The world is in a state of crisis with the covid-19 pandemic crippling businesses and causing heartache for business owners. Since March 2020, the United Kingdom has been faced with a varied state of lockdowns, local lockdowns and the introduction of the new tier system.
All of this uncertainty is affecting SME business owners to the point where they will have to make the decision of keeping the business open, fully or scaled back, or shutting down.
Fortunately, some companies have coped well, particularly those with strong cash reserves and funding facilities and some sectors have managed to bounce back throughout the crisis. Depending on the products & services your company specialises in, your offerings might be in high demand, whereas some companies have had to adapt and rethink about their product & service lines to ensure sales and revenues steadily go back to normal.
In this article, we will be discussing how best to survive the current crisis with the current support measures available and what business owners should be doing to ensure they remain in a strong position during and after the pandemic, avoiding company closure.
- Cashflow Management
Cash is king has never been so true. Keep your balance high and regularly monitor your forecasts. If your cash flow forecast highlights possible gaps in your funding, consider what is available to you (don’t just think about bank loans, consider things like invoice discounting or lease financing as these may be more effective and also speak to your shareholders to assess their support options) and make sure you allow time to get your application in and for the lender to go through its’ approvals process. Pull together the documents a lender might require (e.g. recent bank statements, annual accounts and up to date management accounts) so they are immediately available, and avoid wasting precious time.
Make time to look at expense items the business is incurring and eliminate any that aren’t critical to the business. Find out what notice period you are on (if any) and either cancel the service or give notice you intend to either cease or reduce the level of activity. For those cost items you can’t live without, consider talking to the supplier to see if they can offer you a better deal.
If you are considering either reducing the hours staff work, their pay and benefits or making people redundant, make sure you take professional advice before acting, as mistakes in this area can be both expensive and time consuming to correct.
Don’t blow the money you build– there will be further lockdowns and fallow times ahead and even another crisis – having cash liquidity will be vital.
- Engaging Customers & Shareholders
Talk to your stakeholders, share your worries and excitement about any new opportunities to increase your sales activity. Lift your eyes to the horizon. Make time to see beyond immediate crisis management. Ask your stakeholders (customers, staff, suppliers) what they want from you and what you can provide them. Develop those ideas, don’t shelve them but encourage lateral thinking. Challenge the status quo. One thing is certain – the business model of yesterday will be outdated and only those who adapt will survive.
- Speak to a Business Mentor
This is a lonely place and time for business owners. They have set up their business with a passionate vision of what customers need, probably risked their career by leaving a stable position to pursue their dream and put reputation and money on the line to get to this point. So, talk to someone who understands what you’re going through, not only fellow business directors or your partner, but somebody on the outside, a fresh set of eyes, who may have experienced similar business crisis and will challenge your ideas and come up with ones you hadn’t thought of before.
The rewards of having an EFM Growth business mentor can be great, and the risk is low. You have nothing to lose and everything to gain by bringing onboard a mentor. Every entrepreneur should have one.
- Credit Control
Make sure your business’ payment terms are clearly laid out and ensure that your accounting records are up to date, so you have an accurate picture of who owes you money and are aware of existing balances if the customer is looking to purchase more. Consider using an outsourced or part-time credit controller to help you save time and money in this area and if you don’t already have the appropriate resources in-house to help collect what’s due to you.
If you don’t currently credit check customers, consider introducing this into your customer due diligence process, especially for material transactions or new and unexpected customers – ask yourself why have they suddenly approached me? Also, consider taking credit card payments, if you don’t already have this facility, to make it easier for clients to pay you.
- Engage your Suppliers
Just because a contract for services is in place doesn’t mean that the supplier will not be amenable to a change in terms. EFM has a client that placed two thirds of their staff on furlough and, despite a strong reluctance to ask, got the IT provider to readily agree to a £2K per month cost reduction for the duration of lockdown. Other suppliers also agreed to extended payment terms and payment holidays. Remember many suppliers need you as much as you need them!
- Grant Schemes
The UK Government wants to ensure the survival of SMEs, especially since start-ups and SME businesses make up for 99% of the business population, with over six million companies in operation in 2020. To help support with the start-up, innovation and survival of businesses, the Government creates and funds grants via portals such-as Innovate UK as well as Covid specific support during periods of lockdown. There are also grant funds supported by VCs, local enterprise network, universities and councils, focusing on geo location, SME’s and sectors such-as technology, agriculture and manufacturing.
If you have not done so already, it’s imperative that you take advantage of these schemes and apply to ensure the survival of your company. An EFM Finance Director can support you by researching the grants suitable to your business and completing the application forms on your behalf. Our experienced Associates can also prepare the data often needed, such as a business plan and cashflow forecast, ensuring you’re fully prepared and well equipped throughout the application and assessment process.
- Prepare for the Post-Crisis World
As the world continues to face the Covid-19 pandemic head-on, the strategic focus for business owners is now turning to what the competitive landscape will look like in the aftermath of the crisis, what it means for their business, and how to come out in front.
EFM hear of many companies that are questioning their viability post-pandemic, including those in the travel, hospitality, and events industries. We also hear of businesses accelerating their growth because their value propositions are in high demand e.g. face masks, antibacterial chemicals, home delivery services. Because of such factors, firms will differ in their resilience. You should take steps now to forecast your position when the pandemic eventually begins to end.
You will also need to assess your company’s preparedness – Are you ready and able to accomplish the plans you’ve outlined, particularly if much of your organisation has shifted to remote work?
The EFM team see various differences in preparedness at an individual, team, organisation level. The resources at hand, along with the speed and quality of decision-making, vary greatly, and the differences will determine who achieves and who falls short of success. EFM have a post-Covid checklist to help bring structure to business owner’s preparations. Contact us to find out more.
When tackling a crisis of this magnitude….
- Don’t forget to focus on the positives!
Yes, a crisis can be devastating to businesses, but it can also bring many opportunities in the way of evolution. Throughout 2020, EFM has seen many businesses, including our own clients, adapting their products and service offerings to remain competitive, enhance their revenue streams and to keep doors open. One of our clients, an online fashion retailer, began designing and selling their own facemasks as they saw an opportunity to sell a high-quality product that’s both in high demand and beneficial to the health and safety of the public.
Remember – you must think of new innovative, strategic ideas – adapt to survive and thrive!
Get in touch
If you would like to find out more about how EFMs bespoke, part-time financial management & business advisory services can benefit your business, contact the EFM team. Our EFM Experts can help you to construct & manage your crisis survival plan effectively. Get in touch via email@example.com or call 01582 516300 to arrange your free 1 hour 1-2-1 consultation.