The UK is precariously positioned as it continues its fight against the coronavirus (Covid-19) pandemic. Whilst the worst of the outbreak is behind us, notwithstanding the risk of a second wave, many businesses are rightly worried about the economic fallout and the financial impact of months of inactivity. With this, and the Brexit transition period due to end at the end of the year, small businesses are dealing with unprecedented uncertainty.
On the day many shops have reopened in England, we spoke to experts in a range of professions to understand how businesses can equip themselves to survive and thrive in the post Covid-19 world.
“Only open when you’re ready”
Jenny Spiver is Retail Consultant with over 30 years experience in the industry.
“I believe that small retailers have an opportunity to reverse the trend of a dying High Street. Compared to their larger counterparts, small businesses can be much more fleet of foot, offering a local shopping experience to customers still feeling very wary of travelling outside of their home and safe environment.
“You can ease those anxieties by paying extra care to health and safety with a strong focus on customer’s overall comfort and well being. Good preparations need to be completely in place before opening up the doors again – and make sure you’re following the government guidance. Only open when you are ready. Reputation and recommendations from local social media will be key to attracting more customers.
“Many retail businesses will have been evaluating and evolving their online offering during lockdown. In most cases retail has to deploy both ‘clicks and bricks’ to move forward. Just one or the other will always be a weaker position to accelerate trading and evolve the business.
“Lastly, one of the most important things will be customer service. Going that extra mile and making sure your employees are also the best ambassadors for the business. Extra touches or engagement with your customers requirements can only help make your business stand out against the competition. The current situation will deliver many winners not just losers. Choose and work hard to stand on the right side of the fence.”
“Plan, budget and strategise”
Dale Mitchell is a partner with Baldwins Accountants.
“Even where a business had good cash reserves going into the Covid-19 crisis, these are likely to have been drawn on and be depleted, despite the availability of government support. In very basic terms, businesses are likely to have less cash and reserves to fall back on.
“For those dealing with goods, for example, access to less cash could restrict the ability to procure stock in the same quantities as they did pre-Covid-19, even if their customer demand for such items return to pre-crisis levels. This can affect the buying power in terms of economies of scale and unit price. It can also cause stock management issues if the flow of items through the system is not large enough. Businesses may turn to finance options to fund purchases, either through loans or arrangements with suppliers. Adding additional debt to a business trying to recover, from what we now know is the biggest fall in the UK economy in history, can put additional pressure on the finances of the business.
“For all businesses, there are two key considerations:
- Is there still a demand for their products/services?
- Can they successfully deliver on that?
“For many businesses, the stream of income from sales has either slowed or dried up completely. As businesses look to re-open, there may be additional costs with either getting premises and systems Covid-secure or the cost of adapting your business, perhaps the cost of additional online platforms or restructuring. Costs could be increasing before the cash registers start ringing out with sales. Add on the cost of returning employees from furlough leave and cash flow becomes even tighter – this will unfortunately lead to some businesses deciding that redundancies are the only way to protect their business in the short-medium term. There will be casualties and some businesses will not survive.
“The best way to overcome these challenges is to plan, budget and strategise.
“We know times are tough and we know we are not at the end of the Covid crisis. We may have a second wave to deal with and there is no way to know how that will affect any future lockdown measures and by default, the economy. The forecasts all suggest the economy will contract in 2020 but there is likely to be a bounce back in the next 12-18 months. Making sure you can survive the crisis, revive your business and take opportunities to thrive, are the key priorities.
“Take advantage of the Government support where available, but understand the difference between the loans that need to be repaid and the cash grants that don’t. It is crucial to have a timetable so you know exactly what liabilities you have and when they are payable. Opening a free business bank account is another great way to take advantage of the free resources available, to help businesses during such unprecedented times.
- When do the loan repayments start?
- When is that deferred VAT liability due?
- What about corporation tax?
- Have you got an HMRC Time To Pay Arrangement in place and if so, what are the conditions?
“Understanding the timing of payments will help to identify the peaks of business outgoings and help you calculate if those peaks will be matched by income or if you need to start saving now. Cash flow forecasting has never been more important.
“As Directors, Partners and Business Owners, you need to evaluate your business and understand if the business you had six months ago is still viable. The economy has changed and how people work and do business is unlikely to revert to where we were pre-Covid. Have your supply chains changed? Is the demand for your products/services the same or do your customers have different expectations? Have you taken the time to review your costs to make efficiencies, where possible? And what about your profit margins – are they reasonable and in-line with sector expectations? Once you have made these assessments, you are better placed to understand what changes you need to make to meet the challenges of the ‘new normal’.
“Above all else, remember that even in recession and economic disruption, business goes on. There are plenty of success stories of innovation and businesses adapting to meet challenges head on. There will be winners and losers, but give yourself all the tools and knowledge to ensure you succeed.”
“Projections are key”
John Evans is the Operations Manager for Alternative Business Funding.
“One of the key challenges facing SMEs who are trying to raise funding for their business, is the impact that lockdown has had on their financial transactions over the last few months. Usually when making an application for finance a funder will ask for their last set of filed accounts, to see their historic financial performance, and their last three months bank statements. This is to assess their current financial performance as well as see any existing debt service obligations.
“The issue facing SMEs is that, for the vast majority, there has been very little trade over the last few months. This, plus the uncertainty of whether they will return to the same levels of trade when the lockdown restrictions are eased, means that it is more challenging to raise finance for their business.
“As the business’ recent transactions aren’t providing much information to underwriters, it means that more focus is on projections. So, for SMEs looking to raise finance my advice would be to spend time on their cash flow forecasts and projections. These will form a key part of the underwriting assessment and so they need to explain how they have derived at the funding requested figure and to breakdown their cash flow forecasts.
