Surviving turbulent times
The Covid-19 situation is a crisis in the very real sense of the word. It fundamentally affects the way we live, it fundamentally affects our economy and there is no end in sight.
Most businesses will need to accept that their plans are radically altered by the pandemic but this is especially true of young growing businesses. Start up and scale up businesses rely on winning new clients, they rely on momentum and they rely on access to new funding. All these factors are undermined by the Covid-19 pandemic.
In some quarters there is a reluctance to accept the seriousness of the situation; there is a residual hope that this will blow over with no more than superficial damage. Such thinking is dangerously naïve – if you don’t engage with the gravity of the situation your business could well be a casualty.
What do you need to do? First up you need to revisit your plans. For the short to medium term, you need a plan to ensure survival and get your business through to more stable times.
Ensuring survival means a ruthless focus on cash.
Update your cashflow forecasts. Ensure they are completely up to date for recent trading and that they take account of all your outstanding commitments. Depending on your area of activity, you are likely to need to significantly downgrade your revenue expectations. Even if it does not immediately appear that you are vulnerable to recent events, you are likely to be affected by their consequences as spending dries up, corporate clients are disrupted, meetings are cancelled and everyone avoids making decisions or changes.
Hold cash for as long as you can. This may take you into some uncomfortable places but you may need to be tough to survive. If your balance sheet is strong enough then I would encourage you to keep paying suppliers on time and to be good corporate citizens, but if you are at any risk you may have to delay payments and even look to renegotiate some arrangements. HMRC and landlords are examples of counterparties where you may be able to delay settlement and who might reasonably be expected to show forbearance in a crisis.
Prioritise short term revenue and cut costs. There may be revenue on offer which you have avoided because it comes at a cost to your longer term plans; this situation changes the balance of priorities and should make you more open to taking such revenues. In terms of costs, act quickly. Cost cutting is painful, especially as it applies to staff costs, but you need to be open to the potential need to cut costs and to reduce headcount. The earlier you act, the more room you have for manoeuvre and the greater your chances of survival.
Minimise your reliance on raising new capital. Hopefully, most businesses will retain access to capital whether from existing shareholders or new investors. They may also be able to access government backed schemes. If you are relying on any of these sources, get assurance ASAP. With such widespread economic disruption, chaotic financial markets and the prospect of a long and deep recession, investors are likely to be revisiting their priorities and it is dangerous to take anything for granted.
In tough times we all rely on friends. This is a time when we need to know who our friends are. It is really important to build and retain trust. Even if you are going to need to take some difficult and painful decisions it is critical to deal fairly with people and to be honest in the way you communicate. Avoid giving assurances you may not be able to honour; don’t be afraid to tell people that times are tough or that there are things you can’t discuss. You may well have to face some unpleasant conversations and you will likely lose plenty of sleep but you will be rewarded for honesty and trustworthiness.