As nations of entrepreneurs SMEs account for 60% of the UK and 70.1% of the Irish Labour market and around 50% of turnover of both countries. The response of SMEs to the Covid crisis will clearly have a huge impact on the shape of both economies and future skills requirements. Of course, neither country is the first in the world to navigate recovery.
Across the world, countries are starting to open up their doors, albeit slowly. The Czechs can now have a beer, Spaniards can visit museums, Italians can go for a swim, the Greek Islands are open and Polish children can go to school. As we each seek to find a sense of normal in a strange situation, the rush to get back to business is understandable and inevitable. Despite businesses predicting poor short-term performance, and reporting a dip in sentiment compared to last quarter, there are early signs that they have begun the road to recovery. This blog looks at ways in which businesses can look at preparing for their return and safeguard the future of the business.
There is little doubt that businesses will make changes, sometimes significant, to their objectives, processes, thinking and supply chain as the economy recovers. Markets may differ but the needs of SME owners are the same. Most have small teams, fulfil a product niche, likely run on tighter margins and have less weight when negotiating prices with suppliers and customers alike.
With so many people at home, those early movers into the online market have seen huge growth over the last few months. But the opportunities are not solely online. Restaurants turned to delivery or used their own supply chain to pivot to supplying take away and fresh produce for the local communities. Both the UK and Ireland became countries of gardeners, sports equipment sold out and the New Year’s resolutions were suddenly remembered as people flocked outside for their 1 hour a day.
So as you turn survival into revival and ultimately to thriving, think about what measures you need to put in place to safeguard your businesses to cope with the opportunity or upturn. Do you have the processes in place in order to be able to take advantage immediately? Play to your strengths: the ability to be nimble and the relationships with your business partners. Speak to your clients or customers to find out if they have needs other than what you’re already giving them.
Cost cutting has already begun and could go deeper. Caution and uncertainty are the biggest risks to a ‘bounce-back’ in the economy. With the global economy hit as a whole, some sectors will feel the pinch more than others: it is important for businesses to not only look internally but also to their wider sector and supply chain. You will need to take a realistic view of prospects, expect the worst outcome and prepare for it. As trade recovers, it will take time for the cash to trickle down the supply chain and the impact of this will be felt most by SMEs. SMEs are the largest provider of credit to the economy and businesses may use this leverage to extend payment times, with payment up front becoming a scarcity. Rather than wait for this to become an issue, it may be worth looking at finance options now and set up accounts in place which can be used at short notice.
Find out what local and national government support might help you, but focus on fundamentals: review your cash position, supply chain and areas of your business that were weak links in good times. Some options are revolving credit facilities which act as pseudo overdrafts or invoice finance which allows you to receive advance payment of your invoices and can be done on an individual invoice basis or across your whole debtor book.
The shifts in business operations, consumer behaviours and government priorities that are envisaged are significant. But this will be heavily reliant on the capabilities and skills of the working population. Skills shortages have been a real constraint on economic growth for decades, and this is unlikely to change. Reskilling will clearly be an essential part of ensuring that those who are displaced from their current roles can be redeployed to new roles in our future world.
In Barclaycard’s most recent survey almost two-thirds 64% of SMEs say they are planning to invest in their business over the next 12 months. With top areas of focus will be marketing 26% and new equipment and technology 20%.
Use this time to plan and absorb advice that you may not otherwise have had the time or ability to do so under normal circumstances.
Even before the Covid-19 pandemic, the health and wellbeing of your employees will have been a top priority in an SME’s mind. Unlike the larger companies, SME employees often wear many hats and “key man” means that if one person is unable to work processes can be hit in a dramatic fashion.
Closing down may have felt difficult, but with the social distancing restrictions seen to remain for a longer term, reopening and recovery is going to be a whole new situation. Confidence and trust have become common themes throughout the crisis and will form the basis for a sustainable return to a new normal. For those who have continued to work remotely or those on the government’s furlough scheme employees will need to have confidence to safely return to work.
Companies of all sizes will seek reassurances on their ability to continue trading. It is therefore important that those that re-open without a clear plan, or open in areas where case counts are still rising, will likely face an even more uncertain future.
Just as we search for that clean bill of physical and mental health for us and our employees it is important that businesses also do the same. It is also important that SMEs remain strong and not daunted by the challenge. The long and winding road will be hit by many forces of change that generate both opportunity and risk! In combined nations of gardeners and sports fanatics at the heart is a universal nation of nimble entrepreneurs who should continue to be inspired by opportunity.