If you were in business during the 2008 crash you’ll remember that the whole country seemed to freeze. Businesses made crazy decisions to cancel their strategic plans. People stopped marketing, training and recruiting. They cancelled projects. They got rid of good staff. They hunkered down.
And we talked ourselves into one of the most brutal and prolonged recessions in living memory – far worse than it ever needed to be.
I know. Because I was one of them – employing 12 people at the time. I vividly remember the panic. The frenzied review of our cost base and binning everything that wasn’t 100% critical to keep the lights on. It was a big mistake and led to us going backwards for at least a couple of years after.
I can see it happening again. Already most of my clients are reporting cancelled meetings “just in case”, cancelled networking meetings, projects being put on ice, pipeline getting pushed back, sales decisions going on hold, and marketing spend being pulled.
So what to do?
Ok, so this is a very real threat. And a physical one this time. Of course we have to take it seriously.
But I’d like to propose a calm, well planned and proportionate response.
Being conscious of the impact of our decisions on other’s lives. Knowing that every decision has a ripple effect.
This crisis is likely to affect everyone in some way.
We have an opportunity to not join the hysteria of the panic-loo-paper-buying public and calmly think things through.
Do your planning. Do it now. Whilst you’re still calm
Do the up-front planning now with a clear head. Think through the tricky issues, make the best decisions you can based on the facts and let your team know what you come up with.
Plan out various scenarios so you know what you’ll do.
Time spent planning now whilst you’re calm will mean you’re not trying to make important decisions from a place of panic and fear, and should stop you over-reacting.
If you allow yourself to slip into a fear and scarcity mind set then all you’ll see are the negatives. Being in this state affects how you perceive the world and you’ll miss the opportunities that will undoubtedly be there.
At the most practical level can you carry on running your business if you or your team can’t get into the office for any reason?
Will your technology and comms stand up to you all working from home?
Have you got enough laptops for everyone to work from home?
Several of my clients are doing a full day test, with everyone working from home (I appreciate this isn’t possible for all businesses) as a proper stress test of their remote working capabilities. This sounds like a great idea to me and suggest you do it too.
From now it’s a good idea for you and your team to take laptops home every night, just in case.
I have to admit I hadn’t thought of insurance when I first wrote this; a client had the idea during a financial planning session we’re doing today.
So I’ve been in touch with one of my insurance contacts this morning, the very helpful Ian Lloyd of Roberstson-McIsaas Ltd to find out what the situation is.
It’s not great news though.
“The vast majority of Business Interruption policies will not cover losses as a result of coronavirus. Do recommend to your readers that they check with their insurance brokers, but prepared to be disappointed in the answer – insurers write their policy wordings having taken the best legal advice they can to make sure they don’t get caught by unexpected events like this.”
Ian also advises buying a Directors’ and Officers’ Liability insurance policy – nobody wants to be sued or investigated personally after their business has failed due to a “black swan” event, but having some insurance to meet defence costs is very worthwhile
And to keep a Document a Risk Assessment and keep reviewing it as events unfold – you don’t want to be sued in the coming weeks and months for damages because employees argued they were “forced” to come to work or go to a business meeting or not allowed to self-isolate because of pressure from the boss and took ill as a result. Documenting a risk assessment and issuing sensible advice to employees as to what to do will be good protection. The HSE website has good advice on how employers should be behaving.
Thanks for that Ian, things I wouldn’t have known about.
Be flexible with your team
Make sure your culture is as open and supportive as possible. If people need to self-isolate, or schools are closed and people can’t get child care, make sure they have the tools and resources to work from home if they can. Everyone needs to know what procedure to follow if they get caught up for any reason – who to tell and what to do.
Will people get paid?
What’s your plan if your business is closed, or people can’t get to work? Can people do their job effectively from home? If their job is based in your premises then what is your policy if they can’t work for any reason. The big question is “will everyone get paid”?
And if so, how long for? A week? Two weeks? Six weeks?
I know, it’s a tough one but you need to plan for this and let people know. Your team will be worried about their income too – give them the facts so they can make their own plans.
Don’t abandon “business as usual”
Things have a way of working out, and you need to keep in mind that this will pass and you don’t want to have let go of your strategic plans. Don’t be that idiot!
Think of the time you’ll waste clawing that time back.
If you’ve done your calm planning for this situation you should be able to keep your strategic head on as well. Keep looking beyond these next few weeks and remember your team needs you to lead them through this.
Be ready to emerge from this stronger and ready to roll again (whilst your competitors are digging themselves out of the hole they created!)
Customer and supplier risks
Think through your key customer and suppliers. Where are the big risks? Talk to them about their plans. How would their situation impact on you? And what can you plan to do about it?
Test your comms with your clients so you can still have meetings if you can’t meet in person.
Your financial plan – forecast your worst fears
This is going to call for flexibility, vigilance and being on the ball.
