Business in the UK suffers a recession around every ten years so what can we learn as we emerge from the Covid crisis?
Well the good news is that for businesses this time is difficult but it also a time of opportunity so here are my thoughts based on living through two previous reversals.
Tip #1 Stay flexible
This is the number 1 tip because for me it’s the most important one.
Staying flexible means making sure that you have as many options open as possible.
Being ready to change tack quickly gives you a big advantage over bigger or less nimble companies.
Now is not the time to be wedded to the old ways of doing things or dig our heels in over the way we would really like to work.
New wins in a time of change
Tip #2 Talk to people
It’s amazing that when they are facing difficulties often people try to hide it.
Amazing, but understandable.
But this is really important. If you are having problems with cashflow and you can’t meet you rent or bills then speak to your landlord and suppliers and let them know.
I know it feels uncomfortable but work with me on this.
I used to work in credit control and the one thing we always loved is when a debtor came to us early and said “look I’m not going to be able to pay”.
Why?
Well for a start it meant that they were being honest and realistic right from the start and it meant that if we got them to agree to a payment plan then they’d probably stick to it.
What we didn’t like is when people avoided us for a couple of weeks and then when we did get hold of them they made up some ridiculous story about the dog having eaten the cheque they were going to send us!
Speaking to people early, telling the truth and coming up with a workable and realistic plan works 95% of the time.
Remember, in a time of crisis there will be a lot of people in the same boat as you so your landlords and suppliers have heard this before.
Tip# 3 Understand the difference between cash and profit.
This is really important. Very good companies make sure they have plenty of free cash in a time of crisis because at least they will be able to pay the bills.
Make sure you understand the difference between what your bank account is saying and what is shown on your P&L because they are VERY different.
Tip #4 Look for bargains
This goes for supplies, advertising and even buying up distressed companies.
In a time of crisis people start to have fire-sales and this is a time you can use that excess cash that you built up to really make inroads in your cost base.
People will begin to rein in their marketing spend which will make advertisers panic and drop their rates. You can get some excellent deals at when things are bad.
Speak with your suppliers, it may well be that they have stock that they bought for normal times that is just taking up space on their shelves and they may also want to realise some cash.
And if your competitors go to the wall then see if you can’t buy them from the receiver or even some of their stock at an auction. You could also pick up their best staff!
It’s all about keeping your ear to the ground and capitalising on any opportunities.
And remember that if you don’t ask then you don’t get.
Tip #5 – don’t do what everyone else does.
Take marketing.
Everyone will start to wind in spend on advertising as they see it as discretionary spend but that is absolutely the wrong thing to do.
Marketing is as valuable as your rent because it’s the thing that keeps the lights on.
Also remember that your competitors are also going to be reducing their marketing spend.
So if you maintain your activity you’ll stand out from the pack.
You’ll also probably get a great deal for your money (see tip 4)
Tip #6 – set a budget and stick to it.
Sit down with your accountant and organise at the very least a 12 month budget. Then get them to transfer this into a rolling forecast that gets updated every month.
This will allow you to know exactly where you are and the moment that you deviate from the course you initially set out.
And don’t neglect your bookkeeping – by having accurate accounts you can tell exactly where your money is going.
Tip # 7 – reduce your expenses.
Take a look at everything.
What can be done without?
What can be reduced?
What can be deferred?
By reducing not only the cost but also the cash outlay of your expenses you can make your business stronger for the future.
Tip #8 – Let your staff in on the secret
One of the things that many people think is that tye canhide bad news from the staff.
In fact it is very difficult to do this and even if they don’t know the details, people get an inkling that something is wrong and then it’s easy for their imagination to run riot.
Let people know what’s going on and ask for their help.
You’ll be surprised with what they come up with and I can guarantee that they won’t leave.
Tip#9 – Talk to people
In a similar vein as number 8, don’t take everything on your own shoulders.
Find someone to share your thoughts with because trying to tough out difficult times is hard on your mental health.
Being able to speak to someone, especially if they are also a business owner is a very good way of relieving some of this pressure.
In summary then, don’t worry.
Things might be uncertain and at times they may look bad.
but actually it’s often our imagination that is playing tricks on us and by using sound business principles you’ll most likely to be absolutely fine.
In fact, you’ll find that your business comes out of the covid-19 issue leaner and more able to develop your business in a sustainable way.