As the UK Government continues to tackle coronavirus, business owners across the UK are faced with assessing how the pandemic may affect their staff, customers, suppliers and any other key stakeholders. But with so much information being published and new legislation being passed, many business owners are left feeling overwhelmed and unsure of what steps they need to take.
Joe Hinton, Managing Director of UK Business Mentoring Group, has put together a series of prompts to help business owners prepare six key areas of their business during the pandemic:
In order to protect your staff, consider the following:
- Are you taking enough steps to ensure remote working staff are feeling supported both in terms of their roles and also in terms of mental health?
- How will staff sickness/self-isolation affect the smooth running of the business?
- Is there a contingency to keep trading with fewer staff or can you bring in temporary staff?
- If you have to reduce working hours etc, what is in your staff contracts that covers this?
- If you are forced to close due to the government lockdown, where do you stand in terms of paying staff during closure?
Many of these answers will be directly impacted by government regulations and support packages available to small businesses, so be sure to regularly check in on what is available to you.
- How robust is your supply chain for your goods and services?
- Are there likely to be supply delays? If so, how much stock do you hold? How long can you trade without new stock?
- Are there alternative suppliers?
- Are suppliers increasing prices due to the crisis?
- Do you import? If so what are the implications of late/no deliveries for several months?
- Are you and your staff reassuring customers that you are doing all you can to deliver as normal?
- How is customer behaviour affecting you now and likely to over the coming months?
- Will customers be putting spending plans on hold?
- How are you communicating any changes to your customers?
- If you export, what changes can you foresee? Such as delays, restrictions, etc.
- How could you support high risk customers and go the extra mile to support others in the business community?
Is there an additional/alternative service you can offer to clients at this difficult time?
- Clearly all of this is likely to have an effect on business profits. Our advice is to forecast your profit and loss (P&L) for the next three/four months based on best and worst case scenarios so that you have sight of the potential impact.
- When forecasting (above) look at what costs you may be able to reduce.
- Can you reduce your cost of sale at all and therefore increase your gross profit?
- Can any of your regular fixed costs be reduced/put on hold?
- If you have done everything to reduce your costs, calculate your sales breakeven point.
- How much do you need to sell to breakeven? Meaning, make no profit or loss, just cover overheads. There is a simple formula for this – take your fixed costs per month (or per week) and divide that figure by your gross profit margin %. That then gives you the amount of sales required to ‘breakeven’.
- A reminder: Gross Profit Margin % = Gross profit (sales less cost of sales) divided by Sales x 100
This will be the big issue for many businesses. Profit may reduce due to the crisis, but many businesses will run out of cash first.
- Forecast your cash for the next three/four months (note this is different to forecasting your P&L mentioned above, this is to do with the timing of money going in and out of your bank account). You can access a template to help with this here: Cashflow Forecast Template.
- Again, forecast based on worst case scenario. You may not like what it reveals but it is better to know how bad it could be – it gives you time to do something about it.
- If the forecast shows you will need more cash, consider how you could access funding, such as by approaching an alternative finance provider, or by applying for government support.
About the Author
Joe Hinton is Managing Director and Founder of UK Business Mentoring Group. UK Business Mentoring are happy to take calls from businesses of any size and in any industry to discuss their challenges and give them our advice, guidance and recommendations. There is absolutely no obligation to make a purchase, this is purely an offer of a helping hand to business owners facing challenges in unprecedented times.