“Generally, the biggest challenge businesses faced in 2020 was uncertainty,” says David Skipp, Area Director, HSBC Business Banking. As COVID-19 reached the UK and the Government responded with measures culminating in the first national lockdown, how long that would last and what businesses needed to plan for was unknown. Before the announcement and rollout of Government support, says David, many business’ forecasts were pessimistic. “In fact, a lot have performed better than those initial forecasts, certainly from a cash if not a profitability perspective.”
While some of that uncertainty has subsided as the Government has committed to extending support schemes, certainly through the current lockdown period, businesses still don’t know when trading as normal will resume. “Most businesses planned for that not to happen until the end of 2020, which seemed a conservative estimate back in early Summer,” says David, “but now we’re looking at more weeks and months of disruption and that will be a major challenge for businesses in 2021.”
Seeing opportunity in change
The pandemic has accelerated technology uptake, seeing businesses take steps that would normally have taken them three to five years in the space of just a few weeks,David Skipp, Area Director, HSBC Business Banking
Disruption is often a catalyst for change and that can bring opportunity too, even if it can be difficult to see at the time. Faced with lockdown, many businesses turned to technology to enable operations to continue and to keep in touch with customers. “Technology use had been steadily growing amongst small and medium businesses, but the effect of the pandemic has accelerated technology uptake, seeing businesses take steps that would normally have taken them three to five years in the space of just a few weeks,” says David. That has created opportunities for greater efficiency, responsiveness and the ability to potentially reach a wider market.
It has also helped many businesses to achieve a lower cost base going forward. “Remote working and the increase in online shopping preference has seen businesses reduce their office or retail space requirements, taking out what can be a significant fixed cost for any business. As many businesses have either frozen recruitment or even reduced headcount, that also reduces costs.” With preserving cash the most important move for any business, that can be a key step.
Ability to adapt
Access to cash can enable businesses to act on new opportunities, for example to diversify their offering and innovate to find new customers or new ways of doing business. “What we’ve seen through 2020 and now into 2021, is that the opportunities and challenges are very much sector driven,” says David. “Certain sectors, such as agriculture or professional services have ridden out the storm, but even in those sectors that have been most affected, such as hospitality and leisure, there have been businesses that have adapted and have shown their ability to survive.” David points to restaurants moving to takeaway food or even recipe boxes, and gyms maintaining communication with their clients and moving classes online.
Other businesses have added additional lines to their offering – the most obvious being PPE. For some, that may have been a short-term change to meet demand, although others may see longer-term potential once the market returns to normal.
Of course, in every economic cycle there are those businesses that are unable to adapt or respond, or those that choose not to. “We have seen some family or lifestyle businesses where owners just couldn’t face the changes required and saw an opportunity to perhaps retire or make a change and that created other opportunities for businesses that were well capitalised to acquire market share, for example,” says David.
Beyond the pandemic, David thinks that Brexit will be a focus for many smaller businesses in 2021. “With all the COVID-19 impact last year, many businesses, especially those one or two steps removed from the immediate Brexit impact, this was not an area of focus,” he says. “Now, we’re seeing customers talking to us about what the effect will be on their business and their supply chain and how they get to grips with that and manage it will decide how big a challenge that will be in 2021.”
Focusing on resilience
The world post-COVID-19 will be very different. Asking yourself ‘is my business fit for the future?’ is key to ensuring you’re ready to take advantage of new opportunities as they arise,David Skipp, Area Director, HSBC Business Banking
Business is all about challenges and opportunities. How you deal with them, the impact of the challenges and your ability to see and seize opportunities relies to some extent on the fundamental strength and resilience of your business. “Those businesses that went into this period from a strong and successful basis in terms of cash flow and supply chain management, those that were well-capitalised and not over-exposed to one area or customer, are those best placed to weather the challenges and come out the other side,” says David.
“Businesses who are waiting for things to return to normal and who think they can keep on doing the things they did back in 2019, however, need to realise that habits have changed, technology has evolved and the world post-COVID-19 will be very different. Asking yourself ‘is my business fit for the future?’ is key to ensuring you’re ready to take advantage of new opportunities as they arise.”
How to make sure your business is in the best position to manage challenges and seize opportunities
|Control your costs
take a look at the fixed costs in your business and consider whether you can reduce those or turn them into variable costs. For example, do you need all that office space? Can you lease equipment?
|Manage your cash
keep a close eye on cash flow and identify any areas that need attention, such as if payments are going out before funds are received in.
|Look at your supply chain
is it robust enough or is there flexibility if your trading needs change?
|Understand your funding needs
talk to your bank about whether there are options that can support your short- or long-term requirements and be open about any issues.
|Ask yourself whether your business is future fit
do you need to diversify if you’re concentrated on one market or customer? Could investing in innovation keep you competitive? Will your customers want to return to the way things were?