For businesses and the self-employed, the last month or so has been focused on taking steps to manage business in a state of lockdown. For most, the impact has been a significant reduction, if not a total loss of revenue as many have been unable to avail themselves of goods and services. The exception, however, appears to be those that have been able to adapt or offer services or products online.
In these unprecedented times, it is unlikely that many business leaders have experience of dealing with such a situation. Economic downturns, recessions and even the financial crisis, which was more than ten years ago, may help people’s thinking or approach to managing the situation, but we are still aeons away from being able to learn the lessons that the current crisis is teaching us. As such, we have turned to the government for leadership, intervention and support, both in terms of looking after the health and wellbeing of people, but also economic prosperity and individual livelihoods.
The government have, like many of its counterparts from across the globe, introduced measures and financial support to safeguard people’s jobs as well as the businesses and organisations they work for. Schemes such as the Coronavirus Job Retention Scheme (CJRS), the Self Employed Income Support Scheme, the Coronavirus Business Interruption Scheme and others have been rolled out quickly to attempt to meet the shortfalls in business and personal finance the pandemic has created.
The last five weeks have undoubtedly seen most businesses focused on a mix of looking at possible ways of continuing some form of business activity, through getting to grips with various measures of support available to them.
Challenging times for directors
The launch of the claims process for the CJRS and the receipt of payments for furloughed workers will no doubt be more than welcome and appreciated by employers. Certainly, such funding should help to protect jobs and those organisations of furloughed employees.
We are now reaching a stage where we need to consider how businesses might transition from lockdown to a sense of normality, or what some are calling the new norm. It is unlikely we will see a wholesale return to work for the entire working population. It is more likely that we will instead see an easing of the lockdown and a transition based on controlling the risk to avoid further outbreaks or a second wave of the virus.
All indications suggest that some form of distancing measures are likely to be in place for some time until a vaccine or proven treatments are widely available. As such, it will be important for us to understand or consider at what stage and in what form our business may start to come out of lockdown. Based on the experience of other countries, it would seem that there is a trend towards certain businesses being open sooner than others, for example, garden centres and DIY stores.
Regardless of the timescale, we will all have to consider both the short term and longer-term impact in trying to recapture some normality. We will need to consider myriad factors here, including the workforce, finances, supply chains, customers and any remaining restrictions relating to operations imposed around managing COVID-19.
Getting staff back to work
With more than 70% of the UK’s workforce currently furloughed, most employees are likely to have been away from work for a period of time much longer than any typical amount of annual leave would normally allow. As such, they are likely to experience challenges around re-adjusting to work and getting back up to speed as well as perhaps having a need to understand the impact of COVID-19 on the business and its operation.
If an organisation has sought to manage its staffing through a combination of both furlough and reduced working hours, then it may need to consider the perhaps unintended and potentially negative consequence of such an approach in terms of staff morale. This is a situation that can be easily exacerbated if returning employers are phased back as opposed brought back all at once.
Employers will also need to consider the financial impact of employees transferring from furlough rates, back to their full pay. Lockdown and changes in working practices required to deal with the situation may have led to situations where employers find employees roles have changed and therefore could give rise to the need to reskill or change roles, or unfortunately potential job losses as roles become redundant.
This change in circumstances may also trigger feelings of unrest and review among some, meaning while they do return to work, they might also be considering a career change or exploring other avenues.
Financing a reboot, the business going forward
Looking to finance, the ability for businesses to start to get back up to speed will be as much dependent upon its financial viability and working capital situation as when we entered lockdown as it does when it is eventually lifted.
It has been widely reported in the media that businesses have in the region of three months of working capital. Beyond this period, many would start to struggle and face financial vulnerabilities. Undoubtedly, the CJRS grant should have eased this situation but creditors will have had to have been paid along with the usual fixed overheads. For those able to continue to trade there will also have been additional, unexpected costs related to adapting.
Such costs are likely to relate to increased use of technology, such as the required hardware and software to be able to navigate working from home in many cases. Other exceptional and unplanned costs are bound to have been incurred too. Whether on the back of an envelope or using a spreadsheet of financial forecasting models, businesses will need to look at their financial forecasts and scenarios.
