2020 has, so far, been anything but predictable. Many businesses who were waiting for some Brexit and political stability finally got what they wanted in late 2019 and early 2020 and were ready to put the ‘for sale’ sign up. But before they could so much as locate their mallet, Coronavirus hit, bringing about an even greater level of uncertainty.
So, if you are facing the prospect of simply surviving the recession to end all recessions, what should you do? We’re here to guide you through, not only surviving the COVID-19 crisis and inevitable ensuing recession, but coming back fighting.
Gaining an advantage
A large number of small and medium sized business owners are in dire straits. Many in the services, leisure and hospitality industries have been forced to close for an extended period and either let staff go or take advantage of the government’s Coronavirus job retention scheme and furlough their employees. Many others in all industries have seen their business dry up to varying degrees.
If you are one of these business owners, and cash reserves are about to disappear, your natural instinct may be to throw in the towel. However, if you can find a way to get through this crisis, you may find that many of your competitors didn’t and, as a result, the marketplace may be far less crowded.
It’s quite possible that, if you manage to survive the COVID-19 crisis, your business could be healthier, more profitable (and possibly more sellable) once the dust has settled than it may have ever been before. It’s also important to remember that, although a deep recession is expected to follow the immediate crisis, recessions pass. They are also inevitable cyclical events within an economy, as are periods of prosperity.
So, the key is survival at all costs, so how do you achieve this when your revenues are at rock bottom?
Key survival moves
Downsize as rapidly as possible
Most entrepreneurs are constantly striving for growth. In fact, growth is what drives most businesses, regardless of size. So it may be extremely difficult for business owners to suddenly strip back their business to the bare bones. But this is what is often necessary to survive a crisis such as that we are experiencing right now.
After years of building your business up, you may now need to do the very opposite in order to strip away all unnecessary expenses. Simplify your business and make savings wherever possible. In April 2020, The Hustle https://thehustle.co/small-business-owners-great-recession-covid19/
talked to 212 businesses that survived the last financial crash and found that the most popular approach, taken by 25 per cent of those businesses, was to ‘operate lean’, with a further 10 per cent citing ‘downsizing/layoffs’ as their primary approach.
If surviving means doing without your business premises and working out of your home office, or letting a number of staff go, along with contracts that are no longer financially viable, then so be it – as long as you survive, it may well be worth it.
Prioritise certain expenses
When you are in the process of shedding expenses, prioritise those that you really can’t function without, or that you desperately need to service in order to avoid even greater expenses. For example, rent, mortgages and equipment costs are likely to be among the most important expenses.
Work on your culture and communication
If you have spent time creating a strong culture within your business and have nurtured loyalty from your staff, you may have more success in asking them to come along with you on the survival journey. If you haven’t already, it’s vital to speak to your employees and explain to them that surviving this crisis is your priority, as is meeting payroll responsibilities. Explain that they may need to play their part by working harder to for less money, for example. You can’t force them to make these sacrifices for you, but those that do should be rewarded when you’re out the other side.
Focus on cashflow
As many business owners are finding out, making it through a crisis or recession is mostly about managing cashflow. Those who operate with limited debt will find this far easier than businesses that are over-extended in terms of what they borrow and the debts they have to service. Government measures mean that some bills may stop coming in for a limited period, but they are likely to start up again once the lockdown is lifted, despite the fact that the recession will be starting to bite by then.
Owning your own premises and equipment is a big advantage. If you own vehicles and machinery, for example, make sure you carry out regular maintenance to extend their lives as long as possible. If you rent your premises, try talking to your landlord about a rent reduction or deferral. Similarly, if you have a business bank loan, talk to your bank manager and you may be surprised by their level of empathy and willingness to work with you over a difficult trading period. It’s simple things like this that can make the difference in times of financial hardship.
Exiting Your Business or Raising Capital
If your primary goal, after exiting the crisis as a viable business, is to sell all or part of the business, then there are a few other areas to focus on throughout the COVID-19 crisis, that can help to put you on an even better footing in the eyes of prospective buyers.
Keep on top of your accounts
Making sure that you emerge from this with a set of management accounts that show, very clearly, the strength of your business before, during and after the crisis will help you sell your business. It may also help to add in comments that will allow you to explain and recall certain events and decisions, which will enable you to further illustrate how and why you survived when so many others didn’t.
Show what lies ahead
As well as putting together a solid set of accounts, extending this to a financial forecast for the coming year or years, including a balance sheet, profit and loss and cashflow forecasts, will further cement your business as an attractive prospect to buyers or investors.
In conclusion, the World Economics Forum, predicts: ‘Survivors of the crisis will emerge as potentially massive winners at the end.’ The period immediately following the global financial crisis was one of the most fruitful in terms of establishing new successful businesses, with research suggesting that half of Fortune 500 companies were started either in Bear Markets or during a recession.
However impossible the task may seem at the moment, making major sacrifices in order to hang in there over the coming months may leave you on top of the pile when you’re on the other side.