Post-lockdown planning key for SMEs striving to survive

16 July 2020: The coronavirus pandemic has fundamentally reshaped the UK’s economic landscape. Small business advice specialist Jon Scopes believes SMEs must react, restructure, and rebound to survive and thrive post-lockdown.

As the UK attempts to tentatively extricate itself from lockdown and what some commentators expect to be the worst economic collapse in 300 years, businesses will need a clear strategy to help them emerge into what will, for many, be a very different landscape. 

And it is the nation’s small businesses – those with a turnover between £2m-£30m – that will be crucial in driving that economic renaissance and helping Britain move forward with renewed focus and resilience. 

Stockport-based chartered accountant Jon Scopes has built a 30-year career as a small business advice specialist. He knows only too well that while they represent a key and often overlooked section of the wider economy, they “just don’t get represented” in the ways bigger players often do.

And despite the various levels of government support available such as furlough schemes, rates holidays and 80% guaranteed loan facilities, he believes irrespective of how quickly the COVID-19 situation improves, “plenty of damage has already been done to SMEs”.

“It’s not just to their balance sheets and their cash,” says Scopes, “but to the stakeholders with whom they must interact to make a profit: their customers, supply chains, employees and their competitors.” 

Help, in the form of expert assistance, over and above financial support, will be key. 

Such help can be split into three core stages, explains Scopes, react, restructure, and rebound.

React

Scopes contends that while companies emerge from the ‘government help’ phase and look to plan their futures in an uncertain world, what they lack is proper preparation. 

“From my point of view as a business adviser, and one that works predominantly with small businesses, a lot of SMEs are not good at strategic planning. Many will find that the world will have changed considerably and the things that they relied on in the past won’t be available,” says Scopes. 

“We are now almost at the end of the initial reaction phase, which has revolved around preserving cash and using the various government schemes to the maximum to secure as much of the business as possible,” he continues, “but it has “also been about negotiating with creditors for as much relief as can be obtained, and equally “looking to support customers as much as possible to retain loyalty and help them to stay in business, too.”. 

Seeking professional advice at this stage is critical, particularly regarding short-term cash management and making the best use of government schemes. For those businesses that have not yet done so, a chat with their advisers could yield some beneficial actions they can still take.

As an example, Scopes points to help being offered by ICAEW Manchester, which is working with the Growth Company to facilitate free consultation for businesses with ICAEW member firms.

Restructure: Scenario planning

The current coronavirus crisis is often dubbed as “unprecedented” with little or no data to predict future outcomes, which is why Scopes underscores that the restructuring stage is so critical as it involves scenario planning. 

Traditionally employed by large corporates, the disciplines and benefits of scenario planning are equally applicable (and beneficial) to small businesses, argues Scopes. 

Simply by imagining different futures and outline planning for those outcomes – good, bad and somewhere in between - will help create tangible action plans for each possibility, which can then be rolled out when it becomes clearer just what that future pathway is shaping up to be. 

Compare and contrast 

Scopes believes that despite comparisons with the 2008/9 recession, the near-future landscape will be “much more akin to early ‘90s, which saw certain sectors such as heavy manufacturing and mining particularly hard hit. This time around it will be sectoral again – but with different casualties, such as hospitality and aerospace”. He envisages a lengthy recession and persistent high levels of unemployment and “a lot of CVAs as businesses shrink”. 

To help guard against the worst of such dystopian outcomes, SMEs should prepare to move into the restructure phase, asking themselves a few key questions.

Key among them should be: 

• Looking at end consumers, who will be buying? Will there be a lot of them or a few? What will they buy and from what sort of outlets?
• Amongst our customers, which businesses will be able to pick up broadly where they left off and which will have greater problems (financially, operationally – eg staffing, etc)
• Will all our competitors still be around (not just big ones, but small ones, too)? And in what shape are they likely to be?

A new segmentation of markets will be critical – seeing customers not categorised by industry, geography or what they buy, but by whether they emerge as strugglers, survivors or “escapers”

But it will also be vital to ask

• Will our supply chain be intact? And if not completely, what areas will be weak or gone? How might continuity of supply be affected? How might prices for materials look compared with now?
• What illness disruption might we face amongst our workforce?

Rebound: Critical success factors 

Scopes contends that by being well prepared, SMEs will be able to recover fairly quickly, particularly when a clearer economic picture emerges towards the year end. 

In the meantime, small businesses should identify from their chosen strategy the set of critical success factors (CSFs) that will impact their ability to recover and prosper, before translating them into a core set of dynamic KPIs that tell it how well the business is doing in achieving them. 

By getting to grips with KPIs such as forward cash, customer retention, working capital management and supply chain resilience, there is nothing to stop a well-prepared SME from not just surviving the current economic and societal afflictions, but thriving. 

Jon Scopes is an independent consultant who has spent the last 30 years working in and around board level advising on business strategy. He has done it from the other side too, taking over as FD of an AIM-listed company in the depths of the last recession and helping to guide it to a successful sale four years later. He is currently Deputy President of ICAEW Manchester.