Looking at the current global economic crisis and reflecting back on my own personal journey as a business owner, I can’t remember ever facing such a perilous and frankly scary situation as what small business owners must be going through right now. But I do know what it is like to nearly go bankrupt and lose everything, and also having businesses not work out, so my heart genuinely goes out to all of you as I know many people are having sleepless nights right now. The economic impact of Coronavirus will be generational but right now we have an immediate crisis to deal with as we are in a world of hurt.
The ABC basics they teach you in First Aid when putting the patient into the recovery position equally applies to business. A = Airway, B = Breathing, C = Circulation. As a Chief Executive survival has to be at the forefront of your mind, growth and expansion are no good to anyone if you are not breathing. So, if your business does not have a clear airway, is not breathing properly and the blood not circulating correctly, then you are in trouble. The current economic crisis has put businesses, especially SME’s, into shock. Now you have to come around quickly and get moving.
Whilst I don’t have a magic wand to fix anything, I can contribute in so much as to what I would do if I was sitting in the Chief Exec’s Chair again of a small business facing the current situation. Some of this maybe common sense but even these pieces of advice hopefully can act as a check list of sorts for someone.
1. First and foremost, breathe and stay calm! (I am not kidding here). The stresses and strains of a business owner / manager is far greater than many can imagine as you carry the burden of not only your own family and livelihood but also those of your employees and their family’s too. You need a clear head, and you also need to stay healthy, otherwise you are going to be no help to anyone. Your job is to lead, and you have to step up to the plate with confidence
2. Be Knowledgeable – In my old office, I would have Sky or BBC News on constantly. If I was not watching it, one of the office staff would be right now. Things are changing fast, and you need to understand HM Government change in direction, new policy, and also Bank of England decisions. Think macro and then understand how its impacts you on a micro scale. You can’t wait until the end of the day for a catchup in this environment
3. Plan & Lean In - Recognise that your original well thought out business plan for 2020 just got blown out of the water! Create a new plan with the senior members of your team. Three or four heads are always better than one when solving complex problems, so lean in and share the burden where you can. If you do have business continuity plans; then this is the time to invoke them as this is what they were designed for. A sensible time horizon for a plan for this kind of crisis is 12 months – Coronavirus isn’t going away anytime soon. You need to know what you are doing right now; in 10, 20, 30 days time; in 3 months; 6 months; 9 months and 12 months. You also need to be reviewing this constantly; things are constantly changing, so you need to adapt accordingly and move fast.
4. Your employees are your business - Look after them (personal safety is always the priority) so start by communicating to them first and foremost. Be clear about what you are doing and be completely transparent about the state of the company. They are going to be worried and by providing clarity; being completely transparent and also personally available to answer questions, you will build their confidence up in you and what you are doing. You are going to need their help and you need them on your side to get through this. And when something changes (and it will); react immediately and tell them. You need to be pragmatic and flexible. But remember Employees come first! Always!
5. Cash is King - without cash you are out of business. Positive cashflow and liquidity is key. So, you need to preserve cash, and make the “cash runway” as long as possible
- Create a weekly cashflow plan – be clear of when monies are coming in and when they are going out; and review this daily
- Freeze all recruitment; don’t compound the problem of having more cash going out than you have to. This is not the time to over stretch yourself until you have a grip on the situation
- Don’t replace any individuals that are already transitioning out of your company
- Stop all and any unnecessary expense; for now (short term) that does include marketing and education but that also includes all the small things like stationary whose costs can go unchecked and mount up over time
- Stop all travel; unless it is absolutely mission critical; 99% of things can be done remotely over video link or by phone. If you haven't got these systems, you can get setup over the Cloud in a matter of hours
- If you do pay dividends? then you need to suspend these. Talk to your shareholders (if you have them); they will understand the situation as you need to preserve cash
- If you do have cash reserves; now is the time you are going to need to use them – but be smart; use the reserves sparingly to carry you through the periods when cash coming in is going to be down; factor into the gaps in the cashflow plan
- If you have outstanding loans and you can pay them off; unless the interest rate is really excessive – then don’t! Cash in your bank account is better than being in someone else’s even if you are having to pay interest
- Negotiate with customers for faster payment terms (reduce your trade debtor days); especially on Public Sector contracts. I often have found by talking to HM Government Procurement Officers that they were more than willing to help an SME out. It is not in their interest for you to go under; especially as the current circumstances have not been caused by you. And if they do help you out; remember to return the favour in some-way!
