last updated 20/05/2020
Helping Franchisees #8 - Beating the Recession Blues
last updated 20/05/2020
April 2020 - Philip Morrison of Franchise Accountants draws on past experience to offer some practical pointers on navigating through the current uncertainties
It’s been a challenging few weeks, but we’ve all stood together and got through the worst of the lockdown – well done us. Now we have to face a future which looks very different from the one we were expecting at the beginning of 2020, and a recession of unknown size and duration. If you own a small business, there will certainly be some challenges ahead. Here are some tips to get you thinking.
This too will pass
First, it’s important not to be paralysed by fear of the unknown. Pessimism leads to inaction; inaction leads to lost opportunities. Don’t consume a negative diet of media which believes that bad news sells. Look for positives which can be anchor points to pivot your business into new opportunities.
However, hope is not a business strategy. You need to put a business continuity plan in place which covers all aspects from your personal well-being (your mental health and resilience) and your family to business issues such as cashflow (see below). Email the author for a free Continuity Business Plan outline/template.
Communicate honestly and openly with stakeholders, staff, clients and suppliers, and make yourself accountable and open to change. Be prepared to make hard decisions early.
Survival is your primary objective
As a business owner, your focus will be on surviving all the way through from shut-down to full recovery. Here are some of the areas to consider:
Cash is going to be more important than ever in the coming months, both to pay your bills (and yourself) and to ensure you have enough working capital to grow your business as the market expands again. Read more detail about working capital and the importance of cashflow.
Create a cashflow model covering 3, 6, 9 and 12 month periods and update it regularly.
Is there a funding gap?
If you don’t have ready access to the working capital you need, where will it come from? Three options are:
- Introduce shareholder funds;
- Take up or extend your overdraft;
- Take advantage of the Government-backed Loan Guarantee Scheme through your bank or the Small Business Cashflow Loan Scheme (until 12 June).
You can’t expect to do it all by yourself, so be prepared to take advice from others, especially:
- Your accountant – they will know the key elements of business continuity planning and how to apply them in your case. Your accountant can also help with tax planning, smoothing tax to match cashflow;
- Your bank – they can help access additional funds and arrange or re-arrange finance terms to suit your changed situation;
- Your franchise – if you’re part of a franchise, remember you are not alone. Talk to your franchisor and fellow franchisees to share ideas.
When you are planning how to reposition your business, be sure to plan proportionate cost adjustments that align with your overall business continuity plan:
- Don’t over-react – don’t cut what is core to delivering services/products or attracting customers;
- Revise discretionary expenditure;
- Divestment and re-investment may be required.
Look at how you can support each other to survive and thrive:
- Collaborate and negotiate;
- If you operate a bricks & mortar business, look at percentage-based rentals. Can you reduce size of premises and do more online?
- Advertising – reconsider mix and message, and promote service offering to meet current needs;
- Review sponsorships not core to delivering business or generating goodwill in key markets;
Client contact and account management
It’s important to keep close to your customers:
- Find out what their needs are and respond accordingly;
- Offer alternative credit terms and working payment plans;
- Focus on delivery, value and service.
Everyone in your business will have taken a bit of a battering during this time, and there’s some hard work ahead. It’s important to build and rebuild a healthy team culture with everyone:
- Focus on team work and encouraging everyone to contribute and collaborate;
- Ensure you have a high fun quotient at work;
- Find out what your staff enjoyed about working from home and what they missed about coming to work. Can you create more of either?
Finally, it's not just about the numbers - prioritise your own well-being. Pace yourself and don’t burn out. You are in this for the long haul. Ensure you have a balanced diet, exercise regularly and get enough sleep. Spend time with your family, build positive memories and relax.
Remember, the business is there to serve you (and your family), not the other way around.
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