Jim Forshaw, a business coach who also operates two small businesses, has put pen to paper to share his lockdown experience to date and offers other businesses some helpful tips on how to come out the other end.
We have all experienced a whole range of emotions over the past three months or so, maybe more so if you are self-employed or running your own business.
But have we learned anything from this experience?
Most of what follows isn’t rocket science but rather is based on fairly basic good practices, to be adopted in good times and bad. However, in my role as a business consultant, it never ceases to amaze me how little some owners know about their own business, including what is their break even, what are their margins and how long are clients taking to pay them?
These are all critical questions with answers that should be readily available to you from within the business, if you have systems in place to access the information.
The moment of change
Personally, the reality of the situation regarding COVID-19 hit home specifically in a three hour period between 15.30 and 18.30 on Monday March 23, 2020, when 80% of both my small businesses’ future turnover disappeared! By the time I’d finished breakfast the following morning, I realised I had to take control of the situation.
I began by looking at all the personal and business outgoings. What could I cancel? What could I defer to give me some breathing space? I had some success but I still had very serious concerns, particularly as we had no idea at the time, how long this situation was going to last.
Then information started coming out about state assistance in the form of grants, furlough arrangements (be honest, who had even heard of the word ‘furlough’ before this year?) VAT and rates payment deferrals. Next came CBILS and Bounce Back Loans, and more recently the discretionary Grants.
This is all aimed at keeping the economy afloat through SME’s, so I made sure I kept myself abreast of the various avenues of support (information was coming out daily at the time), and was not only able to obtain funding for myself, but also for a number of clients. I have assisted in accessing nearly £350k in grants and loans to date for clients.
The question is, how many SME’s had the knowledge or ability to ensure they accessed what was available and quickly? Well if you did keep whatever accounts system you use up to date and pulling in the relevant information, then it shouldn’t have been too arduous.
But what if you view that aspect of your business as some form of ‘witchcraft’ which is left to the annual one-hour meeting with your accountant to complete your tax return, and is your only financial understanding of your business?
If that description fits, I can assure you that you are not alone, but please read on!
What you can learn from this current experience
If you can take something away from this horrendous experience, maybe it is the value of keeping your financial records up to date. Use your financial information to build a leaner, more robust business and you will have a far better chance of surviving even a global pandemic and the economic aftermath that we are about to face.
Here are some simple principles to adopt:
- Don’t judge your business performance solely on what your bank balance looks like:
But do log on to your bank regularly to make sure you know what is going in and out – if possible daily.
- Don’t just accept invoices from suppliers, check them:
Is the unit cost of the material or service correct? Are the quantities correct? Does it match the delivery note and your purchase order (please don’t tell me you don’t have a PO system)?
- Have monthly management accounts prepared and review them:
Including margins, trends, comparison to budget (obviously you have a budget, right?).
- When cash is tight and you have a problem making payments take immediate action:
Don’t wait for the debt to grow and incur additional costs, contact your supplier in advance and negotiate an extension. You may get a refusal, but you will stand a far better chance of success if you approach your creditors early. You may be surprised how much goodwill a simple phone call can generate.
- Keep in touch with your debtors:
Simple reminders in advance of an invoice falling due can push you to the top of the pile when they are preparing their own payment runs.
The importance of communication
Hopefully, what you can see from this is communication is key – both internally within your own organisation and with suppliers, clients, business partners and key stakeholders.
Possibly your market will have changed dramatically post-lockdown so can you adapt to this change – is your business model able to diversify? Now more than ever business owners are being forced to think outside the box and review all aspects of what they do. Don’t just continue with a system or practice because ‘that’s how we’ve always done it’.
Are you speaking to other businesses? Networking has always been seen as a lead generation exercise, but it can be a great source of information – sharing experiences with others in a similar situation very often throws up solutions that may not have otherwise become apparent. Many networking events have adapted to being online during the lockdown. Also, contact the business support services at your local council – they are there to help, and it’s free.
As I stated earlier, none of this advice is earth shattering, but by following some fairly basic practices you could save yourself a lot of pain and save your business at the same time. The information for you to put these systems in place is already there within your business, so use it.
Good luck and see you on the other side!
Jim Forshaw is a director of HJL Business Services Ltd and JA Flooring Contractors Ltd.
He is also a business coach for the Boost Bespoke Programme which is designed to support ambitious Lancashire businesses with the potential and determination to achieve significant sustainable business growth.