The Art Of The Possible – As The U.K. Steps Up Corona Restrictions What Can SMEs Do To Prepare?

Is there anything that Britain’s small and medium-sized businesses can do to weather the Covid-19 crisis?  

As things stand, the country is not yet in a state of complete lockdown. The Prime Minister has advised that everyone should avoid bars, restaurants public gatherings – triggering a crisis in the sports, leisure, tourism and hospitality sectors – but most shops are still open. The government has also said that those who can work from home should do so. For the moment at least, economic activity is continuing.

But businesses of all sizes – and in most sectors – are facing a triple whammy in the shape of broken supply chains, falling demand and staff absence. We are already seeing huge corporates – notably British Airways owner IAG – calling for financial assistance, but arguably it’s smaller businesses that are likely to take the biggest hit, if only because many don’t have the resources to weather any sudden decline in revenues, even over a relatively short period. 

Government Support

So what is to be done?  Last week’s Budget offered at some support, with Chancellor (Finance Minister) Rishi Sunak announcing measures that included statutory sick pay for most workers (funded by the Government for up to two weeks), business interruption loans, and the abolition of local taxes for smaller businesses in the hard-pressed retail, leisure and hospitality sectors. Meanwhile, the Bank of England reduced its base rate to 0.25 percent (with other central banks taking similar action). Yesterday, the Government went further with a £20 billion package that included £330 in business loan guarantees, an extension of cuts to business rates, and grants of between £10,000 and £25,000 to help small companies.  

All welcome measures and depending on how quickly the virus spreads over the next few weeks, we are likely to see more government interventions. But in the meantime, what should business owners be doing?   

Financial Planning

Reece Tomlinson is CEO of RWT growth, a turnaround specialist, consultancy and investor with interests in Canada and the Britain. As he sees it, Covid-19 poses a real threat to smaller firms. “It’s a scary situation,” he says. “Many small companies are within one or two months of going out of business.”    

That thought on its own probably doesn’t lead anyone to anything that could be described as a helpful place. But Tomlinson says there are measures that can be taken, starting with a cold, hard look at the worst-case implications.  

Look To The Worst Case

“You begin by doing a detailed cashflow forecast,” he says. “And do different scenarios, including worst-case.”   

Confronting what the “worst-case” might actually mean could take businesses into uncharted, uncomfortable and unprecedented territory, particularly if owners and managers have never weathered a crisis before. “Most businesses don’t plan for anything more than a six percent drop in sales,” says Tomlinson.  Many businesses will face a much bigger contraction. 

So what if the forecasts tell you that you could be in real trouble – that the virus represents an existential threat? 

Taking Out Cost

Tomlinson recommends developing strategies that are focused on the continuance of the business. In practice, he suggests cutting back on discretionary spending, possibly slashing the operating budget by as much as 20 to 30 percent. In addition, he says, it may be necessary to take a view on which suppliers to pay first. Equally, businesses should tighten up their invoicing and try to arrange faster payments.  

There may, of course, be a problem here. If every business is trying to optimize its finances and perhaps also stagger payments to suppliers, then it could be very difficult indeed to arrange, say, faster payment of invoices. Indeed, customers might themselves be seeking slower payment terms. Acknowledging this, Tomlinson recommends that businesses contact customers as quickly as possible to try and arrange better payment schedules – if possible.   

Meanwhile, businesses should be talking to lenders or investors to discuss additional finance when required. Communication with suppliers and staff is also vital. “What you need to have is a solid business continuance plan,” says Tomlinson. 

Arguably, this is where the government measures could help. For businesses prepared to take on debt, the loan guarantees offered under Chancellor, Rishi Sunak’s package should mean that credit is available. Likewise, grants to SMEs and relief on local taxes could be a lifeline. But a lot depends on how quickly this money can be brought on stream. Given that there might be delays in, say, securing credit, now is probably the time to explore options and press ahead with measures to raise money.  

Looking After Staff

Of course, survival is not totally about addressing financial issues, important as they are. Businesses also have a responsibility to keep staff safe and there is, potentially, a real tension between keeping the business running and avoiding situations (such as meetings) where Covid-19 could spread.  

Huel manufactures a nutritionally rich replacement food that can be stored for 12 months. The company expects sales to rise as a result of the crisis, but it is aware that policies and practices must change to protect staff.  

“ Ensuring our staff are informed as much as possible is really important to us and we are educating them on symptoms and how to identify them, “ says spokesperson Sandra Vernuccio.. “We are enforcing strong hygiene practices and being mindful not to come into contact with people from affected areas including visitors to our offices. We may consider making thermometers available so staff and visitors can check their temperature before coming into the office. Those staff who have recently traveled to high-risk zones are also working from home.”  

Remote Working 

Digital freight forwarding company, ZenCargo has stepped up remote working since the onset of the crisis in Asia. As Marketing Director Arav Patel acknowledges, a move away from face-to-face meetings has the potential to change the dynamic of how business is done, so the company has prepared its staff.  

“We actually kicked off this week with a Covid-19 drill and everyone in the office was told at the last minute to work from home for Monday and Tuesday. We wanted to see how everyone responded to the situation and the team’s response has been great,” he says.   

The company has also sought to mitigate psychological issues related to home working. “Working from home is not for everyone, loneliness, in particular, can cause negative effects on mental health. To help teammates cope with this we’ve held remote lunches and catch-ups to make sure the team continues to feel connected wherever they are,” he says.

London-based startup Hopin facilitates virtual events and conferences. As founder and CEO, Johnny Boufarhat explains, the company’s employees are more than accustomed to working remotely from home. Nevertheless, with team members working in virus hit areas that include South Korea and Northern Italy, staff safety is a priority.  “In regards to our team, we’ve advised them to take all precautions. We’ve supplied facemasks, hand sanitizer and followed other recommendations from the WHO. We use our platform to have our all-hands meetings, online tea/coffee times and even online office parties,” he says.

This is an evolving crisis and it remains to be seen how entrepreneurial businesses will cope over several months, particularly if (as seems likely) further powers are employed by government to restrict movement. Nevertheless – in the short term at least – there are measures that can be taken to support staff and shore up finances. In the longer term, even more Government money will surely be required to ensure that once the worst of the crisis is over, most businesses will have survived.  Fingers crossed.