Much ink has been spilled and many voices raised on what the government should do to save our small businesses in the wake of Covid-19. Indeed, the politicians have a large role to play in ensuring the UK’s small-and medium-sized enterprises continue trading. With 99 per cent of all business in the UK defined as an SME, it is no understatement that they truly are our economy’s backbone.
But while the government should of course be supportive and creative, business owners must also take their destiny into their own hands to ensure they are able to survive once the furlough scheme comes to an end next month.
There is no silver bullet to getting a business back on track but if you want your business to continue trading instead of becoming a Covid-19 statistic, there are three things to consider today. I cannot stress the urgency enough. The sooner you review and action these, the more likely you will survive the slump. The longer you procrastinate, the worse your position will be.
Do not let today’s subsidised bubble trick you into thinking it is the new normal. It is not. The furlough scheme will end and the coronavirus business interruption loans (CBILS) will eventually need to be paid back. The government has been of great help but its financial resources are finite and while there have been extensions to some initiatives, they will eventually come to a close. You want to make sure you no longer need that life support.
The first task is technically the easiest but psychologically the hardest: review your numbers objectively and ask yourself if you have enough revenue coming in to cover all of your costs at the current rate of trading. Do not fall into the trap of thinking things are about to turn around or one of the potential new clients you are engaging with will place a large order. Look solely at how you are trading today and project cash-flow three to six months ahead.
Whatever you discover while reviewing your numbers, next on your list is to call all of your suppliers, investors and creditors and have honest conversations about where you are and what is the expectation. Aligning these stakeholders from the beginning (or, as soon as you can) is important because no one likes surprises and everyone appreciates being kept in the loop.
Rest assured most will want to work with you and find a long-term solution that benefits everyone, not just a short-term plan that benefits them. You may, on occasion, have a misaligned stakeholder. But for the most part, because every action has a counter-action, most will take a holistic approach to your situation.
However desperate your current situation seems, it is important to remember that the worst case scenario of insolvency is but one option and only ever needs to be taken if a business absolutely cannot be salvaged. Many businesses can be saved, especially if you are on top of your numbers and are honest with yourself and others. The earlier you catch any issue, the more time you have to rectify it.
Lastly and very importantly, you should speak to your customers and employees. While it may feel kinder and easier not to share bad news with staff, keeping your employees fully apprised of your plans to manage any challenges communicates to them that they are highly valued and you trust them.
This, in return, makes them want to be there for you. Your clients, on the other hand, depend on your goods and services, and will be another set of strong ambassadors for you. They may even be willing to support you in a financial or non-financial way.
Whilst we hope the government will continue supporting SMEs we have evidence, such as the reports of a substantial future increase in corporation tax, that it just will not be able to continue supporting in perpetuity. That is why businesses must help themselves.
To do so, you must be honest with yourself and be open to communicating with your key stakeholders. This must be done as soon as possible so that your list of options is long and varied. Leaving things to the last minute is not right by the business, nor right by your people.
Mark Supperstone is co-founder and managing partner at ReSolve, a boutique business advisory and restructuring house.