Now wash your hands

In the midst of the ongoing Covid-19 crisis, we can all be forgiven for thinking that Government advice to protect your business and family can be distilled into those four words. Yet for most environments that is the best first line defence against becoming infected or spreading the virus.

SMEs will be facing some unprecedented challenges over the next few months. As an owner or leader of a business you will need to consider every aspect of “how we do business” in order to make sure that not only your business survives but also your employees are safe.

The Government is publishing much material on how nationally we as a nation are managing the Covid-19 crisis. If you are an SME owner, manager or investor, here are a few factors to consider as you assess your business readiness for Covid-19.

Protecting employees – employers have a duty of care towards their employees. It is your responsibility to provide advice and guidance on safe working practices which includes hygiene. Take a fresh look at your cleaning schedule and start sanitizing everything that has a high touch usage: door handles, handrails, common kitchen, hot desks. Involve your employees in drawing up the policies and they will help you implement them.

Turn off the taps – the life blood of any business is cash. Take a long hard look at your regular and discretionary expenditure. Ask every time is this spend really necessary now? Make sure those who owe you money are paying up on time (not easy when you are the little guy selling stuff to a large corporate).

Manage the bank – make sure you keep your lending partner up to date with the challenges facing your business. A well constructed forward looking monthly report focusing on the key KPIs: sales, orders, cash, debts and profit will help any difficult discussion you may face. Management should be thinking about actions they can take to mitigate shortfalls and pinch points in the short-term cash flow.

Re-evaluate how you do business – can your sales people travel or take meetings with customers? Encourage as much contact as possible via email or video conferencing (hint turn off the camera, no one wants to see your bedroom!). For some businesses this can be a time to completely refresh the sales pitch. When you can no longer deliver it 1-2-1, the presentation pack has to close the deal.

Supply chain disruption – where do your material inputs come from? Do you have a map of where stuff you rely on is made and how it is shipped to you? Large multi-nationals supplying key components may have multiple facilities, but all can be quickly stopped for several weeks with shortage of a key component (supply shortages of specialist electronic components stopped many industries in the aftermath of 2011 Tsunami and flooding in Bangkok). Today some 60% of the world’s passive electronic devices are made in China. These facilities are still coming back online due to the displacement of workers. You will be amazed in the weeks ahead how much product needs these components.

Local supplier disruption – have you considered the financial viability of your local support and maintenance local suppliers? This group is usually under-capitalised and reliant on short term asset finance or bank overdraft facilities. It may not take much of a downturn for the cash coming in to be substantially less than the cash going out (wages, rates, crown debt, insurance, premises rent etc). Whilst lenders will approach such challenges sensitively, covenants may be breeched and what might have been considered a well-managed “sound” local supplier may be tipped into administration. (The cash flow strain of paying sick pay is somewhat alleviated by Budget announcement to refund 14 days sick pay to SMEs employing <250 people).

Labour shortage – the UK Government has announced that anyone with a cold or cough or flu like symptom should self-isolate for a minimum of 7 days. The ill party automatically qualifies for sick pay without the normal procedural requirement of certification from a Doctor. Schools may also close for an extended period.  Clearly such events will impact business through absence of employees who are “ill” and employees who have to take time off to care for children no longer able to attend school or to care for other family members. Can you run your business with >25% of your employees off sick? Home working is an option but that depends on context – good broadband, a home workspace, an IT device compatible with your systems and the nature of your business.  

Customer volume disruption – what about your customers? If you are a retail business can you survive if people just stop going out? Can you pivot your face to face business to an online business? And if you are in a supply chain, whatever tier level, you will be at risk of the OEM at the top abruptly halting production through shortages of parts or people. Your future may well depend on how long the stop or period of reduced working lasts. Global car OEMs faced plant disruptions of 6 – 12 weeks some two months after the 2011 Tsunami.  Consider how you “right size” your business for a prolonged period of reduced demand. Remember you will need to retain key skillsets for when “normality” returns.

Beware scammers and snake oil salesmen – when people come under work pressure, and this period will be extremely challenging, they generally think less clearly. Scammers will take advantage of your vulnerability. Make sure all your employees think twice about every email requesting payments or offering to help. Remind everyone of the cyber security basics.

Keep your eyes open – downturns ironically can be good times to pick up business as competitors get into difficulties, perhaps fall into administration or become acquisition targets. Buying a competitor might give you the scale to survive and best position your business for an upturn when normality returns.