I will not pretend to be an adviser that has all the answers for business owners on this. I absolutely don’t. What I can say though is that I am a business owner myself and so I can relate to all the uncertainty that business owners are facing……a number have already been forced to make difficult decisions and many more will have to do the same over the coming weeks and months.
These are extraordinary times. My view is that there are possibly three phases to this for business owners to process.
For certain industries the impact has been immediate and those business owners have been spending the last few days figuring out whether to stay open or close. For those that have closed there have been the difficult conversations with staff and the focus over the last few days has been trying to understand the reliefs and supports that have been announced by the Government and arranging the logistics of those with their staff.
For other industries, while the initial impact has not been as sudden on staff or work, there is still huge uncertainty. Every business knows they will be impacted, but they just don’t know the extent of it as yet. The movement to home working has been the first step for those that can do that.
I always think things are clearer when viewed in front of you…..on a spreadsheet, on paper……..it doesn’t matter what you use at this time but make the financial state of your business visible to you. This allows you make decisions.
How should you go about this?
- What are the current cash reserves of the business?
- How much is currently owed to you from customers and what exposure do you think you have to debtors that just won’t be able to pay in the short term? (this will not be because they don’t want to pay but because they just won’t have the cash)
- What is the sales pipeline or order book (this can be for services or for product/manufacture). Then risk profile this pipeline i.e. based on the customer, their industry and what you know about how their business might be impacted, what is the probability of that order still being fulfilled and paid for. We are looking short term here – 3 / 6 months
- Determine what the profit margin will be on those sales that you view as still being certain.
- What are the current fixed weekly or monthly costs of the business – rent, light & heat, insurance etc. (ignore wages or loan repayments for now)
- What is your payroll cost on a weekly or monthly basis
- What are the business loan repayments on a weekly or monthly basis
You are now armed with data to allow you make decisions.
It may be possible to defer or get some extension from suppliers in relation to the fixed costs mentioned at point 5.
The banks have said they will help. This situation is evolving and we await clarity on exactly what this help will look like. Contact you bank ASAP. Tell them you are trying to understand your position and will need support. Request from them a holiday or some other short term reprieve from your loan repayments mentioned at point 7
Point 6 is the difficult one but if the numbers don’t add up you have to have a very transparent and open conversation with your team. Allow them to understand the numbers and see do they have suggestions or input to the conversation.
How we do business is going to change. That is for sure. We are in for a severe economic shock in the short term. We are all in the same boat. All we can do in the immediate term is to survive but more importantly help each other and our communities.
- Show leadership as business owners in following the HSE advice
- Community needs to support their local economy more than ever by where possible using their products and services
- Local business which remains open and operational needs to support the community. This will be done through ease of access, quality of service, coming up with innovative ways of ensuring the community have access to the products and services they want
- Businesses that remain strong have a responsibility not to take advantage at this time. They need to pay suppliers quicker than they have ever done
- Local and national government need to help business owners with whatever supports are needed. We need a period where everyone can focus on the health of the nation and doing what is right. This is the most important and will be the quickest way of addressing the virus. Ensure peoples mortgages, rents and at least basic earnings are protected so that they have that level of security.
Over the coming weeks, as we understand more about what the medium term future environment will look like, all business owners are going to have to consider their business models and consider how they can adapt to that environment. Can we make adjustments based on what that environment will look like to allow our business to continue in a different way? By dealing with the immediate we can start to ask ourselves these questions over the coming weeks.
Look after each other.