Resilience - This mentality must change05th May 2020
Over the past few weeks, I’ve seen lots of discussion around how businesses will have to change, once the lockdown is eased.
Companies will have to get used to remote working, they say…
We’ll have to improve our IT… Learn to forgo conferences… Rethink our supply chains… Perhaps adjust pricing…
And doubtless these are all true.
But the biggest change of all is one that is rarely mentioned.
It concerns the mentality of the owner.
You see, until recently, too many business owners were perfectly happy for their companies to “just get by” financially.
Oh, make no mistake. I don’t mean that the owners didn’t care whether they were profitable. Of course they did – it’s just that if the businesses were running a profit, the owners took much of the money out of the business, to pay themselves.
The result is that the companies were left with very little financial buffer, if something went wrong. Cash flow was relatively tight. There were no serious cash reserves. And if they had arranged a credit line, it covered their needs exactly.
In short, there was no spare cash in the business.
As long as times were good, that close-to-the-wire approach felt fine. It’s quite possible to live a very comfortable life running such a business!
But just below the surface, these businesses were incredibly fragile.
The slightest change in the market, in their customers, in government regulations, in their industry could plunge them into disaster.
And just a few weeks ago, when COVID-19 burst onto the scene, that’s exactly what happened.
Those companies whose finances were ropey could not easily weather the shock.
Many have had to be bailed out by the government already. Others are teetering on the brink.
In the future, company owners will have to have a different mentality and a different approach.
No more “just getting by” financially – instead, financial caution will rule the day. Everyone will have to focus on building financial resilience in their businesses.
Why? Because this Coronavirus crisis is by no means over.
Even when the lockdown eases, the repercussions will be with us for months if not years to come.
We may still experience further lockdowns, and the government will be unlikely to bail out so many businesses again. It won’t be able to afford to.
Companies are going to experience a long period of economic uncertainty, market shocks and changes to their ‘normal’ way of working.
And that’s even before we consider additional possible disruptions, such as changes to particular industries, infections in other countries that affect our supply chains, Brexit, and so many other events.
The entire world is interconnected, events move very fast nowadays, and we are all vulnerable to events entirely beyond our control.
Business owners are going to have to get used to looking at the world in this much more cautious way.
And they’re going to have to build their businesses’ financial reserves to get them through this period of extreme uncertainty, if they are to survive.
That means excellent financial management.
You simply cannot get through these coming years and months managing your finances casually…
…Without enough financial information to plan properly and to make good decisions about the future of your business…
…Perhaps even questioning the reliability of the numbers you’re being given by your accountant or bookkeeper – who may be contentious and well-meaning, but is nevertheless not senior enough to help you navigate this difficult financial era.
We help companies implement the kind of world-class financial management that corporates take for granted.
If you turn over more than £1 million, we can do the same for you.
We’ll give you the financial resilience you need to survive whatever the next few months and years bring – and even grow and thrive.
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