We could still be weeks, maybe even months away from Showrooms across the country being able to reopen. If you’re sitting on your hands just awaiting this to happen, you’re probably making a mistake.
The retail landscape will have changed immeasurably by the time the doors reopen. Consumer confidence has taken a battering, many people will have seen a serious degradation in their finances, and many will be uncomfortable with the thought of having installers in their homes. Your suppliers will have had a torrid time too, and it will take some time for their normal levels of service to resume, you need to be aware of this and manage your client’s expectations accordingly.
What you should be doing right now
Last quarter’s VAT has been deferred, not cancelled, unless it is deferred again, you’ll need to plan to make payment, or plan to not make payment through a facility called ‘Time to pay.’ If you approach HMRC in advance and have a structured written plan, your application is likely to be approved. If your payment is for a substantial amount (£100k+) it may be an idea to appoint advisors to assist your application.
If you’re concerned about cash, look for a loan now under the British Business Bank’s scheme that requires no personal guarantees. The initial period is interest free- so if you end up not needing the money, you can repay it. Remember, your business plan must high quality with detailed and accurate financial information. Your accountant will be a good place to start for advice on this. A crucial caveat is your business must have been profitable before the outbreak.
Keep talking to your suppliers- nobody likes dealing with an Ostrich. If you owe suppliers money, they are unlikely to be surprised if you are struggling to pay them, so talk to them and keep talking to them.
What comes next?
We know Governments here and abroad are trying to work out how we can come out of lockdown safely, with mass testing and ‘immunity passports’ being spoken of, along with contact tracing applications. None of these measures are commensurate with ‘business as usual’ but instead speak to a period of perhaps a year or more wherein individuals, regions, and even companies may be put back into isolation on a dynamic, data-led basis. What does this mean for your business? The only certainty is continued uncertainty and disruption.
The bottom line is you must try to ensure your business is as resilient and responsive as it can be
What does that actually mean in practice? Here are a few examples.
- Try to renegotiate your lease to have at least an element of it that is turnover related.
- When employees that have been furloughed return, you may need to renegotiate terms and conditions. Think about this carefully in advance. Perhaps contracts can be made part time, pro rata for example?
- You or a key member of your management team could fall ill. Look at getting ‘key man insurance’ to protect your business should you be unfortunate to have this happen.
- Manage cashflow carefully. Really, really carefully. Go line-by-line through your p&l and make sure all of your spend is as efficient as it can be.
- Think about contingent sources of capital should you need it. Prepare a business plan that you update month-by-month that you can quickly share with potential lenders or investors.
- Digitise your sales and marketing activities to the maximum degree you can. Make sure your website is top class, that you offer virtual appointments, can share designs over a virtual appointment, that your digital brochures are up-to-date and well-designed etc.
- Make sure you have visibility of the performance of your ad spend. If you can’t see exactly how much money it is costing to generate a lead, and from channel/ campaign etc… Fix it. If you can’t measure it, you can’t manage it.
- Be flexible with clients; offer to store deliveries at your cost should they need to self-isolate, be prepared to post samples to people who can’t come to the showroom, perhaps let people cancel the installation element of a contract so they can self-install etc.
- Prepare your showroom for reopening; make sure it is spotlessly clean, that hand sanitizer is available, and given the schools may still be closed for some time, try to put in a games console or a couple of ipads to keep kids busy.
- Build a network of people in a similar position you can bounce ideas off and learn from. One good idea could make a big difference, and one good laugh could brighten your day.
If you are doing well, remember Warren Buffett’s famous quote…
‘Be fearful when others are greedy, and greedy when others are fearful’. If you have cash and your business is stable or growing, there will be opportunities. If your business has a strong cash position you might be able to negotiate a discount to close out a credit balance. One business we advised saved £10,000 last week doing exactly.
If you are near the end of your lease or considering additional premises, landlords are not in a strong position- so negotiate hard. Don’t be afraid of submitting a low-ball offer and letting them know they can always come back to you- the worst they can say is no.
Your suppliers will know who is struggling, and there might be opportunities to buy a holding in other businesses and play a part in their turnaround. If you can afford capex investment there are deals to be had from the likes of Salesforce for CRM and we at Lead Wolf have suspended set up fees.
Keep your eye on the likes of John Pye Auctions and the London Gazette; high value equipment from computers to display appliances to power tools will be appearing in bankruptcy auctions.
If you are seriously worried your business will fail
This a terrible situation to be and unfortunately one too many SME owners are going to find themselves in over the coming months. Firstly, wrongful trading legislation has temporarily been relaxed, so you have a little time to think and plan. Talk to your accountant or ideally an Insolvency Practitioner; there are options- from a Company Voluntary Arrangement through to a Prepack Administration, it might be one of these is right for you. Finally, and most importantly, commit to paper the maximum amount of time and money you are prepared to commit to your business before you declare the battle lost. important. Any business closure is a tragedy, but far too often that commercial tragedy is followed by a personal one with families losing their homes, retirements ruined etc. As horrendous as it may be to contemplate, don’t let your heart rule your head. Do everything you can to protect your business, but if your reach the point where you are considering investing money you cannot afford, don’t give in to the temptation to throw good money after bad.
In conclusion
People will always want to upgrade their bathroom, fit a kitchen in a new extension or redesign their bedroom. There will always be demand for what you do, so manage cash prudently, make every pound you spend work for the money, and you can ride out the storm. On the other side there could well be a release of pent up demand and perhaps a less competitive environment.