READ these words carefully:

''I believe real business growth during the 1990s will only be

achieved by companies who (sic) are focused down extremely tightly into

niche markets which they clearly understand. They will also have to

watch their financial management extremely carefully, and their

financial strategy will have to go hand in hand with a business

strategy.

''The risk of over-stretch will be extremely high during the 1990s and

the market will punish swiftly and unforgivingly those who do not manage

their cash flow or who fail to tailor their ambitions to their financial

abilities.''

They come from old kipper tie himself, Sir John Harvey-Jones. Fresh

from bashing innocent managers about the ears on TV with truisms about

why their companies are doing so badly, the former ICI chairman is now

delivering crisp warnings to the depleted ranks of British business

about what they have to do not just to grow but to survive into the next

century.

JHJ's remarks come from the latest issue of QED, the quarterly

enterprise magazine of venture capital group 3i. I chose them because

the more we think about next year's business climate for our own

company, the more we identify with such views.

Think about it. ''Real business growth'' . . . ''Companies focused

down extremely tightly'' . . . ''Niche markets which they clearly

understand''. How many small-to-medium-sized companies still around in

Scotland today fit that strategy? I see lots of businesses that are

indeed focused on markets they know well -- but that is not what our

florid friend is saying. Sir John means that sort of single-minded,

obsessive focus that is the hallmark of the best managers: the kind of

attention which ignores all the side issues and other distractions that

surface hourly to compete for the brain space of business managers.

When you think about it, this is the classic problem of small company

owner-managers. Not only do they have to be chief executive, corporate

strategist, marketing director, and sometimes financial director all

rolled into one, but they have to think of a million and one other

things all the time.

Pouring all of your energy into a sliver of a niche market and its

specialist requirements is a really difficult personal challenge in such

circumstances. But there is no doubting that it works.

In our own modest way that's been precisely our strategy this year.

The only way we will change it for next year is to become even more

tightly focused. We have good products, a brand name, an excellent

customer base and a reasonable reputation within that market.

We have all been working very hard to provide that market with better

products and some new products. The results to date have been remarkably

encouraging in terms of new business. And of course the inevitable

consequence of focussing so tightly is that you discover all sorts of

things about the market that you never appreciated before, and as a

result still more new product ideas come spilling out. To be frank, we

had taken that all-important market rather for granted during the boom

times. No longer, and never again.

As for Sir John's next point about financial management, we're hot on

that too. Our bad debts were well under 1% of turnover for the financial

year just finished. It's costly and time-consuming to do that job well,

but again there is no alternative.

Unless an acquisition prospect comes into view, we will not need

finance. What, though, of businesses that are struggling to fit their

financial strategy to their corporate strategy, and on present trading

patterns known only too well that they will have to seek more debt or

equity soon?

Again, some useful words in QED. An article by Anne Segall, the Daily

Telegraph's economics correspondent, forecasts sharply increased demand

for capital funding during the rest of this decade. However, there is a

matching difficulty in persuading the shell-shocked banks that your

business proposition is worth a punt. While this is a view one would

expect to find in a publication produced by a venture capital group, the

wise course seems to be to seek equity funding rather than debt. Too

many businesses had their balance sheets badly burned during the past

couple of years to want to become overburdened with debt once more.

Eyes down -- and don't lose concentration. The future of your business

probably depends upon it.

* Alastair Balfour is editorial director of Scottish Business Insider

magazine.