10 time-critical tasks to do to survive the headwinds of tough trading conditions
The Bank of England has predicted a 1% contraction in the economy between Oct and November. It has also predicted that the UK’s GDP output will be lower in 2023 than 2022. What this means is that whilst the UK is not technically in a recession, we are going to have very difficult trading conditions for the next 12+ months.
With everything going on in the media right now, it’s very easy to get distracted or scared. However, your business depends on doing the right thing and staying focused. With the right preparation you and your business can protect yourself against the negative things happening and also take advantage of the inevitable opportunities that will come your way.
How do you take the right kind of action?
The key tasks to do now:
- Make quick decisions – the most important thing you have to do at the moment is to make decisions quickly. When you’re decisive, you can then take action quickly. Business owners who do this, who don’t get bogged down with analysis paralysis, are the ones that will come out of this the strongest.
- Look to fix prices in sterling – the markets reacted very badly to the mini-budget. So much so the pound nearly became at parity with the US dollar. By the end of the week sterling had rallied. Whilst not quite to the level it achieved pre-mini-budget, it regained a lot of ground over the week. For many businesses who pay for materials, parts or labour in dollars, this meant at the beginning of the week a potential hike in costs of 30%. If the pound still remains weak against the US dollar, it is worth looking at how to mitigate this.
- Spend some time scenario-planning – do the ‘what if?’ analysis. What would you do if your turnover drops by 20%, 30% or 50%? What would you do if everything stays flat or if everything grows like you originally planned? What is going to happen if your costs – particularly your fuel and finance costs – go up by 10%, 30% or even 50%? It is very likely that interest rates will increase beyond it’s current rate of 2.25% – potentially up to 6%. It’s incredibly valuable to plan for all the potential scenarios that could happen because it takes the emotion out of it. It ensures that in that moment, you know exactly what you’re going to do when you need to do it. Our firm can help you with this scenario planning.
- Cut down on expenses/overheads – to save some cash flow, you need to first know what your minimal viable service is – what is the minimum you need to carry on trading profitably? Then you can look at what overheads you can cut and why. What overheads could you cut now with minimal impact? What can you stop doing or what can you change? What are your nice to haves versus the critical stuff? We recommend looking at your subscriptions first and saving some money there. With rents set to rise due to interest rate rises, it’s time to look at what office space you really need if you need one at all? Maybe a hybrid working model will suit you now. Another area you can look at for any unnecessary costs is your procedures and your staff. How can you increase efficiency and productivity? What could your staff be doing, that they are not doing today, to serve your clients? As well as cutting costs, it’s also valuable to put the money you are saving towards the areas that will grow your business (e.g. business development, marketing, outsourcing etc).
- Communicate more with your staff – if you’re thinking “we’re going to be fine, we don’t need to worry our staff” and you say nothing, this is the worst thing that you can do. Your staff are worried whether their job is safe so they need reassurance. They may be worried that the business/company will go under, so if you’re not saying anything at all, then they are filling that gap for you. They will assume that the situation is much worse than it actually is and they may even start looking elsewhere for a new job. As an employer, it’s your job to close that gap. It’s your duty to over-communicate your strategy to them. They don’t need to know that everything will be fine, they need to know what you’re doing and what they have to do for everything to be fine. Give them the details and help them understand their role.
- Check your contracts – We are entering into a tougher trading conditions and a more litigious time. It’s time to check you have the right contracts in place with key suppliers and your customers/clients. For example, are you covered if a key supplier goes out of business or is unable to supply you for a period of time? Have you got the right protection in place if a client decides to sue you for incorrect advice?
- Look at the terms of your lease – The cost of mortgages is only going to go up over the next 12-24 months. The UK has enjoyed an unprecedented decade of very low borrowing rates with low interest rates. What is happening – rather rapidly – is a market correction to more normal levels of interest rates. Most landlords will pass on their increased mortgage costs to their tenants. Therefore, check your lease or if you are in a serviced office what does your contract state? You may need to factor in a rent review on your commercial properties.
- Get tough on credit control – In a recession cash is king. Many a profitable business in a recession has gone under due to poor cash management. Now is the time to get tough on clients or customers who owe you money.
- Get your numbers up to date – You can’t take the right decision without knowing all the facts. This means getting your bookkeeping up-to-date… and making sure it is up-to-date every single week. In turbulent times stuff can change very quickly. This means you can’t afford to be basing decisions on out of date financial information.
- Offer more value to your clients – last but certainly not least, is offering more value to your clients. This is a key task for every business owner during the recession as your clients are your most important commodity. Their loyalty is invaluable so you need to be thinking about how you can do more for them. How can you help make their lives easier through the recession? This will require creativity and thinking outside the box, but it’s more than worth it.
Use this time to make key changes
The worst thing you can do right now is put your head in the sand and pretend that everything will be alright. Prepare carefully now and your business will sail through the next few years and emerge stronger, leaner and fitter for the journey ahead.
If you would like help with the matters raised in this article please call us on 020 3915 8585 or email us.
Find out more: