Last updated: 10 Aug 2022 02:50 Posted in: Partners
UK businesses are under assault from every side. Global supply shortages, inflation, staff shortages, hugely increased energy costs, Brexit, governmental uncertainty and the crisis in Ukraine have created a perfect storm - and many are being blown off course.
PayPal’s latest annual ‘Business of Change’ report found that 78% of small firms cite the cost-of-living crisis is the biggest threat to their survival in the coming year. Two-thirds of Britain’s small business owners told PayPal that the past two years have been the most challenging since they started their venture – and 47% fear the next 12 months could prove even more difficult.
Carl Jepson, AIA Director of Sales & Marketing added “One of our biggest roles in a time of crisis is to guide clients through challenging financial circumstances.
“For those with a chance of survival, it’s about taking stock of their current position and identifying the possible futures.”
These are the steps that AIA strategic partner, FA Simms take a business through when they hope to rescue it. As the closest person to your clients’ financial position, you might already be doing some - or all - of this with them.
The last two+ years have taken their toll on 1000s of business owners. Some might have viable businesses but not the impetus to continue. So the first thing to determine is what their aspirations are for the future.
Do they want to evolve their current business?
Do they want to look at changing their business?
Do they want to extract any profits and walk away?
Or even, are they in an insolvent position and need a formal process to save their business?
If your client is solvent and has made the decision to stay in business, it’s important to define where they want to end up. Or put another way, if where they are now is Point A, what’s their ideal Point B? To get to B, they might have to make small adjustments, or big changes.
This is the time to take stock of their business and look at every aspect - from brand to employee costs and premises. Try to sort these into categories of essential obligations, contractual obligations and optional obligations.
Once you know how vital each aspect of your client’s business is to its running, it’s important to look at whether, in Point B, this will be the same or different. Or whether it even has a place at all. Premises is a good example of this. It might be essential now but do they need it for the future?
It’s important that you help your client to see things objectively. Think about the cost, whether a contract can be broken, and the value of the part of the business you’re examining. It might be best for the business that any owned premises, to continue the example, are used in another way to create income. Or that your client downsizes or employs a work-from-home model.
Your client will need to understand that their ideal Point B might have to change, depending on how the cash-flow forecast looks in different scenarios. It might be that their dream Point B is not possible now but Point C, D or E is the best option. Again, you will most likely need to help them be objective about this and remove sentimentality from the decision of which direction is best.
By this stage, your client should have a clear view of what needs to be done to make the changes in their business. These changes might be able to happen quickly. They might take some time and careful guidance from you.
I’m sure this is a role you’ve been used to playing since the beginning of the covid crisis. For them to have the best chance of success, continue to be by their side to give sound advice…and probably some gentle encouragement to overcome any challenges.
Further Advice
Richard Simms is a licensed insolvency practitioner, chartered accountant and MD of FASimms. If you think your client could benefit from insolvency or business rescue advice, call 01455 555444 or email enquiries@fasimms.com for more information about how FASimms can help.
