Business owners are having a little bit of a head scratch moment this week. That pesky little COVID-19 seems to have thwarted the best laid plans of the entire globe. Regardless of our personal view business of all types has and will continue to be a little odd for a little while.
In the face of an unprecedented global response, social distancing and self-isolation what does that mean for your business?
Cash flow takes priority for this crisis period. Survival mode kicks in and this is how I would approach that situation. I’ve made no secret of this being a skill of mine over the years when life & business have gone south but I have always had food on the table and a roof over my head.
These are the four categories you are about to sort your expenditure into. I’ll go into the detail of each of these below. Before that it’s worth us drawing some values and boundaries around our decision-making process. At this point go back to why you started in business in the first instance. Look at what your purpose is and be guided by that.
Have a list of the last 3 months expenses to hand, you are going to need to know your numbers to make this count.
Step 1: Stop all unnecessary expenditure TODAY.
If it isn’t crucial to the legal, operational or moral purpose of the business stop it from today.
We all have bloat in the expense’s lists. Posh coffee, client schmoozing, subscriptions to magazines we hardly ever pick up. Memberships to clubs we barely visit. There’s likely a natural drop from events and travel here given the current restrictions too.
Step 2: Substitute for other options
The goal here is to make sensible swaps of expenses.
Maybe you buy premium as a rule but could downgrade temporarily to free up some cash flow. I’m hard pushed to think of an example where a cheaper option isn’t available for anything.
And as the ‘cattle class’ or ‘first class, so I get the lounge before I leave, a meal in the train and wifi so I can work’ argument springs to my head I know how much that sucks. My partner is an accountant. He finds my choice of premium goods questionable at times, especially when I choose first class travel, or £165 haircuts. He is always right.
Where can you drop to a lower cost version of what you have? Remember here the goal is survival so ask is risking the business viability worth the additional spend? Sometimes it legitimately is, buy cheap and buy twice is a thing. But There is also a lot that can be substituted too.
Step 3: Delay the drain
Keep the cash with you for longer.
You may be pushed to make some tough calls over the next few months. Having a little something is better than having nothing. Keeping a healthy bank balance that gives you choices and options is key.
Utility bills, for example, are often generated on a cycle of 3 / 6 / 12 months. We tend to opt to pay them monthly to smooth out the cash flow. That means you might actually be paying a monthly amount that’s is building up credit for your next utility bill. Smart – in normal times. But imagine 4 months from now you have £3000 credit on your electricity account and need £2000 for a creditor that is winding your company up. Cash in the bank gives you options.
Look at all areas where you are generating monthly expense that is building / saving and swap that into sending it to an instant access savings account instead. You can still put that money aside to pay the bill when it’s due (or negotiate terms when that happens) But keep control of your options for as long as you can.
In really severe cases you will be surprise at what becomes ‘non-priority’. For personal support you can view Step Change guidance on that here. For companies you can see their business support here. Step Change are a debt management charity operating in the UK , there may be someone local to you that does a similar thing.
Step 4: Cover
There will always be a survival budget needed, all business needs some level of cash.
By the time you’ve gone through the first 3 steps that’s a much smaller figure than you started with. Likely though it will also be the most important, premises, people, product etc.
Now it’s time to be creative. What options do you have when your customers are all social distancing or self-isolating? Cash in now – service delivery later. Morally you need to be confident you’ll deliver, and people won’t end up out of pocket before you do this though! I’ve sparked some ideas below and I’d love to hear your ideas too.
Season tickets: Not just for the football clubs but for any venue where people would normally attend regularly. How frequently do your customers normally turn up? What is their average spend? Then create an annual season ticket price based on what that looks like for a year. Football clubs are selling season tickets now for games that starting August. If you’re a cinema or theatre and people normally on average 3 times a year and spend £30 per performance, then a season ticket that costs £120 gives you your annual customer spend up front plus a bit extra! Profitable and cash flow creating.
VIP Club: Time for the premium extra offers for regular customers. Exclusive offers like behind the scenes visits, meet the (team / cast / crew) or early seat reservation or priority booking before general sale for events. Take a look at Amazon Prime if you need some inspiration on this. Not only will you create a better customer experience you can also scale this without the need for social contact right now.
Deposits: Holidays, business events, functions there are loads of examples of deposit taking business. You can still take these booking even if you’re an event photographer, cake delivery service, venue. It probably won’t be enough to cover the delivery of the service, but it should help towards your fixed costs now and the full payment should be enough to cover your delivery.
Pre-Launch Offers: You’re an in-person business, training provider, gym, accountant etc and you’ve realised that maybe you should have built that course you were thinking about 3 months ago. You know it’s going to take a little while to get live (3-4 weeks is realistic). Sell it NOW. Pre-launch offers are essentially saying, you’ll be the first to get access at a lower rate or with more 1:1 support for the first 100 people to join or if you join before XX date.
Change the Delivery method: Normally people come to you for the ‘thing’. So how can you either take it to them or deliver it in another creative way? I’ve visions of drones flying around the Tate Modern with a live video feed to a person in Newcastle. Can you deliver a yoga class via video on your membership platform or social media? Can your kitchen switch to meals to be delivered or collected like our local pub did. Are you a local band that plays in pubs, can you put on mini-concerts and stream online? Could the local pub quiz be run in another way (think The Chase app or those riddle sheets we used to bring home from school)
Completely new: life changed pretty dramatically over the last two weeks, so people have new needs now that means there is opportunity to serve your customers in a completely new way. It would not be a bad thing to call customers (especially if they fall into a vulnerable group) and ask what you can do to help them and have a chat about new things they might want in their life. I genuinely mean do help if you can, this is not a pitch in disguise but an opportunity to do good in the world and hopefully get inspired for new ideas. Doggy day care centres will see a drop in demand, but those same dogs might now need walking. Childrens play areas might begin to look like ghost towns but children still need entertainment.
Something else? what else can you think of that would help your business or another industry completely. How are your needs changing and what do you need? Let me know.