Planning for the unforeseen!

During these unusual times we have all realised that we cannot plan for every eventuality, but we can help by being prepared. How we react to sudden events is our choice and our decision.

Situations can come out of the blue just like Covid-19 did, but unexpected events can take many forms – a technology shift in your market, an unsolicited offer to buy the company or something more personal like divorce, illness or injury which can affect either yourself or someone close to you.

Why prepare?

The better prepared you are to deal with the unforeseen, the sooner you can react and the less impact it will have on your business. This is where having an Exit Strategy and Contingency Plan come in. Planning ahead, doesn’t mean you are expecting something to happen or that you are selling your business right now, but it means you are prepared and able to react accordingly. It will bring peace of mind and often many other benefits which you otherwise wouldn’t have realised.

Many business owners are often fully consumed with the day to day running of their business, so allocating time to focus on preparing these plans can be difficult.  Making time will ensure you are fully prepared when you need to be and that you don’t lose sight of your direction and goals. Getting bogged down in the daily operations of running the business won’t help you should the unforeseen happen.

How to prepare an Exit Strategy or Contingency Plan

If you’re unsure how to approach the planning process, a Business Advisor can help you action this, offering advice and support along the way.  A monthly meeting with follow-up actions will soon have your plan and strategy coming together and will bring clarity and confidence in the knowledge that your business will continue to operate during challenging times.

Creating such plans can and, often does, identify other areas that need attention, helping build a more thorough structure from which to work.  It can identify the need for more growth and funding, through to marketing campaigns and staffing levels.  The benefits will far outweigh the small investment and effort of setting aside a few hours in a month. As an example, recently a CMC Business Advisor helped increase a company’s growth by over half a million pounds in just six months. A great return on investment for the client for such a small monthly fee.

What if you decide to sell your business?

Most owners have never sold a business and it can be a complex process if you have never gone through the experience.  CMC Business Advisors have over 30 years’ experience and can guide you to navigate the many pitfalls that you may come across in preparing your business for sale.

Remember, most businesses don’t sell so having the right insight, information and know-how will increase the odds as well as the business value.

It is always a good idea to know the true worth of your company.  Learning on the job is not the recommended way to prepare your business for sale, but having an exit strategy in place can make you ready and prepared for the event.  Give yourself time to do this and review your plan on a regular basis.

To discover how we can support you, get in touch today and arrange an informal chat.

Adopting a purpose-driven strategy

Understanding a business’s purpose just became more important. Here’s why. 

In a recent Ipsos poll of over 21000 people across 28 countries, 86% of respondents said they want to see the world change to become a fairer and more sustainable place.  

Talking about the new normal has become fashionable. Yet, how many businesses can genuinely claim they want a new normal. Why would companies desire a new normal any way – when the old one was suiting them fine. After all nobody was talking about changing the norms in December 2019 

We know life changing events – loss of job, death of a loved one, partner separation – often lead to soul searching. The economic wreck, heaped by the pandemic, has led many businesses to pause and reflect on this life altering event.  

This is an opportunity for businesses, of all sizes, to reflect on the reasons they were in business in the first place.  

Why do you do what you do (or did before the pandemic).  

What is your purpose for existing? Did you have one? If not – how can you create one and adopt a purpose-driven strategy? 

We offer a basic structure to think about and incorporate purpose into your own organisation: 

Purpose = Strategy = North Star

Purpose, however, defines the reason for your existence and how you decide what to do. 

Purpose is distinct from a firm’s mission or vision statement. A mission statement describes how a company does what it does, while its vision statement is an attempt to define where it wants to go. 

In defining your company purpose questions such as ‘Is our purpose to become the most profitable technology services company?’ or ‘Is our purpose to become the world’s largest food delivery company?’ are misplacedThe better question instead is to ask yourself ‘Why are we in business?’  

Once you are clear about why you are in business it becomes a whole lot easier to define what you will do to achieve that purpose and through what means you intend on getting there. 

Virgin Group aspires to change businesses for good. The group attempts to use this statement in running their operating companies and subsidiaries and the way they build their brands.  

Unilever’s stated purpose is to make sustainable living common place. There is a clear emphasis on the environment and the potential for creating a negative impact on the climate if it doesn’t recognize the extractive nature of its industry on the climate.  

