Now, four months into lockdown and sales for a number of businesses are still weak. What’s on the proactive owner/manager’s to do list?
There are a number of big decisions to make. Here is a bit of a hit list with the objectives:
- Promoting your business – getting it rapidly back on the rails
- Preserving cash – property and people
- Maintaining resilience – ensuring there is sufficient cash to weather any (inevitable) shocks.
1. Promote Your Business
Get, or bolster, your on-line presence
Faced with a complete closure of client businesses, some specialist suppliers to the hotel and restaurant trade are already selling direct to the public. Websites can cost as little as £30 /month and payment with order means no lengthy delay in getting your cash in. Even if you haven’t traditionally sold into the retail channel, the costs to entry are low and you could find that extra cash really helpful as lockdown eases.
Engage the youngsters
Instagram and Facebook advertising are cheap and effective means of getting your message out to the wider world. Younger members of your workforce see these ads constantly and are skilled at constructing the sort of message that appeals to the under-35s. It’s a growing market and, be honest, do you really know what rocks their boat? With less work needed around the business, use that available in-house creativity.
2. Preserving Your Cash
Speak to the landlord
Economic indicators are all pointing towards recession and the next 12 months is going to see a glut of commercial premises coming on to the market.
With that as a backdrop, how would your landlord react if you closed down? Almost certainly by marketing your premises at a lower rent and with a mouth-watering rent-free period. So why not ask and try to get some of that reduction to help your business stay in business?
We know it’s a really tough time for your landlord; but they get to keep a known tenant with a track record of paying the rent on time, rather than taking a chance on an unknown tenant in tricky trading conditions. If needed, you can sweeten the pill by offering to extend the lease by a couple of years.
Tectona Tip: Be mindful of agents looking to strip out break clauses as part of the negotiation. You could also negotiate to get rid of any stipulation of upwards only rent reviews.
Look around for help with a rates review
Retail and hospitality businesses have automatically benefited from a year’s rates relief. However, if you’re not in either of these sectors you need to look to challenge the valuation and aim to get a rates reduction.
The situation is unclear at the moment but, with a likely depressed commercial property market, rateable values for 2021/22 will probably fall. Starting now will put you in prime position to benefit from a reduced rateable valuation in the next financial year.
The Coronavirus Job Retention Scheme has been a real winner and, it is highly likely that you will have already taken advantage of it. What next?
From 1st July a mix of part-time work and flexible furloughing became possible. Start thinking how your business can adapt to this and plan when and how you are going to discuss it with staff. Employment law still applies and decisions need to be fair and equitable; and the new buzzword – “reasonable”.
Tectona Tip: As an employer, if you are planning to furlough flexibly you need to get written agreement from each member of staff affected
Find out early who are themselves vulnerable, or are looking after vulnerable people, and whether there are persuasive reasons for them to return or not return to work. Don’t leave it until the last minute to discover that your carefully crafted shift pattern isn’t to everyone’s satisfaction.
3. Maintaining Resilience
Bounce Back Loan
This is still a really useful source of quick finance – we’ve seen loans turned round in less than a week from application. Loans are available for up to 25% of turnover, capped at £50k. Interest is covered by the Government for the first twelve months and you have six years in which to repay the loan (interest and repayments do not start until month 13 and interest is at a very competitive 2.5%). The scheme is still open and, with increasing uncertainty over how we exit lockdown and with Brexit looming, it will provide some much-needed cash whilst trade begins to re-establish itself.
CBILS – Coronavirus Business Interruption Loan Scheme
This scheme is the ‘big brother’ to Bounce Back. It is still open and businesses can borrow up to £5m for up to six years. However, as banks are on the hook for 20% of the loan, they will inevitably be keenly focused on you’re ability to repay.
Preparing a budget and cash flow forecast plus a compelling narrative explaining the trading history and commercial strengths together will help satisfy their “affordability” measures.
Your application has to be credible, robust and complete – approaching an experienced partner such as Tectona to pull this together can avoid a number of the pitfalls and dramatically speed up the progress of your application.
Tectona Tip: Once an application is referred back for further information, our experience is that progress can be glacial; a well-constructed first package of documents can be signed off in less than three weeks.
Liquidate old and slow-moving stock
We hesitate to include this approach here as you must first fully understand the implications and dangers of discounting; click here to see our article on discounting.
That said, and with money tight across the board, everyone is looking for bargains. You have a prime opportunity to deep discount old and obsolete stock that hasn’t shifted and get back some of the money that you paid for it. Quick cash and not profit is the motivator here.
Tectona Partnership helps business owners sleep at night by embedding one of our 15 commercially minded CFOs in your management team. Very often, a part time CFO is the most effective solution for smaller businesses.
We make sure you have the necessary management information and strategic insight to make informed decisions. We will tell you (bluntly, if necessary) what you need to know, when you need to know it.