Yesterday, the British Prime Minister, Theresa May, cancelled the planned Brexit vote in Westminster. This decision was made as it became increasingly obvious that she would not get the support for the deal that was negotiated with the European Union over the UK’s exit.
How do small businesses prepare?
How are small businesses preparing for such an outcome..? The Federation of Small Businesses (the UK Small Business Advocacy), in its recent survey, showed that only around 14% of small businesses were planning for the fallout from possible scenarios. On top of this, almost half of those businesses, believe that a no deal Brexit will mean significantly worse trading outcomes for their companies. And with over 90% of all businesses in the UK being small businesses, this lack of planning could be seen as a massive risk to millions of companies and their owners in the UK – over the next 24 months or so.
Shocks are a fact of life for business
Throughout the history of time, and business trading, shocks to an economy as a whole, or trading conditions for certain industries, have been a regular feature of the small business landscape. Just in the past 40 years, we’ve seen the oil crisis of the early 70s, structural changes to traditional manufacturing industries in most western economies, Black Monday and the high interest rates of the late 1980s and early 90s. Without forgetting 9/11 and the hit to the global travel industry, the GFC and tightening of capital markets. Major business and economic shocks don’t happen every week, but when they do they can have a detrimental impact on financial performance, hampering revenue growth and create significant uncertainty within the business community. While such uncertain times can provide opportunities for many, it’s undoubtedly a situation for which businesses find it difficult to plan for.
Scenario planning – your friend
Economic shocks aside, small businesses can hit difficulties for a variety of reasons. A lack of planning is perhaps one of the main reasons, and can lead to a lack of time and options should the proverbial do-do hit the fan. How would your business survive the next shock? How would it survive a Brexit-like shock? In order to survive, one of the key attributes that businesses of all shapes and sizes need, is the ability to assess the things that influence the performance of the business the most, and in term map out best and worst-case scenarios. It is critical to do this, and at the same time, give your business the time and breathing space to implement your recovery options.
In order to achieve this, it’s essential to understand what your business tolerances are. For instance, what effect would a Brexit type shock have on your cash position, or ability to trade? What level of revenue reduction can your business accommodate should such a shock happen? My argument is that every business needs to be equipped with this information. Every business needs to understand what options are available to them to optimise their cash and funding options. This could be as simple as collecting your client invoices quicker, or optimising stock levels for the new levels of expected business.
Planning such scenarios can be a time-consuming and often costly exercise, but it needn’t be. Jazoodle’s small business tools can provide you with valuable scenarios and insights – in an instant. And for much less than your daily cappuccino!
Jazoodle is a cloud-based business performance and scenario planning application for small businesses that interacts with your existing Xero account, as well as their trusted accountants and advisors.
Andrew Paton-Smith is the founder and CEO of Jazoodle.
Find out more at Jazoodle.com, or email us at firstname.lastname@example.org