To be clear, a company cannot be a sustainable business if it does not generate margins or positive cash flows. Producing profits is necessary for viability and doesn’t make a company evil. Yet, it’s purpose cannot be generating margins. 

Let your business purpose dictate how you allocate capital

Strategy is nothing more than a set of conscious choices you make as an organisation. You decide the customers whom you want to pursue, you design products that could meet the unmet needs of these customers and then you invest in making and selling those products 

Thus, where you allocate capital i.e. invest cash or resources, is a critical decision.  

Purpose-driven companies use their stated purpose to decide which project investments to pursue and which to reject if they are divergent to their purpose, even if this means that they will earn lower returns on their invested capital by not pursuing those opportunities. 

Unilever would want to avoid investing in sectors or ideas that could negatively impact the environment or source raw materials that could erode sustainability even if it is less expensive to do so. 

This makes having your employees, shareholders, partners and suppliers buy into your purpose a vital determinant of success.  

Recruit and reward to reinforce purpose

As we said above, a purpose is a shared belief. It does not help if the purpose is only in the head of the CEO or only a handful of senior managers understand it.  

It is critical that the entire organization and its stakeholders subscribe to it. Recruiting new employees who are able to imbibe the purpose is arguably the most critical. Recruit employees who would actively engage with your purpose. Basic introduction to the company’s purpose, as part of onboarding the employee, can create an immediate impression of the importance the firm places on its purpose. Many companies go a step further by requiring employees to demonstrate their commitment to purpose as part of the performance evaluation process as well as tying elements of compensation (say a % of bonus payments) to living the company’s purpose. 

A purpose is not just for global firms with large balance sheets, or only for public listed firms to put on their annual reports. Firms of all sizes and ownership structures can and should define their purpose and then adopt it wholeheartedly. 

Stick to your purpose and your employees and customers will appreciate it 

Exit strategy

Stand out amongst your peers, have an Exit Strategy in place

An exit strategy doesn’t necessarily mean you are looking to leave or sell your business. It can be this, but it can also act as a contingency plan. Having an exit strategy can keep your business moving, providing an income and keeping it viable in the unforeseeable event of the business owner not being able to manage it for a period of time, or even permanently.  

With this in mind, the largest generation category of SME Business Owners in the UK is Baby Boomers. Typically, the youngest of the Baby Boomer generation are from the mid 1960’s putting the youngest of them into their mid 50’s. Many have been through several recessions now and the latest Covid19 pandemic is for many, the last one they hope to work through. Many Baby Boomers are fast approaching retirement age, if they haven’t already. Many are also actively considering their retirement and what will happen to the business they have built up over many years and decades. 

Why you need an exit strategy

Depending on which statistics you read, around 80% of the UK SME owners don’t have an exit strategy or succession plan in place. This can cause the business not to sell – around 100,000 companies per year just close as they are not able to sell.  Having a clear and professional exit strategy in place has been proven to assist owners in getting better value for their company and enabling them to sell the business when the time comes.  

Take time to prepare

To make a company viable to sell takes time and preparation. It is advisable to start putting an exit strategy or succession plan in place at least a few years before you are planning to sell. This will not only increase the value of your business, but it will give reassurance that the business will run and continue to provide an income should any unforeseeable events happen. It’s an insurance policy! 

Creating a good exit strategy gives any potential buyer all the information they need about your business. It offers clear insight about the succession take-over of the company to gain a better valuation for the business.  

There are more Baby Boomer owners then potential buyers from the up and coming generations to buy the business. This makes it a very competitive market.  An exit strategy will show the advantages of buying an existing business, proving to your successor that they are acquiring not just a viable business, but they will gain: 

  • customer base and the history of income 
  • A trained workforce 
  • Required licenses and permits 
  • Established vendor relationships and credit lines  
  • A plan for growth 

The benefits of buying an existing business

Buying an existing company rather than starting your own would mean that you step into a position of respect within the business community rather than starting from scratch with many unknowns.  

By owning your own company, you are in the position of making the decisions that affect your own future, as well as the futures of those you employ – you may well keep a number of individuals in their job, very important in these uncertain times.  