- Equally remember your suppliers; they have their businesses too – so be fair, and pay them just as quickly as possible
- Take advantage of PAYE, VAT and Corporation Tax payment delays; however, make sure you are talking to HMRC and not just doing this in isolation. They are allowing you to delay payments; but remember when normality returns (and it will), they are going to come back to you for the money
- Debt funding; the Banks are usually completely useless even with Government backed loan guarantees; so, I wouldn’t waste too much time trying to talk to them about overdraft extensions or bridging loans. (I will be pleasantly surprised if they have changed their ways, but I am always highly sceptical here)
- Look at the secondary market and peer-to-peer lenders; e.g. Funding Circle. If you have good credit history; your accounts are reasonably solid; and you have a comprehensive business plan; you will be surprised how quickly you can raise debt finance. But again; remember it is usually an unsecured loan, backed by a personal guarantee – you have to pay it back; and when you do get the physical cash add it to the cash pile
- Your looking to protect the payroll and employee’s monthly salaries providing stability. If you have any bonus payments pending; then discuss with your employees to delaying these to later in the year. Also, if HM Government is providing additional guarantees in the salary arena and you meet the qualifying criteria then access these initiatives (keep in view; it takes time for these to come through, and again no doubt the small print will ask you as the business owner to act as a personal guarantee)
- Equally, as a business owner if you do have a personal cash surplus, lend the business money through the Directors Loan Account, but do remember to charge the Company a commercial interest rate and to draw up the correct paperwork. Naturally, don't start taking the money back out; push the repayments out for at least 12 months - It's your money, you can set the terms of the loan
- Finally, and only if you really have to, reduce your own salary by delaying your payments. It is not something anyone would want to do, but again you need to preserve the business cashflow; and just sometimes by pushing your own salary payments out, you can help overcome cashflow difficulties
6. Risk Analysis Review of New & Existing Engagements – All projects carry risk; and whilst we try and mitigate these through contract negotiations; right now, you need to look very carefully at a number of factors more closely than you have done so previously that could materialise. Failure to do so could put you in very real trouble far quicker than you ever envisaged. The current crisis compounds any previous risk profile you previously might have had. Key risk factors include, but not limited to:
- Financial standing and liquidity of the Customer (doesn't matter how big they are, they can fail)
- Payment terms offered
- Payments linked to milestones; with Customer dependencies
Understand where you will be if a financial risk materialises; and cash you was expecting to arrive doesn’t.
7. Talk to your Customers – reassure them that you are very much “open” for business; but also look and ask what you can do to help them in the short term. We all talk about long term business partnerships and relationships. Well its times like this when “the rubber hits the road”. People will remember how you act right now
8. Reach Out & Help - to previous Customers; and even Prospects that you haven’t managed to do business with. Let them know that you are there if they need help. Everyone needs to help each other at this time; it’s the only way everyone will come through this – Be genuine in this, it’s not just about selling something to someone, it’s about helping out right now for no financial reward. The by-product however is goodwill for another day, and there will be another day!
9. Stay Focused on the Now – Employees may be working from home; but you need to keep the business running normally. Ensure that you establish a routine with your delivery teams, just as normal. Virtual stand-ups three times a week; Monday, Wednesday, Friday. This allows for a sense of community or as we also use to say at Certus “family” and provides the opportunity to cascade information ensuring that everyone knows what’s going on. The key here, is to make sure everyone is undertaking purposeful work – if not on front line delivery; building assets and undertaking education (especially if it is free) is a positive use of time
10. Keep One Eye on the Future - The implications of a pandemic like we are experiencing are going to have political, financial, technical, economic and social implications for the next generation to come. So, once you know that your business has enough oxygen to survive – and yes you will survive (think positively), new opportunities will emerge, and you need to figure out as to how you can be part of this
This list is far from exhaustive; and we are going to be all living with the effects of this crisis for probably a decade once it passes. Stock markets and the global economy are not going to recover overnight. Look at the recovery periods of the FTSE and the Dow Jones, post 1987 (Black Monday), 1992 (Euro), 2001-2002 (Dot Com Bubble), 2008 (Financial Crisis), but be assured that the markets always do recover and remember what triggered all of this was not a financial crisis.
I do hope this short blog is of some help and my thoughts and best wishes are genuinely with you all. It may come across as extremely self-centred, but when you are the Chief Executive of a company, especially of your own company, the buck stops with you. So I am not going to apologise for that. You have nowhere to hide, and you have responsibilities to your employees, customers, shareholders as well as to yourself and your own family.
As I have said so many times before, if you don’t look after your employees then you won’t have a business. So, right now you have to do the right thing by them for everyone. It’s tough sitting in the big chair, many think they can do it, the reality is few actually can. But for those who do, I know that you will steer your ship successfully through the stormy seas ahead and I also know that you will be truly amazed how your people will rally around you and how much you will learn about oneself.
If anyone wants to talk through where they are, then feel free to connect and direct message me. If I can help, more than happy to do so.
Stay Safe - Mark
