Watch the video here …
I really do hope that you’re well and making good use of these weeks, whether you’re lucky enough to still be working and earning, or are dealing with reduced or no income. Please know you’re not alone in dealing with whatever you find yourself facing right now.
The last few weeks were full of panic and emergency planning; working out what this all meant, getting set up at home and understanding the various forms of government support. It feels like people have this cracked now, and after a long Easter weekend break are back at work and asking “what’s next”.
So I recorded a video yesterday about this, which you can see at the top of page, but thought it would be useful to write a blog as this next step is critically important for longer term survival and success.
(Quite bizarrely as I’ve been doing a video most days I’ve found myself with a YouTube channel with 19 videos on, it’s safe to say I’ve overcome my terror of doing videos!)
Corona Business Advice Facebook Group
And I don’t know if you’re part of our Facebook group – Corona Business Advice, but we’ve over 2,700 members now, all business owners, and we’re sharing every day the very latest we’re hearing on anything that affects business owners. It’s a great place to feel supported and connected. https://www.facebook.com/groups/coronabusinessadvice/
Working out what’s next
Absolutely no one knows what’s going to happen and where the economy is going to land. All we know for sure is that things are going to be very uncertain and unstable for a long time to come yet.
But that doesn’t mean we do nothing. I’ve heard some people are taking the “do nothing, wait and see” approach but I definitely do NOT recommend this!
Far too many businesses are going to fail in the coming months.
So we have to get ahead and work out what might happen, from best to worst case scenario and have an action plan ready for whatever emerges.
The immediate issues of course are meeting payroll costs whilst we’re waiting for the furlough grant to come through. We know the portal is due to launch on the 20th April with the first payments due by the 30th. Expect the portal to be overwhelmed and to crash and don’t expect to get paid out early – you need to always err on the side of worst case when planning your cash flow.
I suggest you get your March claim on ASAP, then put April on as soon as you’ve run payroll.
Every week I interview two funding experts about what they’re seeing on the front line getting their hands on CBILS loans and they offer their best tips and advice for successfully getting a loan. If you haven’t applied yet you can see the last 2 videos of these interviews here.
Last week talks about how to increase your chances of success https://youtu.be/C_UjnHQc7-g
And this week’s is an update on the situation following the government intervention to get the money moving https://youtu.be/CmAJHTvmqTY
We’re hearing that applications are still taking a long time to approve and very few people have had money through yet. We’re also hearing of a real reluctance by the banks to lend this low margin money. There’s a lot of political noise about this and I personally think there will have to be more government intervention to really get a shift here.
Dividend support for furloughed company directors
Although the government position hasn’t changed on this, the FT reported yesterday afternoon that the small business minister was working on a proposal for Rishi about how this might happen. It seems there are logistical reasons why it’s difficult to identify our dividend income, although there are ways around it. However we know the treasury are opposed to this in principle; they clearly think we’re a tax dodging bunch who don’t deserve the same support that everyone else is getting!
There’s a lot of political pressure on government from many directions, from the FSB, IOD, Enterprise Nation, local Chambers, as well as a number of petitions so who knows, we may get somewhere on this. But I definitely wouldn’t bake it into your plans!
So how do you start to plan?
By now I hope that you’ve planned out April and May. We’ve some certainty about this time period; we’re most likely on lockdown and we have furlough cover until the end of May.
But then what?
We’re over half way through that furlough period now, we have to plan what happens next.
This can feel really overwhelming. Where on earth do you start?
1) Decide your scenarios
There are factors that will affect us all and there will be factors for your individual business and industry eg:
- How long will lockdown last?
- How gradually the economy will return?
- Will furlough be extended?
- How do you bring people back to work?
- How are your customers and their customers going to be affected
- What’s happening in your industry
- What if mass gatherings can’t happen again until there’s a vaccine?
- What is likely to happen to your market and industry
Once you know the factors at play for you, come up with at least 3 scenarios:
- Worst case
- Best case
- Somewhere in-between. You may find you have a couple of in-between scenarios for your business.
2) Get the right timescale.
You need to be able to see at least a year ahead. If you’re part way through a year you need to extend your accounts so you can see beyond year end. There is going to be a serious time lag getting back to “normal” levels of business and that will eat cash quickly.
3) Scenario plan your income
For each scenario decide what your income is likely to be. Keep a note of the assumptions you’re making and why.
4) Map your numbers on a spreadsheet
You absolutely cannot do this in your head or on a scrap of paper. This is crucial stuff and you need to do it properly. You’re going to need your business mapped out on a spreadsheet. Hopefully you have management accounts and can use these as your starting point. If you don’t have management accounts (why not? they are absolutely critical to getting out of this) then set up a simple spreadsheet with your income at the top and all your business overheads below. This will give you a simple profit and loss forecast so you can use to plan.
Once you have your base model, copy this spreadsheet onto different tabs so have a separate spreadsheet for each scenario, as you need to play with the costs to get your business model to work.
Name your spreadsheet tabs so you know which scenario you’re working on.
5) Put your different income assumptions into each scenario
For each scenario put your income assumptions in. For now keep all of your overheads the same.
The goal is to see what your bottom line is in each case assuming you have the same cost overheads.
6) Work out a survival plan for each scenario
You can see what the profit or loss for each scenario is now.
Now you need to plan to get each scenario to at least break even.
This means going through your cost base and working out what resources you’ll need at each income level. Your goal is to not leak cash, so you have to make sure your business isn’t going to lose money.
7) Create your action plans for each scenario
For each scenario, having played around with the numbers, you’ll have a pretty good idea of what needs doing. This will save you so much energy and stress later, and your genius brain can get started on thinking of other solutions and ways to innovate to prevent the worst case scenario.
8) Know your trigger points
Many of my clients have already done this and know exactly what their trigger points are for the next round of cuts. This means they can crack on with their plans because they already know what they’re going to do in each case. They’re not on the back foot and they won’t be going into panic mode.
Cutting too deep?
Just a warning when you’re looking that what costs to cut. There’s a real balance between cutting too deep, and not cutting deep enough to survive. The ultimate objective is that your business must survive and that may mean cutting deeper than you’d like. But cutting too deep can make it difficult to build the business back again.
However survival comes first, which means preserving cash at all costs. We’re in for a long recovery so please don’t burn your cash holding onto costs you know you can’t afford. It could cost you your business.
Preserve cash at all costs
I’m advising all clients to hold onto their VAT, corporation tax and even PAYE for as long as is humanly possible! Even if you have your taxes put aside (which of course you should have) please hold onto them. You need every cash advantage you can muster because we don’t know how long this goes on for and the only way your business will survive is if it has CASH.
I don’t even want you spending your buffer cash. Once that’s gone you’re at high risk. We’re only at the start of this and you’ll likely need that in the future.
I hope this goes without saying but PLEASE make sure you’re keeping your cash flow forecast up to date at least weekly. Cash really is everything right now and not something you can afford to let slip.
That’s it for now. Please do your scenario planning and please feel free to drop me an email if you need a shove in the right direction. Very happy to have a chat to make sure you know what to do!
Stay healthy and look after your cash!
With kind regards