As a member of the local business community you will be able to bring influence and bear on the issues that matter most to you and your employees.   

Now is the time in any stage of a business to have a current exit strategy and succession plan in place.  It will bring you peace of mind and give you added advantage when selling your company in this very competitive environment.  For more information and an informal chat, contact your local CMC Business Advisor. 

Contingency plan

A quick guide to contingency plans

Business gurus always say that every business requires a contingency plan that anticipates all life’s little uncertainties. All too often, the listener nods sagely, partly out of boredom, partly because he does not really know what the term ‘contingency plan’ means – ‘just another piece of Management-Speak, if you ask me….’

And if such advice is being properly followed by most, how come so many businesses fall by the wayside when the going gets tough?

The answer, sadly, is that many business owners DO NOT really know how to implement contingency plans that will not only save a business from disaster but shorten the ensuing recovery time.

And contingency plans should also be about identifying and harvesting new opportunities, no matter how tough the current economic climate.

Here are a few questions to help make the point:

Question 1: What is a Contingency Plan?

Wrong answer: ‘It’s when you batten down all hatches when things go wrong’.

Right answer: ‘It details action designed to stabilise the business when the unexpected happens AND to do so in a way that facilitates future dynamic growth, even when the going is tough’.

Question 2: Why do I need a Contingency Plan?

Wrong answer: ‘I’ve already told you. It’s to survive, pure and simple’.

Right answer: ‘Any business with a well-defined, profit-focused business plan should have worked out how to get back on course via economies that enable a healthy recovery. This enables tactical investment when markets change as a result of business failures creating vacuums to be filled, or as new demands emerge’.

Question 3: Is it difficult to prepare a Contingency Plan?

Wrong answer: ‘Nah, piece of cake. All you have to do is sit down with your finance guy, run through all the budgets and cut them. Sorted – you’ll soon be right as rain’

Right answer: ‘Provided you have a business plan and your management team has ownership of it, you should be OK. But you need to apply financial restraint with great sensitivity so that you quickly restore your original equilibrium.’

Question 4: But what if I don’t have a Business Plan?

Wrong answer: ‘You don’t need one, mate! Just do what I said before and cut your budgets hard until the figures look right’.

Right answer: In the short-term, that could be a problem, but what you can do is work out a financial forecast based on reasonable working assumptions and then estimate how far off those targets you have drifted. Then you can work out with your senior management team what must be done and agree a timescale for implementation.

Once things are more settled, you can prepare a detailed Business Plan, so that you do not get caught out again’.

Question 5: Do all Contingency Plan changes have to be immediate?

Wrong answer: ‘Of course they do! Sooner the better! Just get on with it!

Right answer: A well-conceived Contingency Plan will work out what needs to be done and when. You may opt to hold back some of the more drastic cuts until it is clear that circumstances demand it.

For example, large-scale redundancies: why reduce your important skill centres without considering alternatives or before you know the full extent of the bad news? The Contingency Plan should be phased and everything worked out in advance so that each phase can be implemented professionally.

Another example: what would be the point of slashing your marketing budget just when you are about to launch a new product that could speed recovery? And what would be the sense of cutting your sales and customer services teams who will be focal to the success of that new product?

Conclusion

It is perfectly reasonable to identify non-essential costs and take them out quickly. It would be bordering reckless to rush into eliminating costs that are essential for long-term success.

And the only way you can know what they are is to develop a comprehensive strategic Business Plan.

Such a plan would carry a ‘Sensitivity Analysis’ showing the impact of certain negative developments. From there you can develop your provisional Contingency Plan for use if required.

And, just as a Business Plan needs to be reviewed regularly/annually, so does your Contingency Plan.

Make a plan – The next few months could be crucial

You have survived the last few months, but you are in a different position now and it is not business as usual. So where do you go from here? How do you begin to move your business forward and get back to where you wanted it to be when you started out?  

To refocus your efforts, here are 3 crucial questions to help you plan. 

Ask yourself –

  1. What is the purpose of my company, why does it exist?

Understanding why your company does what it does and diving to the heart of its existence, will help you form a clearly defined mission statement. This will ensure you and your target audience clearly understand what you do and why. 