Right now, objectives on file are likely to be different from a very different-looking pre-lockdown situation and therefore a fresh approach may be needed.
The focus must now be on driving cash into the business, re-establishing the customer base, improving profitability, developing new and or more efficient ways of doing business, or instigating new working practices based on lockdown working. The danger is that some businesses will perhaps start to reopen based on the ‘factory reset’ model, wrongly assuming that everything will simply start work again as it did previously.
In terms of addressing the need to ensure finances are in place to take the business forward, many will have started this as part of good practice or as part of an application for support via the Coronavirus Business Interruption Loan Scheme.
The real test here is ensuring that the business has sufficient working capital and the most appropriate funding model to sustain a steady return. The great risk for many is that whilst they have managed to stay afloat in the downturn, they don’t have the financial wherewithal or collateral to trade through the other side and maintain profitability.
Re-establishing the supply chain
Businesses which rely on a supply chain either for raw materials or finished goods or services ,there is a real need to ensure that suppliers are going to be able to service demand. As such, contacting suppliers in good time prior to opening up for business is essential. It may be the case that your suppliers have their own challenges, or supply chain issues which may frustrate supply, with the need then to consider alternative provisions or sourcing. As well as the financial aspects, the workforce and supply chains of businesses coming out of lockdown, customers must also be considered.
Reconnecting with your customers
For the many businesses that have not been able to carry on servicing the needs of customers, there will be a real need to consider a plan for re-engaging and informing the wider public that you are open for business once more. Whilst many will have cut marketing activity due to lack of demand and to save costs, consideration will need to be given to rekindling your marketing and creating awareness and demand for your goods and services.
For some, there may be a need to consider whether lockdown has created a change in consumer behaviour or buying patterns. As such, your marketing may need to reflect this with a different strategy or campaign. Certainly, many will have adapted to their needs and sourced essentials and products they have wanted to purchase from other avenues during this time.
Some customers may have been influenced by suppliers’ attitudes to or around dealing with the impact of COVID-19. Certainly, customers and consumers are influenced by how businesses have been operated or behaved during adverse trading periods. COVID-19 is no exception and aspects such as how businesses have treated staff, supported their customers will be under increased scrutiny. Indeed on the other side of the coin, those who have ‘done their bit’ or gone the extra mile during the situation will also be held up as examples of how to conduct business in the future and could well be reaping the rewards.
Looking to the new normal
Much of what has been covered looks at the transition from lockdown to a return to normality. The term normality has been used as opposed to the norm because it is widely claimed that the impact of COVID-19 is unlikely to lead to a return to the world as we knew it. COVID-19 certainly has been unprecedented in terms of its impact on the whole world.
It has and will continue to shape all our thinking especially around the way we live our lives and what is important to us. As a consequence businesses will need to consider the longer-term impact whether it is actually around there very existence and role, through to how they operate and conduct themselves.
The pandemic and lockdown have in many cases accelerated a number of emerging trends, including the use and adoption of digital technology, remote working, employees’ desire for better work like balances and changing attitudes to more traditional and increasing less conventional work practices and business models.
This is in addition to a growing appreciation and awareness of the impact of how we live our lives and the impact we have on the world. Those businesses and employers that recognise this and seize the opportunity to change and adapt no doubt will benefit greater than those who simply continue what they have always done. This runs the risk of becoming further and further behind the curve, which ultimately is something none of us wants to see.
— James Pinchbeck is the Marketing Partner at Streets Chartered Accountants
James Pinchbeck is Partner at Streets Chartered Accountants, a top 40 UK accountancy practice. James, as a specialist in marketing professional services, is responsible for the development and implementation of the firm's strategic marketing as well as its engagement in the community it which it works and serves. His role allows him to capitalise on his broad interest in the national and local economy as well as his passion for enterprise. As part of his wider interest in enterprise, marketing and education, James is a board member of NBV – the East Midlands Enterprise Agency, an FE College Governor and a board member of the University of Lincoln’s Business School. He is also an Institute of Director’s past Branch Chairman.