Businesses faced a tough recession as coronavirus (COVID-19) continued to have an impact and businesses deal with lockdowns across the UK.
And while the UK is now out of recession, the uncertainty around coronavirus means it could slide into one again sooner rather than later.
So, as a business owner, how can you navigate the choppy waters of a recession on a small budget?
According to a recent study by Mckinsey & Co the effect of coronavirus on small business performance across the UK “is immense”.
Of those small businesses surveyed, 80% reported stable or growing revenue for the year before the coronavirus pandemic.
Now, 80% of small businesses say their revenues are falling. Things look tough for business as the UK navigates a recession.
The coronavirus pandemic and the nationwide lockdown measures that occurred in early March 2020 not only crippled numerous businesses but pushed the UK economy officially into recession.
Between the months of April and June 2020, the UK economy shrank by 20.4% compared with the first three months of the year.
The outlook for the rest of 2020 and 2021 doesn’t look rosy either. The Institute of Fiscal Studies (IFS) predicts borrowing this year will hit levels “not seen in peacetime” due to the coronavirus pandemic.
But this doesn’t mean your business has to give up, far from it.
In this article, we look at how a business has adapted to the challenging times brought about by coronavirus and suggest a series of tips to help navigate your small business through a recession.
How a heating and plumbing business adapted due to coronavirus
Marc Smith, managing director of The GHS Group, a heating and plumbing company based in Hampshire, has adapted his business in light of coronavirus.
He says: “We suffered a great deal when lockdown started. We were doing really well and were on actually on track to double the size of the business.
“And then lockdown happened.
“We worked predominantly with pubs and as a result had a huge £800,000 hole in our business and lost about 90% of our clients mid-March 2020.”
Investing in the business
Smith decided to tackle the coronavirus disruption head-on by investing in the company, the employees and in the local community.
He says: “My priority was protecting the cash reserves I had left, so I used online business community tool BBX, which saved my business during lockdown.”
The first thing Smith did was to employ a funding expert through BBX to help navigate the ‘very confusing landscape’ of grants and loans that were available.
He says: “Like many businesses, I haven’t received any of these government grants as yet, so I’m glad that I went through all the applications when I did, as who knows how long they’ll take.
“For anyone else that’s still trying to make sense of these, I would strongly advise them to get someone in to help.
“I doubt I could have done it without her, and she definitely saved me a huge amount of stress and made sure I got as much support as I could.”
Streamlining the business
“Once all the applications were in process, I turned my attention to streamlining the business and started with installing a new CRM [customer relationship management] via BBX,” says Smith.
“This is something I’d been meaning to do for years but could never find the time.
“Usually we have so many jobs on the go that introducing something like a new CRM would have been very disruptive, but with weeks without work, this task suddenly became much easier to do.
“The new CRM will streamline the business and make the logistics and admin side of things run much more smoothly when we’re back in business.”
Offering new services
“For the community, the first thing we did was offer a free telephone service for fixing boilers, where our engineers were on hand to talk through people’s boiler issues to try and fix them over the phone,” says Smith.
“The second thing we worked on was the GHS Trust.
“We set this trust up when one of our engineers met a vulnerable person that couldn’t afford to have their boiler fixed. The engineer asked us if he could use his spare time to fix it and of course we agreed, and so the GHS Trust was born.
“During lockdown, the GHS Trust is working hard with our engineers donating their time and GHS donating parts.
Supporting staff and upskilling them
“For the staff, I really wanted to support them as much as possible while they were furloughed,” says Smith. “I know a lot of my engineers have families, so I used an incentive scheme on BBX to get them all a card that gave them discounts on their grocery shops.
“I also wanted to use this downtime to upskill my engineers, so I’ve been looking into all sorts of training via BBX from health and safety, to asbestos training.
“If I can give something back and help them keep busy, I hope to make this difficult time a bit easier for them.
“None of us really know when this is going to end, or how it will affect families and businesses, but for me, they are one and the same.
“My team are my family, and I really wanted to do everything I could for them, and I wanted them to feel as valued and supported as possible.”
How your business can use a small budget to get through a recession
When times are challenging, saving money and spending in the right way are two things that will help to protect your business and keep things moving. Below are six tips to consider.
1. Make cost savings on equipment
It’s worth identifying cost savings that you could implement. One example might be to carry out a stock take of office equipment.