  1. What are my goals and aspirations for the business?

When you understand what you are looking to achieve over a longer timeframe, it depicts a vision of what the company will look like in the future. Creating a vision statement helps focus you towards longer-term goals and ambitions.  

  1. How do I achieve this?

This is the important part, where you start to develop and build your plan.   

What type of business plan should you build?

This depends on what you want to achieve and where you are now. Below are various types of plans. Which best fits your current situation? 

  • You’ve survived the pandemic quite well and want to build on this – make a growth strategy plan. 
  • You are still in business, but it’s been a tough few months – make a contingency plan.  
  • You are in much the same position as before, but it was a shock how the pandemic hit you –  make an exit strategy to handle unforeseen circumstances.  

The past few months have created an unprecedented situation for everyone. However, there are opportunities and advantages to be gained but it should all be undertaken with a clear view of where you are and how to proceed forward.  

It is not all bad news and the future can still look bright. The upturn could be quick. Some positive news for the North East Region recently published by the Department for International Trade outlined –  

The North East has outperformed every other English region outside London on the number of new jobs created from foreign direct investment in 2019/20, relative to its population. 

The latest figures from The Department for International Trade (DIT) show that in 2019/20 the North East created 179 jobs for every 100,000 people (working age population), placing it behind only London as the best performing area of the country. The sectors that saw the biggest job increases in the region were business services, digital, offshore wind and advanced manufacturing. 

Where do you go from here?

Start to write things down and have discussions around the possibilities of what can reasonably be achieved for your business plan considering: cash flow, order pipeline, prospects, current turnover and secured income, commitments and liabilities.  

Can changes be made and has the lockdown helped to gauge the workability of these.  More remote working, less office space, hiring opportunities, outsourcing?   

All these aspects can be discussed with your CMC Business Advisor who can give an independent overview of the situation and help providinsight and reassurance for the short to medium term outlook. Putting something in place now is essential as the next few months will be very important time. Take control of your business and know what can be done to support it going forward. 

Business recovery observations for SMEs

As 2020 proceeds, the Covid-19 Pandemic has created totally new climates in which businesses must operate. In order to trade successfully and make a strong recovery, these need to be clearly understood by business owners if they are going to lead their businesses into better times 

Our observations so far

Within this blog, we take a closer look at these changes and their impact on SMEs – based on observations with CMC clients across various sectors. It provides an overview of activity across the 4 quarters of 2020, as outlined below, identifying key changes in the new trading environment and how plans have been adapted to fit. 

  • Quarter 1 (Jan – March)   >>>   Pre COVID-19   >>>   Business as usual 
  • Quarter 2 (April – June)   >>>   Lockdown   >>>   Survival 
  • Quarter 3 (July – Sept)  >>>   Post Lockdown   >>>   Recovery 
  • Quarter 4 (Oct – Dec)  >>>   Post Lockdown   >>>   Possible Growth 

Quarter 1 – Pre Covid-19

Business as usual. Slight rumblings about the disease as it hit China, but it seemed to be someone else’s problem’ and wouldn’t affect the UK. 

Quarter 2 – Covid-19 Lockdown – Survival

Almost overnight, Covid-19 was a problem in the UK and lockdown was imposed in Mid-March. Rapidly businesses had to plan for survival. 

During the survival stage, businesses had to implement emergency measures to tightly control costs and to preserve cash. Many businesses were complacent, thinking it would be over ‘by the summer’. However, as the science came to light it was clear that Covid-19 would have an impact throughout 2020 and into 2021. 

Simplistically, there were three categories of client as they went into lockdown. 

1. Companies trading as normal

Clients in software development, IT support, food production, branding/web design etc. worked as normal throughout AprilMay and JuneIndeed, some experienced record trading months! In this stage it was clear that their client base would continue to place orders. 

They did not need to furlough staff and they all learnt to work successfully from home and trade with their clients remotely. This included winning new business and sometimes with new clients. 

2. Companies trading in much tougher markets

Clients in construction or manufacturing or service businesses exposed to catering, events, sports, hospitality and travel had to act rapidly. These clients used the furlough scheme selectively and traded on revenues up to 50% below normal. Survival meant trying to reduce overhead to match the loss of revenue. Many took advantage of government loans to bolster their balance sheets. 

