How Will Your Business Survive the Crisis of the Century

Following on from my article on 16th March, here’s an update for small businesses during this tumultuous time.

I’ll be covering the government measures again and steps businesses can take in a bid to survive during this horrific ordeal.

What the Government is Doing

The Chancellor announced on Tuesday 17th March an updated support package to the one unveiled in the 2020 Budget.  Here’s what all that means, and for what types of businesses…because – in my humble opinion – they’ve missed out support for a big chunk of UK businesses, namely the single director limited companies, trades people, contractors and service companies.

Businesses Paying Sick Pay

There’s not much change to this one:

  • They’re still going to pay two weeks of statutory sick pay for employees who were off work due to contracting the illness
  • Businesses with less than 250 people as of 28 February 2020 will be eligible
  • Sick notes from doctors won’t be required, but companies need to maintain records of staff absences and statutory sick payments
  • The eligible period for this scheme will start from the day that the regulations extending statutory sick pay to self isolators came into force
  • The kicker – there’s still no mechanism for this reimbursement; the government ‘will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible’

Business Rates – For Those that Already Pay

  • Businesses in the retail, hospitality and leisure industries will not have to pay rates for the whole tax year of 2020/21
  • Retail, hospitality and leisure businesses operating from smaller premises (rateable value £15k to £51k) can get a £25,000 grant
  • This is going to come via our local authorities, so they’re the ones to ask about eligibility etc
  • Local authorities will have guidance on this from 20th March

Small Businesses That Don’t Pay Rates – But Have Premises

  • For businesses eligible for small business rate relief or rural rate relief a grant of £10,000 will be made
  • There’s no need to contact anyone about this – local authorities will contact the businesses in question
  • Local authorities will receive guidance on this ‘shortly’

Coronavirus Business Interruption Loan Scheme

  • This will be delivered by the British Business Bank, and will launch next week (w/c 23rd March)
  • It’s for small and medium businesses and allows them to access bank lending and overdrafts
  • The government’s providing backing to the banks of 80% on each loan, and the interest for the first 6 months is paid by the government – meaning 6 months interest free for businesses
  • Loans of up to £5m will be available
  • This will be provided by specific lenders, a list of whom will be available this week
  • The scheme is available from ‘early week commencing 23 March’

It’s not clear what the lending criteria involved in this is, and what types of businesses this will be available to, as it is potentially the only initiative that is available to the single director limited companies, trades people, contractors and service companies I mentioned above.

These businesses make up a huge percentage of small business as a whole, so the fact that incurring debt is potentially the only solution available to them I find quite saddening and frustrating.

Paying the Tax Bill

There’s no change on this one:

  • For businesses and individuals in ‘financial distress’ with outstanding tax liabilities
  • HMRC’s Time to Pay service is available to arrange case-by-case, tailored solutions for individual circumstances and liabilities
  • 0800 0159 559 is the number to call if this applies to you

Insurance

They’re potentially clutching at straws with this one, I suppose the number of claims will be the only thing that confirms or denies that…

  • Some businesses that have cover for ‘both pandemics and government ordered closure should be covered’
  • This was confirmed by the insurance industry on 17 March
  • Advice to avoid restaurants, pubs, theatres and cinemas should be sufficient enough to allow businesses to claim on this basis
  • Most businesses are unlikely to be covered
  • Start digging out that insurance paperwork and getting on the phone to your provider people

IR35 Reprieve

Those who are affected by this already know they’re affected, the contractors of the country.

  • The reforms to this area are now to be pushed back to April 2021
  • So, carry on as you are folks working through intermediaries, such as their own limited companies
  • Revisit any measures you were going to take this time next year

Other Things in the Works

The Chancellor touched on a few other things that seem to be under investigation / in earlier stages of development:

  • A potential support package specifically for airlines and airports
  • That they’re working to identify any other specifically affected areas
  • They want to develop a fixed cost cover package with businesses and unions, namely around supporting the payment of employees throughout this period of uncertainty
  • And any business needing immediate help should contact their local authority, who are being funded to supplement this support, and banks who ‘will be sympathetic’

Things We Could We Do Personally

There are practical things we could be doing personally to ease the financial burden:

  • Three month mortgage holiday announced by the Chancellor on Tuesday 17 March;
    • The usual assessment of an individual’s finances and consideration regarding whether a mortgage holiday is the most suitable option is being waived
    • So contact your mortgage lender
    • Some banks already have webpages up with contact numbers on them – check yours out
  • Cut out the unnecessary spending:
    • If you have loans, speak to those providers and see if they’re offering any support – maybe some payments can be reduced?  Or interest on credit cards waived?
    • Comb through your bank account, see if there’s anything else you can cut out

Hopefully you didn’t panic buy and rack up loads of debt on credit cards during the last week too 😉

What Businesses Could/Should Do

This situation is unprecedented in terms of business as we know it today.  And, we have no idea how long this may go on for.  It could be a fortnight; it could be a lot longer.

