Roy Lauder: Managing the COVID recession
Roy Lauder, director at Kilmarnock-based business management consultancy firm Harrison James Partnership, discusses the steps business owners can take to manage the current COVID-19 recession.
This is a time of great concern for business owners as governments react to the ever-changing situation with COVID-19. As long-established advisors to SMEs throughout Scotland and the rest of the UK, we supported our customers through the great financial recession of 2008, and we are helping them again. This recession, however, looks distinctly different in kind.
First and foremost, all business owners, will be focussed on ensuring the health and wellbeing of themselves, their families, and their teams.
In addition, however, it is essential to take steps to protect the business that feeds these families by aiming to make the best of the current situation and preparing for when this crisis will end: and it will end.
The emerging economic “recession” will need managed, starting now.
Businesses which not only survived, but thrived, following the 2008 major recession, were those who thought and acted ahead of the curve. Remaining positive is critical: why waste a recession, opportunities always arise out of them?
The question is, will this be a long or short recession?
Having closed their economies down for three months, most countries are trying to reopen. Huge sums have been poured in to prop up the UK economy, but this cannot last and schemes such as Furlough will unwind in the autumn.
So, in some ways, the worst is still to come. Increases in unemployment, reduced demand and the COVID-19 precautions are still restricting business activity in many sectors. This will take some time to recover from: earlier predictions suggested that recovery might be in Q3 of 2021 while more pessimistic forecasts suggest mid to late 2022. No one really knows.
As our recovery graph shows, we see this crisis as having three distinct phases. We have just about come to the end of the ‘respond’ phase with many companies now clear what adjustments they have made or need to make.
The next stage is the ‘planning’ phase, and this is essential as the market has not yet recovered enough for most sectors to implement growth plans. Now is the time to plan what your new business will look like. There is no “back to normal” it is onto a new normal.
Then, when the time is right, you are ready to hit the execute button and put your plan into action.
So, what should you do right now?
- Build a growth fund - It is essential to unwind your business costs below revenues to start to develop a small surplus. You will need to invest in new routes to growth and will need a fund to do this when the time is right.
- Get the right capacity number - Assess what the new optimum capacity of your business needs to be. There are optimum operating numbers of personnel for optimum efficiency and profitability. Some companies, stuck with the wrong number and blend of staff, will continue to lose money.
- Revenue cycle – Assess where you are weakest on your cash generation cycle and fix it. See our free survey on www.harrisonjamespartnership.
- Customer service - Stay in touch with your customers. Even though they cannot buy from you right now they will remember you and come back when they get their budgets approved. Talk to us about our Customer Connection survey.
- Innovate your product or service – examine your pricing and packaging to suit current economic conditions and market needs. This will likely, too, open new channels to market.
- Keep talking to your team – retaining good talent is essential for growing businesses. Whilst few will be moving just now, the good ones often leave when things start to pick up if they feel they have been ignored or taken for granted in the hard times.