Many clients in this group, repositioned the business into new sectors or servicing new types of clients. This happened with remarkable speed. For example, a client designed a range of face shields, got them approved and out to market within this three-month period. Another client in consumer testing perfected home testing with deliveries by courier. Many took advantage of competitors who had removed themselves from the market by shutting down completely. 

3. Companies zero trading

Clients in sectors completely exposed to air travel, holidaysfood service or hospitality had to lockdown their businesses. These clients furloughed all their staff and as much as possible ‘mothballed’ their companies. For these companies the owners and directors were left to keep a presence in their marketplace ready for any upturn at some unknown point in the future. 

Quarter 3 – Post Covid-19 Lockdown – Recovery 

Moving from June to Julyelements of the lockdown were being relaxed. Survival was still a major issue, but equally there were green shoots emerging in the economy. 

Looking forward the balancing act is to start trading again in existing and new markets and to balance the resources needed to service these markets. Cash flow will be tight as companies come out of lockdown with reserves depleted, so good data management is essential to identify the peaks and troughs of activity. 

As people come off furlough there are some very difficult decisions about redundancies. Many clients have taken the opportunity to restructure their businesses and take out layers of management. People working from home have shown a remarkable capacity for self-management. 

Many companies have decided to stay working from home for the foreseeable future, potentially getting rid of their office space or reducing it dramatically. 

All this has placed pressure on the IT systems of companies. Many clients are looking at the recovery stage as an opportunity to start upgrading their IT capability, cutting out clerical jobs which can be automated. Electronic Data Interchange between company and client, ordering items and paying invoices, will be the new norm for doing business. 

The sales cycle in many clients is also challenged. Instead of sales people being on the road in their cars meeting clients facetoface, clients have found that they can successfully deal with customers through a centrally based, graduate level sales person. They sell by researching the requirement, making contact through social media and using video conferencing to get to the decision makers. Often more can be achieved in a half hour VC call than an extended facetoface sales call. 

Marketing has been the common point of success across all companies and particularly digital marketing. Many of those sceptical of how the web can be used alongside social media have been convinced. Digital marketing has provided a very effective way to keep up ‘appropriate’ messaging during lockdown and will be used by many clients to further communicate with the client base as they start the recovery stage. 

Quarter 4 – Post Covid-19 Lockdown – Growth

We have hypothesised that for many sectors still struggling, September/October will mark the transition from the recovery stage to the growth stage. Many companies will not have made it to that time. Often, they will be good, sound companies, blown to the edge by the circumstances of Covid19 and therefore there will be opportunities for acquisition or for strategic alliances to be formed. 

There may yet be another general lockdown. So, companies will have to maintain their resilience, preserve their finances and continue to develop their ability to rapidly evolve and adapt to new markets and opportunities. 

Our recommendation: Plan for the worst, hope for the best! 

Are you having a good pandemic?

The question isn’t as daft as it sounds. We’ve all heard about the industries that are having great difficulties (like Leisure and Entertainment), but ask the same question to the big supermarket chains and you will get a very different answer! And those supermarkets which geared up quickly to meet the huge surge in online demand have done especially well, as have local farm and corner shops.

At times like this, business owners experience successive waves of optimism and pessimism; the furlough scheme came as a huge relief, which was soon dissipated by worries about what happens further down the track.

The stress of making loyal staff redundant has never been so great, but the focus is inevitably on short-term survival. Try to balance the books the best you can and await developments…

There’s plenty of good advice out there on what you must do to keep things tight, and I do not propose to repeat solemn words about cash flow, overheads, and profit margins.

My point is that the worst battles lie ahead and are already raging within the business owner’s mind – centred on the question:

Now what?

I have heard some business owners say things like:

‘Our customers know where we are, and we don’t want to bother them, so we’ll just sit tight and see what happens’ or…

‘I’ve mailed all my customers and will see what comes back’.

The key lesson from this pandemic: ‘It’s good to talk’

We have seen how important it is to maintain the strongest possible communication links throughout this crisis. But that is a good habit at any time, so what is new?

For business owners, it is crucial to avoid obsessive contemplation of your own problems. It should be clear that all your customers are experiencing similar waves of optimism and pessimism, and are searching desperately for solutions to their woes.