Make sure you have your month by month profit and loss for this year on a spreadsheet that you can easily access. You need to keep this live and update it regularly
When you’ve done your planning, put the potential changes through to see what it does to your profit. Put in a hefty contingency budget for those unpredictable situations.
I think it’s wise to plan for a couple of months with a significant reduction in revenue. You need to forecast your worst fears so you can quantify the impact. Then your genius brain can start to come with solutions.
Don’t let the situation take you unawares.
I think it’s worth putting some bad debt provision in your forecast – for future customers not paying and also for anyone you’re already worried about or who is in a high risk industry.
If you’re a client of ours, or have been following my blog for a while then you’ll have your buffer cash put away. You’ll have that warm glow of knowing you can still pay your overheads for at least 3 months before things get tight.
Thank God for buffer cash eh!
I knew I was right to keep banging on about it…
If you’re even remotely concerned about cash, with or without a buffer, you must keep a cash flow forecast that you update at least several times a week. I recommend the 13 week rolling cash flow forecast (and if you’d like a template just email me)
Cash is everything so it’s mission critical you’ve got a tight hold of it, and are looking at it all the time.
I would imagine HMRC will have to become accommodating again with Time To Pay arrangements, but really you don’t want to get into arrears with them if you can help it.
Spread your payments
Take any opportunity you can to spread payments rather than pay up front. A good example being your annual insurance. Look out for things you might have paid for in full because you have the cash and just put preserving cash at the top of your list.
Ok, cash is going to become more of a scarce resource, and the game of credit control is going to be critical. You absolutely MUST make sure your credit control is hot.
As the owner you need to see the debtors report at least weekly – be on the lookout for problems developing with customers. There’s no wriggle room on this one, you need to be ones getting paid, and not pushed down the payment list.
Watch out for the warning signs of not getting through to accounts and generally being fobbed off. Take action quickly before it’s too late.
What to spend, what to cut
This is such a tricky one. I’m really conflicted about this.
On the one hand, conserving cash could not be more critical, because if we run out of cash it’s game over.
But if we all stop spending, the economy is going to be badly damaged.
I’m already holding fire on booking a planned holiday, buying some new jeans and going out for a meal… just in case.
And I know its’s good financial sense to not spend anything I don’t need to, but there’s an immediate impact on others by freezing our spending.
We need to take sensible measures to conserve cash but try not to go into crisis mode, not unless you truly need to.
So obviously it’s a balance, and it will depend on what’s right for you, but here are some thoughts:
- If you can reduce or suspend your directors pension contributions for a month or 2 it will keep cash in your business and you can always make them up later. Of course you’ll miss out on what your fund could have bought at lower stock prices.
- Can you reduce your dividends temporarily? They can of course be clawed back later. Again this keeps much needed cash in the business.
- Trim the fat. Are there people or projects in your business that aren’t working? Things you’re been putting off dealing with? Now could be that perfect time to deal with tricky staff issues or bin that time-wasting project. Have you got loss making customers you’d love to get rid of? Now could be perfect time to make those decisions and make your business stronger for the future.
- If you’re recruiting for vacancies is it worth holding off until we know a bit more? If income drops and takes a while to build back up again, do you need the extra person. However if you DO need them, don’t hurt your business by putting strategic decisions off.
- It’s probably a good time to defer that decision to buy the yacht / new sports car (unless you have a ton of cash!)
Don’t screw the little guy!
When you’re making decisions about your spending or cash flow, or cancelling meetings or pulling work, just remember the responsibility you have for the smaller suppliers / freelancers in your world. Cutting their work and paying them late could be catastrophic for them.
Don’t be a (knee) jerk
Remember everything you do has a ripple effect. Everything you cancel, scale back, cut back will affect other people. Try to be conscious of what impact your decision could have on the wider world. I truly think we can make a difference to how this plays out if we all keep a calm thoughtful head.
Plan what to do with any down time
If things get quieter, plan what you could do with the down time. What projects do you want to start or finish? What controls, systems or processes need sorting out? Get your priority list ready so you know you’re doing something useful and making your business stronger and more efficient.
Don’t stop marketing!
Its crazy behaviour to think the way out of this is to become invisible.
If you remember 2008 then you’ll remember that the businesses who did the best are the ones that didn’t pull the shutters down but kept on – business as usual. They didn’t pull the marketing projects. They didn’t stop communicating with their customers. They didn’t neglect their pipeline.
Notice what we can learn
I do love Chris Evans in the morning. He’s just so positive. One of the things he was talking about today was how much we’re all going to learn from this experience. How much stronger and resilient will we be? How much flexibility will we learn to embrace? It’s too early to say but by taking that approach rather than worrying yourself into a financial crisis I’m convinced it will be good for everyone.
Be bold. Plan ahead and stick your plans. Don’t let this define your financial results this year any more than it has to.
We’ve got more than enough idiots in the country panicking. Let’s not go there. As business owners we have huge responsibility to keep the wheels on. What we do matters and impacts more people than you could imagine.
Your attitude to this WILL be the difference to how your business comes out the other end.