“Businesses should also look at their requirement and whether they need this funding all at once, or whether they need a smaller amount initially, that is more easily serviced, and could be topped up as the turnover grows.
“It might also be that the requirement could be split across a couple of different types of funding, for example a revolving credit facility to provide some initial funding to help prepare for reopening and then a Merchant Cash Advance loan, based on average monthly card takings, once the business is open and trading.”
“Don’t lose sight of what makes you different”
Sophie Cross runs the content and marketing agency Thoughtfully.
“It’s long been seen that businesses who invest in marketing during tougher times are the ones who are much more likely to come out on top on the other side. It’s about using marketing budgets wisely and strategically, and tracking what’s working. Capturing your customers’ data and communicating regularly with them about things like opening times, lead times and changes to your offering are crucial. If trading is slow right now, take the time to focus on your marketing efforts. If it’s booming, data gathering and communicating is still important as things can change quickly and you’ll be glad you did.
“As businesses adapt they need to make sure they don’t lose sight of their values and USPs. The danger is that every business will start to blend into one as they make the necessary changes but you need a point of differentiation more than ever. What is your brand’s take on the changes that need to happen? Beyond employee and customer safety being a priority (which should be a given) what are you doing that’s memorable to help and stand out? Act and communicate with confidence.”
“Forecast for different scenarios”
Sam Horner is the Vice President of Partnerships at Futrli, a cash flow software provider.
“One of the main issues will be the repayment of government loans. Whilst the CBIL and Bounce Back loan schemes have offered a lifeline to many businesses, it is unclear if those businesses will see their trading return to normal when lockdown is eased. There is a high likelihood that many industries will see a much longer-term impact. This will pose issues when repayments are due – with the Financial Times reporting as many as 40-50% ‘bounce back’ borrowers will default. Similarly, there’s no doubt some businesses will struggle to cover staff costs when the furlough scheme is scaled back.
“With this in mind, businesses will need to make more tough decisions – redundancies being an obvious option. However, you need to veer away from short sighted tactical moves. Make sure you have a long term view of your financial position and forecast for difference scenarios, best, worst and expected cases. Look where you might have future cash shortages and identify where expenses could be reduced, such as travel and marketing, and which operations can be temporarily paused. On the flip side, how can you increase the cash coming into the business? Are there more profitable product lines or services that are selling well that you can double down on? You need to do whatever you can to improve your liquidity position.”
“Look after yourself”
Dr Annika Sörensen MD is an author and regular public speaker on topics related to stress management and healthy living.
“All this uncertainty is scary. We want and need security. We want to know what’s awaiting around the corner. This uncertain state can make us depressed and cause anxiety.
“As businesses start reopening again that depression and anxiety may be a block in the way back. We have lost our belief in what we do. And we go into a new uncertainty – will the customers still be there? The best we can do – both during the lockdown and when reopening is:
- Take good care of ourselves (sleep, eat and exercise).
- Take a positive approach.
“Regular sleep, eating, and exercise is the one and only way to feel really well – because that is in line with what our bodies want from a biological standpoint. It will give you energy to tackle the challenges that arise. It will also keep your brain at its best and help you to make the best decisions.
“Combine that with a positive approach because all feelings are contagious. Anxiety, fear, anger are contagious. Calmness, kindness, love are also contagious. Which one do you want to spread to your surrounding AND back to yourself? The positive feelings, of course. Also, focus on what you want, because that is what you will get. Work towards what you want and the things you don’t want will go away automatically over time.”
“Don’t over-invest in digital”
Rich Brassett is the Co-Founder of Long Live King Ltd, a digital agency creating bespoke built websites and applications.
“I think it’s definitely the time to think digital, to adapt, to work with your team and serve your customers in a new way. What I believe is even more important moving forward is doing it in the right way, technically and financially. It’s easy to look at the big picture and try to solve all your problems with a single digital solution or application. This can lead to a costly and time-consuming exercise.
“Exploring what problems you are trying to solve is the key to efficient and strategic planning. Start small and build up slowly to make it achievable. The iterative process of launching and learning allows you to deploy new platforms or processes quickly and gives your team or customers a chance to offer feedback. You’ll learn a lot about any assumptions you’ve made and have the opportunity to change and adapt what you’ve implemented before moving on. What you see in many cases is that the big picture doesn’t always pan out and the final product varies a lot from the original idea and plans.
“Phasing a larger project can help steer the path of the website, application or platform and keep costs controllable. A really good exercise I would recommend is to do some research on the free or small fee accounts that could provide a good solution for what you need.
“For example, if the budget is tight or the outcome is unknown, rather than develop a full e-commerce website straight away, platforms like Shopify could be ideal to get you up and running. Run that for 6 months with minimal investment and see how your customers respond. If and when it’s time to upgrade then you have 6 months of experience and guidance on what the full site needs to be, by which time you’ll have the revenue to justify an investment.
“I can’t stress enough how important finding the focus of what you’re trying to achieve is from the very outset. All too often, when asking someone the purpose for an app, I get the response ‘we just think we need one’. There are so many ways to look at the same problem and find a solution that fits scale, timeline, and budget. Using eCommerce as an example again, you may not even need your own site for this initially. Amazon, eBay, Etsy, or a niche offering could be great platforms to establish a customer base and generate the interest to warrant further investment. Overall I think investing in digital platforms, website and applications is key to all businesses in some form post-Covid, but I firmly believe in approaching this in the right way for the longer-term benefit to the business and customers.
“Start small if you need to, look for various ways to solve the same core issue and learn from how people respond to what you implement.”
These interviews were conducted over an email Q&A – a big thank you to everyone who participated. If your business needs help dealing with the current situation, check out our coronavirus support hub.