Business Owners - Businesses how to survive Covid-19
TO ALL BUSINESS OWNERS - as an investor in businesses I am talking to two types of business owners - those running scared, not sure what to do, some burying their head in the sand thinking #COVID-19 #coronavirus will pass and others that see this as a opportunity to do things differently and come out of this stronger.
SMEs in the UK account for 99.9% of the business population (5.9m businesses); three fifths of the employment (16.6m employers); ￡2.2 trillion (about half of the UK private sector).
The UK government have announced support for businesses and here is a useful summary from HMRC outlining what is available :
I am not a scientist or healthcare professional but my personal view from talking to people and reading the research is that this is long term. There are trials already for a vaccine and drugs to ease the symptoms but most pharma are saying it’s 12-18 months before a vaccine will become available. Even then who will get it ? Vulnerable people or those at risk (like healthcare workers?) what about the rest of us ? So I imagine measures to limit social contact and not going to work/work from home will come and go as we see spikes in the curve. Flattening the curve to ensure the hospitals are not overwhelmed.
So the impact on business is huge and will be long lasting. But even when this will pass (just like the dot com bubble bursting, 9/11, 2008 crash, SARS, MERS, Ebola all did) business will have to operate differently.
To repay ￡330bn from 31.5m tax payers in a recession will take some doing. Expect higher VAT, corporation tax, income tax, other taxes, inflation. Will interest rates go negative ?
So apart from the short term cash need by the vast majority of businesses, what is the future going to look like, and who will emerge stronger than before? SMEs in most sectors are hugely fragmented. Take a couple I know something about :
Estate Agents for example there are 20,000 of them on our high streets in Britain and many “hybrid/online”.
Recruitment there are 39,000 recruitment companies in the UK.
Only 1% have over ￡1m revenue and only 0.1% have ￡10m+.
Now is the time to collaborate.
Larger companies present opportunity:
Buying power (joining with other businesses to buy stuff can be cheaper than trying to buy as a stand-alone);
Economies of scale (sharing services and internal functions like finance, HR etc. is cheaper than every business doing that themselves);
Best in class (sharing best practice, ideas and deploying them in other businesses to get a better result);
Less risk (a diverse portfolio <not all your eggs in one basket> reduces risk of business failure);
Access to capital - larger businesses can access capital to grow and expand much easier than a small standalone - have you ever been to the bank to get a business loan - even if they can get one usually there are PGs required).
Now is the time more than ever to collaborate and join forces.
Who in your sector could you join forces with / JV with / collaborate / merge / acquire?
Take the above two sectors -
Estate agents - Who on your high street could you merge with ? You don’t need two offices - you only need one, there will be shared services to drive those economies of scale - yet you could double the number of properties you have to sell, lower cost per sale. If you are a quality business that’s respected by your competitors it’s those competitors you want to target. Not the cowboys! They will go bust.
Recruitment companies - rather than competitors what about related - let’s say you recruit IT into blue chip companies - could you merge with a Telco recruiter that recruits into blue chip - you can now offer IT recruitment to the telcos and vice versa.
This may sounds complicated and long winded - in the last week we have merged two companies together it took three days and we took a company of ours public.
Looking for collaboration, joint ventures, mergers and acquisitions is the quickest way to grow exponentially. Those business owners that focus on finding JVs and merger and acquisitions rather than the day to day will prosper. In my view those in a larger business and working with other entrepreneurs will emerge stronger.
If anyone wants to grow their business and navigate through the current challenges and don’t want to do it alone ... whether it be negotiating with suppliers, HMRC or accessing the government help and set up JVs , mergers and acquisitions this is what I do every day of the week for the businesses I am involved in. We can double if not triple your business in the next month by collaborating. Always happy to help.
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