So why not try this for starters:

Put yourself in their position

  • What are your customer’s concerns?
  • Can you come up with solutions that may go some way to addressing them?
  • Draw up simple plans that show how you could help them

You could well find that you identify pent-up demands for new ideas, products or services.

Just look around and you can see plenty of examples:

  • Online Zoom meetings doing all manner of distance learning, therapy sessions
  • Arts companies running free performances of plays and operas online
  • The boom in the sale of products online (requiring products to be packaged and serviced differently)
  • Pubs and restaurants ‘ticking over’ by offering takeaway food and drink

One of my clients is a sports coaching company – focused on youngsters – who have been locked down for months – frustrated, bored, fed up with home learning and being unable to be with their mates. My client proposed online coaching sessions, which schoolteachers loved, and 1-2-1 coaching sessions, which parents craved! ‘Anything to get them off our hands and getting good exercise!’

For him, it has opened up two potential lines of new business development: online live coaching classes and a sports coaching video library for ongoing sales.

What he has also found is that if you can identify and meet new demands like this quickly and well, customers are willing to pay over the odds, provided that the pricing is sensible.

Your good pandemic guide

  • Stabilise your short-term business
  • Look ahead by speaking and listening to your customers and suppliers
  • Come up with new, imaginative ideas that will enable their own business development and well as your own
  • Execute those ideas briskly and efficiently
  • Do this, and you can bet that you will steal a march on many of your competitors

So you can….

Look forward to the ‘new normal’

Your local CMC Partner (that’s me, for one) stands ready and able to help you. We do this for many clients and can offer the type of strategic planning and emergency services that could be the very lifeline you need right now.

The worst thing one can do is to sit on one’s hands and ‘await developments An American satirist once said: ‘Disaster is a natural part of my evolution. Toward tragedy and dissolution’. To be avoided, don’t you think? So why not chew carefully on that and give us a call?

Hope for the best, plan ahead for the worst

With so much happening now and so much information circulating, it’s difficult to gauge what is going on and how to deal with it all.

Something that is always important and straight forward to do to help understand the situation, is to pick up the phone and make contact with all your clients, suppliers, service providers and staff. They may not have all the answers, but you will get a clearer picture from them and they will be happy to share their thoughts – and they will appreciate you reaching out. This will help provide some valuable insight into your personal business requirements, but what about the bigger picture? What impact could this have?

A worst-case scenario

What could be the worst case in general terms? A long recession compounded by a no deal Brexit at the end of the year. Redundancies are mounting up as we see government support schemes such as furlough coming to an end in the next few months. Some industries will take the impact much harder than others. Airlines, service industries and entertainment will be badly affected and these all have knock on effects to other industries.

The last day to extend the Brexit deal was 30th June 2020 making the risk of a no deal crash out higher than before. If you export or deal in several national sectors, then this would need to be considered. All these people and services will still be around for the coming few months, but as things drag out the likelihood of resurrecting these industries will be so much harder. A long drawn out recession with major unemployment and little spending power in the economy would be hard for everyone.

What could be the best-case scenario?

The government secures a Brexit deal that is beneficial to the UK and with minimum disruption to business. We manage to open up new major trade deals with other economies and improve our import/export business.

The big long recession doesn’t happen, and we get a V-shaped recession where we bounce back quickly. The impact of the crisis so far has been quite severe. Britain’s economy suffered the largest quarterly fall in GDP since 1979 – shrinking by 2.2% according to the ONS’s latest figures just released. However the Bank of England’s chief economist, Andy Haldane said in a speech at the end of June, that the UK could be heading for a ‘V–shaped’ recovery as consumers, locked inside for weeks on end, rush to newly reopened shops nationwide.

He has predicted a return to near normal output by the end of 2020. Sales of cars, houses and general household goods indicate a greater than expected degree of underlying strength in consumer spending. If this was to further role out to the holiday and service industries, then it maybe a painful sharp hurt but temporary with a quick recovery. Companies will need enough cash flow and potential business coming in, to keep going a few months longer and will need to know how long they can sustain this. Signs of a pick-up may come quickly.

Plan ahead – How to prepare

There is no clear answer, but the strengths, weaknesses, opportunities and threats all need to be considered to enable you to plan ahead and make informed judgements going forward.