Planning for Business Survival

Putting business survival first:

The majority of the governments support is centred around companies taking on additional debts to survive the current crisis, however, we do not believe that should be your first option:

The current economic crisis 

Following a challenging 2019 riddled with uncertainties resulting from Brexit and elections, the market was hoping to bounce back when these issues were resolved in December. Just as we were expecting growth in the market following a steady January and February, Coronavirus hit bringing the country to an unexpected standstill. Unless your business is a supermarket or based in pharmaceuticals, it is extremely likely that your market has been adversely affected.

How bad is the global economy?

The Coronavirus is not fixed to any geographical boundaries, it has severely impacted the global economy. In the Recent Purchasing Managers’ Index data published by IHS Markit and the Chartered Institute of Procurement and Supply (CIPS) showed that manufacturing and services sectors in main geographical areas, such as the UK, US and Europe, recorded falls in activity during March. The figure in the UK dropped from 53.0 in February to 36.0 in March. Readings below 50 indicates reduction.

Whilst it always appears that every economic shock is worse than the last one, we do believe this a major one. It has impacted the world and there appears to no end in sight yet. No industry appears to have been spared from being impacted by the virus. That is not to say that we will not return to normal at some point. Every government across the globe has the same target – to return to some form of normality; therefore, within the SME sector, we believe we should begin preparations for business on the other side of the virus.

In seeking to deal with this, the big questions is:

Should my business take on more debt?

Whist borrowing money seems like an easy way to solve operational and trade issues, it is not always the best option and cold leave you with more problems once the lockdown is over. That’s not to say it is illogical to consider increasing your debt to facilitate business growth, however the current market conditions are irregular at present with business declining, taking on more debt is a high risk strategy, especially considering the unknown future. There are many things to consider with this option such as, the sustainability of borrowing money and your expected business growth when the economic climate improves. In our opinion, other options should be explored before considering additional finance.

It is also worth noting, that securing finance is also brings its own challenges – current estimates have reported that approximately 1% of applications had been approved.

What should I do to protect my business?

It is our recommendation that businesses should be developing short term survival plans in order to protect and stabilise businesses and a medium term plan to prepare for the return of markets, as below:

Stage 1 – short term business survival

Create 90 day survival plan with cash flow forecast(s)

Stage 2 – medium term business survival

Creating a flexible strategy that can take advantage of current opportunities as markets return

The key principle of both stages is to allow as much flexibility within the businesses work force and cost base:

It is almost a guarantee that the world will be different post virus, flexibility is key as this allows your business to react to new demands in a prompt and efficient manner. If your business plans for this and develops new structures, this will allow quick responses – which will be needed when we come out the other side of the virus.

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