Luke Desmond has a saying: “Smooth seas don’t make skillful sailors.”
Desmond, whose firm Crisp Accountancy has guided integrators through choppy waters in the past, is presenting his thoughts on the “new abnormal” in a webinar called “Business Recovery Planning 2.0.” For a good many UK firms, Desmond notes, as lockdown restrictions ease, there’s a torrent of business that’s been unleashed. Integrators are suddenly seeing pent-up demand released back into the marketplace, and the ones that survived are suddenly flush with work orders.
The problem? “This is likely temporary,” cautions Desmond. “We’re very likely to see another economic dip, and you need to prepare. There’s a false sense of security when demand spikes. You can’t become overconfident. Otherwise, the consequences could be dire.”
Four Ways to Improve Your Prospects
Depending on the kind of business you have, Desmond believes there are four paths one might take to adjust your business model, from the radical to the immediately practical:
Innovate. “I know of one business that sold travel gear, and obviously, that business has collapsed. They’re transitioned to at-home hair clippers,” says Desmond.
Re-engineer. “Liquor companies have begun making hand sanitizer. An F1 race team has begun making ventilators for the UK health service.”
Adapt. Desmond says this is one that he’s seen as most prevalent among integration firms. “I’ve seen CEDIA companies using drones to scout big jobsites that are still under construction, and then walking their clients through what might be placed where when things loosen up.”
Widen Your Lane. Simply put: Broaden your product or service offering. Are you selling service contracts with every job? Why not?
Turning the Checklist on Its Head
Desmond presents a slide that ticks off all the items one might find in a business budget, from gross revenue (at the top, see illustration at right) to an increase or decrease in cash (at the bottom). “The bottom is where you need to start,” explains Desmond. “What were you making pre-COVID versus post-COVID? Has the cash caught back up yet?”
As you’re accounting for losses (or gains), Desmond says the small business owner should really focus first on his or her personal budget. “What do you need to remain comfortable? Do you have enough to account for catch-up repayments if you have loans?”
Next up: Build your resources. “Are your accounts up to date? Has everyone paid on time? Is there equipment you no longer need? Do you need an office? Call you cut or abolish your rent payout, maybe even sell of a building if you own it?” Desmond says that the key to your cash flow – even if times are strong just now – is to build a big enough “war chest” to survive any sudden plunge.
Build Your Lists
Desmond says you could be regularly checking on a few numbers. “Get some sort of reporting on your finances right away that you can understand and stay on top of it. It’s different for every business,” he explains, noting that the numbers you track should total no more than five or six items that can give you a very quick, back-of-the-envelope calculation on your financial health. “Perhaps it’s sales, profit, cash on hand, stats on jobs in the pipeline – it’s what you think will paint that picture quickly.”
One also needs to develop a “risk register,” a matrix built on an x-y axis to determine the likelihood of various scenarios and their potential impact. Could your operation be affected by a lawsuit? Could supply chains be disrupted? Could employee morale be problematic when some furloughed UK workers have been “off” at 80% pay while some others are toiling away?
And once you’ve filled in all the blanks, Desmond walks through a sample business plan – which you can see in the complete webinar below: