were already in financial difficulty on 31 December 2019 or were experiencing difficulties for reasons not related to Covid-19.

How to apply: For further information, contact your Enterprise Ireland Development Advisor or the Covid-19 Business Response Unit at businessresponse@enterprise-ireland.com

 

Sustaining Enterprise Fund – Small enterprise

Similar to the main Sustaining Enterprise Fund, this scheme provides financial assistance to smaller manufacturing or internationally traded services companies for a three to six-month period to support business continuity. Eligibility criteria are the same as for the Sustaining Enterprise Fund, and the assistance is to be used to support the implementation of a Business Continuity Project Plan. Companies eligible for this scheme are also eligible for the larger scheme.

Companies can avail of the Business Financial Planning Grant to pay for the development of their Business Continuity Project Plan.

The scheme offers repayable funding of up to €25,000 to companies with turnover of less than €1.5m and up to €50,000 to companies with annual turnover of €1.5m–€5m.

As with the main scheme, there is a 4% annual administration fee and a three-year grace period on repayment. No administration charges are levied for the first 6 months and the advance can be repaid early if the company prefers to do that. Funding must be repaid in full by the end of year 5, subject to the achievement of the objectives set out in the Continuity Plan.

Eligibility: Companies are not eligible if they were already in financial difficulty on 31 December 2019 or were experiencing difficulties for reasons not related to Covid-19.

To discuss eligibility criteria or any other aspect of the scheme, contact your Enterprise Ireland Development Advisor.

If you are not an Enterprise Ireland client or do not know who your Development Advisor is, you should first contact the Business Response Unit at businessresponse@enterprise-ireland.com

How to apply: You can apply via the Enterprise Ireland Online Application System.

 

Lean Business Continuity Voucher

The new Lean Business Continuity Voucher helps enterprises to identify and implement the measures needed to ensure that they can continue to operate safely during the Covid-19 pandemic.

It offers eligible companies up to €2,500 in training or advisory services from approved providers. The services may take the form of management advice or training of management or staff within the company and must be related to the continued operation of the businesses during the current pandemic. It is expected that the services will be delivered online in most cases.

Project should focus on one or more of these categories;

  • Review of business strategy in light of changing marketplace/supply-chains & customer needs;
  • Introduction of new business practices in order to increase productivity (especially LEAN/Flow);
  • Development of processes for risk assessment and analysis for Business Continuity;
  • Development of working practices for staff safety based on government guidelines;
  • Development of strategy for or investigation of feasibility of doing business online (excluding website development or online marketing costs)

A listing of approved service providers can be found in the Enterprise Ireland Service Provider Directory.

Eligibility: The Lean Business Continuity Voucher is open to small, medium or large client companies of Enterprise Ireland or Údarás na Gaeltachta.

For more information, contact your development advisor or email the Lean & Operational Excellence team in Enterprise Ireland at: businesscontinuityvoucher@enterprise-ireland.com

How to apply: Companies can apply for the Lean Business Continuity Voucher scheme via the Enterprise Ireland Online Application System.

    Watch financial expert, Brendan Binchy and Enterprise Ireland’s finance team in our Accessing Liquidity & Managing Cashflow webinar.

    Managing Cashflow

    Managing Cashflow in a Crisis

    As managers reset the business for recovery, companies need to adopt a lean culture where expenditure is minimised and every cost is questioned.

    One of the greatest risks facing many businesses in the current environment is running out of cash. A company that can’t pay its bills, regardless of how profitable it is, will quickly go out of business. Cash conservation is therefore key to survival.

    While in the medium to longer term companies will have to look at reengineering their business and operational models in order to meet challenges presented by the post-Covid-19 world, the short term is going to see a focus on cash according to Business Financial Consultant Brendan Binchy.

    “There is much more urgency relating to cash now,” he says. “And there are many things a business can do to manage its cash. Almost everyone out there is availing of debt payment deferrals, for example. They are trying to hit the pause button on cash going out wherever they can so that they can preserve the status quo as much as possible. They are also looking at other areas like aged debtors. You almost have to look at it like a company threatened in a pre-receivership condition.”

    Binchy recommends a structured approach to cash conservation and this starts with the balance sheet. “The profit and loss account is a record of a business over a period of time, but the balance sheet gives a snapshot of the business at a particular moment in time.”

    Companies should pay particular attention to their gearing, he advises. This is the ratio of debt to equity on the balance sheet. “The lower it is the better, but losses will erode equity and increase the gearing ratio,” Binchy continues.

    A healthy gearing ratio will allow companies to borrow judiciously in order to bolster their cash position. “This can be very helpful, but companies need to be aware of the associated debt service costs.”

    The next step is to look at asset funding, where they may be scope for some reverse engineering. “Businesses frequently purchase assets for cash during good times,” Binchy notes. “They could be re-financed now with bank debt and this will improve the cash position. Generally speaking, the asset lifetime and the funding cycle should be the same. It is important to remember that trade debt, like invoice financing, is for working capital not capital expenditure.”

    The sales lead to cash cycle is the next area for examining.

    “It takes time for marketing effort to translate into sales leads, buying decisions, billing, and cash collection”, Binchy explains.

     “This can be quite protracted, and companies need to look for ways to get to close sales quickly and speed up invoicing.”

    The supply chain should also come in for attention to slow the outward flow of cash. “Companies should identify strategic supplier relationships, tighten stock management overall, improve workflows, and negotiate new arrangements such as stockholding facilities with key suppliers. Talking to key suppliers and developing strategic partnerships is a very good ongoing strategy for companies. The more they do it the better.”

    And then there are what Binchy calls the common-sense measures.

    “Defer capital expenditure and other spending decisions wherever possible,” he advises. “Companies need to adopt a mean and lean culture where expenditure is minimised, and every cost is questioned. But this must come from the top down and everyone must share the pain and to be seen to share it.” 

    Once those actions have been taken, it is time to put together a budget plan. “Having these measures in place means you already have your fingers on the pulse and you can make a budget plan to take you from where the business was before the crisis to what’s likely to happen afterwards. The most important thing about the plan is that it should be iterative. You’re not going to get everything right first time around. The plan gives you a framework to forecast and plan for what might happen. You can adjust it weekly and monthly rather than having to build new plans all the time.”

    And businesses don’t have to do this on their own. Binchy recommends the Enterprise Ireland Lean Business Continuity Voucher as a good starting point. This offers eligible companies up to €2,500 in training or advisory services to help them identify and implement the measures needed to ensure they can continue to operate during the Covid-19 pandemic.

    There is also the Covid-19 Business Financial Planning Grant, which is worth up to €5,000, and can be used by companies to pay up to 100% of the cost of engaging an approved financial consultant to assist them prepare a financial plan, understand their immediate financial position, manage costs and identify their funding requirement.

    When it comes to cash for the business, Binchy points to the Temporary Covid-19 Wage Subsidy which he says has been very helpful to businesses throughout the country.

    Sources of working capital and loan finance include the €450 million Covid-19 Working Capital Loan Fund and the €200 million Future Growth Loan Scheme fund available through the Strategic Banking Corporation of Ireland. Businesses which have difficulty accessing bank finance can apply for funding of up to €800,000 from the Enterprise Ireland Sustaining Enterprise Funds. There is also a fund for smaller companies which offers funding of up to €25,000 and €50,000 depending on the size of the business.

     

      Hear from financial expert, Brendan Binchy and Enterprise Ireland’s finance team in our Accessing Liquidity & Managing Cashflow webinar.