It seems obvious to state that good management is the key to business success, but in boom times this can all too easily be forgotten.

It seems obvious to state that good management is the key to business success, but in boom times this can all too easily be forgotten.

Strong growth in the economy can hide a multitude of sins, and new technology such as the internet provides new ways to create wealth in startlingly short periods of time.

The past 18 months have changed all that. In my own portfolio of small and early-stage companies, I’ve seen good management skills come to the fore, making the difference between success and failure. This is my synopsis of the attributes that have allowed companies to survive and thrive in challenging circumstances.

At least four of my private companies have had to make large cost cuts to survive. This has included redundancies, wage reductions and part-time working.

The fact that these were all successfully implemented was due in large part to management leading from the front and taking even more drastic reductions in salaries. In some cases this has also included investing money personally or guaranteeing overdrafts. The objective is often to buy just enough time to allow the cost savings and any new initiatives to kick in.

Most people assume that innovation means new products, and it often does, but this is just the tip of the iceberg. One of my companies is heavily involved in the public sector, and has been and will be hard hit by the government spending cuts – or so I assumed. But I was surprised at my last board meeting by how the management was already tackling this problem and not just sitting down and complaining about it.

They repositioned the product as a cost-saving tool, broadening the scope to include more departments in the same organisation (with very little actual R&D spend), and through marketing the new strategy is already bearing fruit. We wondered why we hadn’t done it before.

Pricing models have a part to play also. The increasing use of pilot schemes or “try before you buy”, and thereafter rental rather than outright purchase, can help enormously, even though this clearly affects cash flow.

Problems can also produce opportunities. An internet trading company I know was able to get stock from a branded source but on the condition that we would not charge the supplier for making the stock available through our site, as was our usual model.

Although the stock brought us web traffic which had some value, the problem was how to monetise it. So management started to charge the buyers and not the sellers for an exclusive right to buy the stock. Early days, but an example of how you can change a business model out of necessity.

One of my companies spent eight months completing an acquisition, and I have to admit that until we signed it was always on a knife edge. We all knew it was a great deal, but the costs were mounting up and management were inevitably becoming distracted from the day-to-day business as the deal dragged on. A lesser CEO could easily have called it a day but ours didn’t. He doggedly went on and made it happen. So far, the results show that this will be an excellent deal for us.

This is also true of companies trying to get into new markets or selling new products to existing users. It often takes much longer than you think, but the good CEO will persevere, change his tactics (even his staff) and keep going. In most cases it pays off, provided you are not selling a real dog, but before it does you will incur no small amount of sniping from your investors.

I have never been accused in my business career of being a details man, but in tough times attention to the finer points can make a real difference. At its most basic, this means thoroughly reviewing your sales pipeline and analysing in detail what are the key drivers for sales.

In addition, have a really good look at your existing customers – check they are happy, see what they think are their problems and find ways to help them. If new product sales are difficult, make sure you are focusing on lower-value items such as servicing and training.

Really good management is always looking for problem areas, anticipating these and putting action plans in place to resolve them before they occur.

Likewise, necessity is the mother of invention. If times are tough, you should exude optimism. Employees very often take their lead from the top, so make sure you are even more in touch with your team and always emphasise the good news rather than the bad – it works.