Ask yourself questions such as: “Do I really need several printers or photocopiers or scanners? Can my business manage with just one or two rather than a dozen?”
If you have fewer clients, maybe you don’t need as many filing cabinets to store their documents depending on the type of business you have.
Obviously, if you’re running an accountancy firm, for example, you might have to store your clients’ documents because of regulatory or compliance demands.
But why not recycle or resell some of the office equipment you don’t use?
You might not need as many phone handsets as your sales staff are now working from home.
Meanwhile, you can communicate through free video conferencing software, such as Microsoft Teams, so it may be worth cancelling expensive mobile phone contracts or switching to pay-as-you-go deals.
It’s all about identifying simple cost savings to improve the cash flow of your business.
2. Check whether your business is eligible for government financial support
Since the start of the coronavirus pandemic, the government has unveiled a series of initiatives to provide businesses with financial support through these difficult times.
This covers the likes of the Job Retention Scheme, Bounce Back Loan Scheme and the Coronavirus Business Interruption Loan Scheme.
In fact, the Job Retention Scheme, which was supposed to close at the end of October 2020 has been extended. It will now conclude at the end of March 2021.
This extension to the furlough scheme means your business will have access to support in light of lockdown measures being imposed by the government.
If you’re planning to take advantage of the government’s furlough scheme – in which the government pays 80% of a furloughed employee’s salary, up to a maximum of £2,500 per month – it helps to know about the latest changes to this scheme and others.
Laura Kearsley, partner and solicitor in Nelsons’ employment law team, says it’s important to keep up to date with the latest government financial support available to your business and your employees.
3. Effectively track your finances
It’s important to have the right accounting software to do things like manage stock levels, so your business isn’t spending money on items that aren’t selling well, and chase on late invoices so money is still coming in.
Cash flow is very important when running a tight ship.
Being clear on how much money is coming into the business and going out is vital – use your software to help you stay on track.
4. Consider making remote working a permanent fixture
At the moment, in light of current lockdown restrictions, the government has said people should work from home where possible.
If your business is office-based, your employees will be working remotely at the moment.
But when lockdown restrictions are lifted, rather than heading back to the office, it might be an idea to continue with remote working.
Overheads such as office space, especially in city centres, can be expensive.
So, forgoing this and moving to a permanent business model where your employees are no longer working from an office but are based remotely could help to cut costs.
Also, by opting for this way of working, you could save money on the likes of season ticket loans, fuel costs and taxis.
5. Improve digital skills
Tightening your budget doesn’t mean you have to miss out on learning new skills for your business.
There are many free online courses to help, covering key areas of IT, business planning, financial management and digital marketing.
A simple fix when trying to communicate with your employees, which doesn’t cost anything, would be used videoconferencing software such as Skype and Microsoft Teams. Communication can happen via mobile, tablet or desktop.
The Federation of Small Businesses (FSB) has teamed up with the government and social change charity the Good Things Foundation to create website Make It Click to help small businesses boost their IT skills.
You can use it to learn the basics of social media and how to use spreadsheets. There are also plenty of online resources and toolkits to use.
A recent poll of more than 500 UK small firms and sole traders by Make It Click found that 47% have suffered a significant loss of earnings as a result of the coronavirus pandemic.
Furthermore, to help keep their businesses competitive, 66% of business owners agree they will need to continually update their online/IT skills, yet almost a third (32%) say they would not know where to go to do this.
6. Rethink your marketing strategies
Rather than cut back on your marketing or advertising spend, try to rethink your marketing or advertising strategies.
Now more than ever, you’ll want to attract new clients and customers to keep your business afloat.
Pre-coronavirus, many businesses would hold face-to-face business to business (B2B) conferences or go to industry events.
But with this becoming increasingly harder due to lockdown restrictions, why not switch to online events? Try holding online conferences and webinars or create podcasts to attract potential clients.
If you are an online publisher of books, for instance, why not create a blog tour to publicise a newly launched book?
In relation to your budget in general for different areas of your business, see where you could be more efficient.
You might not want to spend as much on branding now, but instead more on training your sales staff in essential skills.
While the tips covered in this article are relevant for getting through a recession, they are also applicable when things are more positive.
Spending in the right way and making sure you’re on top of your cash flow are important things to consider and to be on top of when running your business.