Dangerous Waters Ahead
There is a chance that 25% or more of small businesses will close in short order as the UK heads into a lengthy recession now COVID, Ukraine, Brexit factors are hitting them. Plan accordingly!
Our clients, and the UK in general, are facing huge pressures from COVID + Ukraine + Brexit (“CUB”) and there is little or no support or relief coming. Business owners need to prepare for a prolonged and difficult time. The added volatility and uncertainty are going to make that preparation difficult to plan.
The latest surveys are not fun to read
FSB Regional Report
Bank of England latest report
Insolvency Service latest reports
LSE statement
ICAEW warning
It is unwise to ignore the weight of evidence.
Yes, we are all small business enthusiasts, but if we see so many red flags, and still want to go swimming, we should wear wet suits and take a warning buoys and emergency equipment into the sea with us.
What can you do
I am going to say, “take advice from people who were trading through the last 3 recessions, like me”, obviously, but here are 10 quick action steps you can take this week:
Lock in revenue with long term subscriptions, prepayments, and similar deals
Shift effort into counter cyclical products or services
Accelerate cash flow / reduce working capital cycle by 10~20%
Keep good staff but get them to accept non-cash benefits if you can (as people are currently very hard to replace), release those who don’t add value (let them find a better role elsewhere - the job market is buoyant)
Reduce borrowing and cut interest repayments, and if you cannot do that, get a fixed interest deal from your bank to cushion the next 2 years - we work well with some great lending brokers and panels
Rationalise the supply chains you use and reduce cost volatility and risk even at the possible cost of reduced volumes
Reduce all variable and controllable costs
Release unprofitable offices and sites and cut overheads
Mothball production that isn’t profitable
Defer all manageable capital expenditure (sweat the assets you have!)
None of those are fun. Every day you delay just makes the pain worse and increases the risk.
For a few of you
You have a golden opportunity to do all of the above and still expand and capture market share from those who do not act swiftly. I wrote about this in a previous post.
The few who can benefit from the recession and its impact on others are probably already aware of their advantages. One of those advantages might be access to affordable capital, such as VC or Angel capital. We can also help with that. The other advantage might be countercyclical businesses such as video games, social housing provision, or insolvency advice. A third advantage can be access to grants or cash support - grants (like KTN or Innovate) and help from local business support services (Like Growth Hub)
If you think you cannot swim across
If your forecasts show a pool of red ink and serious risks, take advice today. Not tomorrow. Today. Business closure should be a planned process. Planning can reduce the damage to you, your staff, your customers, and your personal life. Unplanned business failure risks serious economic, legal, and social consequences. You have a clear choice. We are not insolvency practitioners (but we know and work with a lot of great ones), and in some cases we can help you find positive results from an initially catastrophic situation.
But I don’t want to …
No one likes cutting staff, or cutting costs, or giving up on growth plans. We know that. It has emotional as well as economic impacts. That is why advisors can be so helpful: we bring a cool and detached eye along with a clear understanding of what works and what will probably not.
I’ve been here, three times, since 1999. I worked with larger clients who navigated the problems in the early 1980s and again in the 1990s. Recessions are not new. They are survivable.
Enjoy the swim
Those who survive, and I hope you all do, may emerge fitter, better managed, and more valuable. The applause can come later, the effort has to come now. Don’t wait, get help now.
Focus, Decide, Plan, Act. Do it now. Grow a thick skin and push through. 2015 could be brilliant for your business. You deserve to get there. We would love to help.