With this in mind this is a bit of a two pronged approach:

  1. Sensible business financial measures to take
  2. Looking at how businesses manage through tough economic climates

First and foremost it’s important to recognise that small, and to some extent medium, businesses actually have an advantage over larger businesses and corporate entities in situations such as these. 

Why you ask? 

Because we’re not tied up with the red tape, layers of management, corporate structures and all sorts of other things that make being decisive and making changes difficult in bigger businesses.  As an amalgamation of two sayings, that someone once said to me, ‘you can’t turn an oil tanker on a sixpence’. 

For businesses that size any changes are made by committee, there’s a meeting to plan a meeting, then a boat load of other meetings and, just when you think there couldn’t be any more meetings, there are.  Then there’s written guidance, that’s changed a few times, then it’s filtered down through the ranks…you get my drift.

Small, and most medium businesses, don’t have these layers to work through.  An idea is had, and it’s implemented.  We can turn an oil tanker on a sixpence.  And we should.

In the first instance, we should take sensible financial measures:

  1. Take advantage of whatever governmental measures apply to your business
  2. Slow the cash burn rate as much as possible; this is the rate at which you’re spending money.  If your cash outflows are suddenly more than your inflows you’re going to be burning through money – slow the rate at which your business is doing that:
    • Cut out wasteful spending, like perks that can be put on hold for now
    • Speak to suppliers, of both finances (like loans/credit cards) and goods and services, and find out what help is available to you to spread costs, to pause repayments, to pause interest, to cut costs
    • Keep in contact with your customers to ensure cash coming in is received – a lot of them might be in the same boat as you, see what agreements you can come to, to ensure the payment of your invoices
  3. Go virtual; I did say this in my first post of this nature, but now more than ever we need to be taking our businesses virtual, if we can:
    • Online meetings, workshops, courses, exercise programmes, even just contact with customers and clients
    • If you’re a business that has to run face to face, this is going to be more difficult for you, I appreciate that wholeheartedly – but do remind your customers and clients you’re still there.  Don’t underestimate the power of a virtual catch up over a coffee at this time
  4. Be innovative;
    • Is there an add on, a virtual service you can capitalise on during this time?  A slightly different offering to what you normal offer? For example, the pubs and coffee shops that are now offering take out services have done this beautifully
    • Something helpful, that speaks to those struggling right now, either personally or in business?
    • Can you adjust your price point to be more accessible?  Just watch out for undervaluing yourself, or what you do, with this one

So, the initial tough part of this situation settles, then what?  The economy is taking a battering right now, and it might take a bit of time for it to smooth out – how do businesses manage through tough economic climates?

The Pessimist’s Approach – Cost Cutting Measures

Some will make cuts; they’ll cut deep so they only have to cut once. 

Sometimes this is the answer, it’s absolutely needed in order for a business to survive.  But, what often happens is these businesses, that cut deep into their cost base and reduce employee numbers, then struggle to take advantage of opportunities, because they’ve cut too deep to be efficient.

The Optimists Approach – Forward, Full Steam Ahead

On the flip side of cost cutting you have those businesses that dive in headfirst, ploughing forwards with bullish enthusiasm ambition, spending here, trying to maximise on opportunities there. 

This is a much riskier approach than the pessimist takes.  Sometimes though, the risk pays off and businesses pull out ahead of their competition, despite the economic uncertainty and climate. 

Other times though, this is the downfall of the business.  It’s a fine line, tread it carefully.

The Pragmatist’s Approach – The Juggle

A little bit of the pessimist’s approach, and a little bit of the optimist’s approach – the pragmatist finds a fine line between the two.

How do you do that?

Well firstly, look internally – operational efficiency. 

We should all be looking to be the most efficient in doing what we do anyway, because maximising efficiency maximises profitability.  So, unless you’ve had a black belt in Six Sigma go through how your business operates (yes, that’s actually a thing!), then the likelihood is that your business is not as efficient as it could be.

This will, undoubtedly, involve some cost cuts – but they’ll be in the right places.  And with the smoother running business you’re in a better position moving forwards, so you can take advantage of opportunities that come up, as the optimist would.  You will approach these opportunities in a clearer way too, so you might not be as ambitious as the optimist, but you’ll be more strategic.

And the beauty of where we find ourselves right now, and how that can help with future efficiency measures?  We have some time on our hands.  Business is probably a little quiet, unfortunately, but with things being a bit quieter, you probably find yourself with a little more time on your hands.  So, look into how things can run smoother when business picks back up again. 

Start your trimming of tasks and costs now – your business will be stronger for it in the long run.

That’s if for now…

As this situation, particularly with the measures the government are taking, is quite fluid, I will do another update when there’s some more information to share.

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