Family businesses face tough decisions in surviving the Covid crisis
18th August 2020
Emotional ties make cutbacks more difficult
The last few months have been extremely challenging for family businesses across the country. In some cases, companies have been thriving, but there are others which have had to significantly adapt in order to survive the impact of the pandemic. Many have changed their entire business model, or introduced new products in response to the ever-changing business landscape. Some customer-driven businesses have had to introduce systems for home delivery, or appointment only systems which weren’t in place before.
The problem is that even with new measures in place, the business may still be less profitable than it was pre-Covid. Some companies whose transactions are high are still suffering a loss due to social distancing, reduced capacity and the cost of providing PPE to staff, meaning they are being forced to make cost cutting decisions.
Family businesses do face a unique set of challenges during times of crisis. Typically, they have a reputation for being more customer and employee-oriented. It can be extremely tough and stressful for business owners who have to make difficult decisions regarding redundancies or restructure, especially if a large number of family members are employed within the company. It’s so helpful to seek impartial advice from an adviser who can help make decisions based on facts rather than emotions. There’s lots of help available out there, so don’t be afraid to ask for it.
Cash is king in the current climate, so it’s very important to look to the future in order to understand what lies ahead for your business. A carefully created cash flow projection will help guide your decision-making, allowing you to look at which costs you need to cut in order to ride the storm. However, the current situation is constantly changing, so it’s wise to reassess your projections regularly.
The most important thing for family businesses to do is look to the future. Although it’s relatively uncertain, some things are a given – Christmas is on 25 December, schools will be on holiday during the October break, and so on. For each business sector, there are certain things you can plan for.
The next thing to consider is that we are facing a recession, which is going to be unlike any we’ve experienced. Never before has such a substantial part of the economy stopped, nor has the Government handed out so much money. What will happen when the furlough scheme ends? How will localised lockdowns impact business and the economy? No one knows how it will play out, but it’s vital to ask these questions, plan for every eventuality, and reassess on a regular basis. By considering what the future holds, you can get real clarity on the best way to operate your business moving forward.
It's also important to strike a balance between cash flow consideration and running your business as normally as possible. A lot of businesses freeze and go into reactive mode during crisis situations, which can be damaging as you’re essentially waiting for a problem to arise before taking action. You still need to set aside time for going out and generating new business. Cutting your advertising or marketing budget might not be the best move - you’ve got to be very smart about where you make cost savings. During difficult times, a lot of businesses also cut training, when actually that might be the most important thing to bring your newly reduced workforce up to the standard that is required.
Remember to look after your customers too. They too have been navigating the challenges the pandemic has brought so it’s a good idea to talk to them, find out how they’ve been affected and see if there’s any way in which you can offer your support. There may be an opportunity for you to deliver a service to your customer to fulfil a specific need. If your company supplies to other businesses, be sympathetic to the fact they could be experiencing a challenging time too.
Overall, this been an exceptionally challenging time for the business community as a whole, but those who run family businesses are renowned for their adaptability, motivation and determination, and I believe these traits will see many through the hardest of times.
This article first appeared in The Scotsman