One of the most commonly heard expressions at the moment is “it’s a strange world in which we live”. It certainly is, and so it is more important than ever to plan effectively. Here Andrew Moorby, Managing Partner of MHA Tait Walker and Head of the Teesside office has some personal planning tips for business owners.
For business the changes have been monumental, rapid and totally unexpected. The Government’s reaction to the problem has certainly helped with measures such as staff furloughing, tax deferrals, and the guaranteed loans – but these will have a limited life.
We are already seeing HMRC taking a much stricter stance on tax deferral requests. We now find ourselves trying to cope with getting back to work where we don’t know what the “new norm” will look like. Most analysts are predicting a V-shaped recovery.
This means that the issues will be significant but relatively short-lived. Clearly there will be some sectors where the recovery shape will differ or where the impacts are for a much longer period, but the predictions, for most us, are that we should plan for this V-shaped recovery.
If we assume that this is correct, what should we be doing or not now doing? The following are some issues to consider as part of your planning;
Cash is undoubtedly King.
Ensure you maintain forecasts showing what you need to survive, but also what you will need to take advantage of any upturn. Rapid growth will require significant working capital.
Remember to speak to your funders early so that you have the cash when it is needed. Make sure that any repayment plans, including deferred taxes, give you the headroom to expand. You should also make sure that you truly understand the nature of the current problems.
The downturn has been so abrupt that we have limited data to truly assess what is working and what isn’t. Many businesses are now coping with home working and flexible hours for the first time. What are the true impacts of this, how can it be made better, is it always the best solution? Take time to truly understand the data, don’t simply go with your gut reaction, and plan accordingly.
The only thing we can be certain about at present is that things are going to change.
That’s why it’s important to ensure that you build an agile business that can deal with change and benefit from it. In particular, view your technology base to ensure it is fit for your future plans.
The redundancy word is inevitably rearing its ugly head as we approach the end of the furlough scheme. The obvious answer to many is to cut staff and therefore reduce headcount and cost. This may be the right answer for some, but don’t simply take the easy options.
Whilst on the face of it letting staff with less than two years’ service is the easy option, it is important to consider what the business really needs. Ensure that you retain those staff who can best help the business move forward and take advantage of the upturn. These may not be the people who have been with you the longest.
Consider alternative options. If you want to keep your entire team together but need to reduce costs, will the team agree to a temporary reduction in their salaries rather than having to make people redundant? That way your team is there and ready when the upturn comes.
In the last recession many firms laid off their trainees/apprentices or stopped taking on new ones. When the recession started to ease, however, they had insufficient experienced junior staff to take advantage of this. As stated above if, as expected, this is V-shaped recovery you may need those experienced junior staff relatively soon.
For several years now employers have highlighted, despite the stresses and strains placed on the economy from issues such as Brexit, that the key concern was their inability to recruit and retain sufficient quality staff to take their business forward. Again, take care that you don’t let good staff leave now only to find yourself short of quality people in the near future. Recruiting new staff can be a lot more expensive than retaining the good ones you already have.
Non income generating areas of a business may seem like easy targets. Areas such as marketing and HR play an essential role for successful businesses, particular those that want to grow, win new customers and look after their team.
Our staff are our key asset
They will be feeling uncertain and vulnerable, so no matter what you have to do make sure you communicate regularly and effectively. Now is the time to truly assess our future needs and to make some difficult decisions. The best management will balance future needs with current problems rather than simply taking the easy option.