The following three things are on my mind right now and I believe they are relevant to every business just now. One is an immediate action, the next two need some consideration, and then some action. In all cases I am making the assumption that we not only want to survive this very difficult time, but we want come out of the traps when it’s all over with the clacker down, full steam ahead.
Cash run (or burn) rate
Right now (today) we all need to know precisely what our cash run rate is on a, say, monthly basis. That is the amount of cash we burn every single month just to stand still. This is not a profit and loss thing, this is simply about cash. It’s also not about any income we may or may not generate from sales, it’s just about expenses and nothing else. So it could include, rent, utilities, insurances, finance agreements, loan repayments, wages, money you need to live on. And for the sake of completeness, we should calculate two independent burn rates.
– the first burn rate, call it ‘(a)’, is the rate at which we burn cash after allowing for any government support that we may get. And just to be clear, this is not ‘lump sum support’ (like a local authority grant) it’s more about the grants we receive (e.g. Job Retention Scheme Grant) that we claim to offset expenses. It’s also net of any ‘holidays’ we may have secured with regards to loan repayments or finance agreements. It is, in effect, the minimum amount of cash we need each month to get by.
– the second burn rate ‘(b)’ – is our new ‘normal’ rate. That is the rate we will be burning cash when all this is over. This one will differ from (a) in two ways. Firstly, some of the support we are getting will end, for example, we will return to (hopefully) paying full gross wages. And secondly, at the end of phase (a) we may be required to repay some of the holidays we took during that period. So, for example, if we reached an arrangement with our landlord for a 3 month rent holiday (April, May and June), it’s possible that those 3 months are then ‘repaid’ over the next 9 months (July – March ’21). This does, of course, presuppose a return to some degree of normality within the next few months. I understand that is unknown.
Nonetheless both the numbers calculated by (a) and (b) above are absolutely vital at this stage. It’s possible that during the (a) phase we will be unable to earn any money. The only receipts may well be Local Authority Grants (if we are fortunate enough to receive them). But we can very quickly calculate from our opening cash position, add grants, less (a) x (the number of months we are in this position) will show us the amount of money we may need to borrow (very broadly speaking).
And (b) sets the level at which our income needs to be in order to cover those costs.
Hopefully you can see how important both these numbers are?
Sorry, did I write that correctly? Recruitment? Yes, it may seem a little strange to even think about that just now but frankly, I don’t think there has been a better time. Firstly, it wasn’t so long ago that recruitment was by far and away our biggest issue. Businesses were under pressure trying to grow and yet there were simply no staff available to take the jobs. Secondly, I see no reason why when all this is over that we will continue to want to grow our businesses and take advantage of the new landscape. Thirdly, it’s quite possible that a few disgruntled employees, or people in places they don’t want to be, are looking to for a ’new start’. So, you could do an awful lot worse than put some feelers out there to see who’s available. Have some conversations with some potential employees. You don’t have to commit today, but you may be able to prime them for when the time is right and maybe this is an opportunity for you to take control rather than being on your back foot.
Ok, maybe I really have lost the plot. But no, this is the golden time for marketing. Marketing isn’t necessarily ‘buy this now’ (that’s ’selling’). Marketing is all about communication. It’s time to communicate with your audience and maintain all your existing relationships, and build some new ones too. Your messages at this precise time should not only express empathy, but also offer hope or opportunity. To be honest, the most fun I can have right now is imaging all the things I want to be doing when this is all over. So people are making value judgements just now about what they do and how they do it. They are also experiencing massive change and therefore are more open to change. So right now we should be creating dialogues with our existing customers and some potential new ones to ensure we are all on the same page when this is over.
Hopefully some of this is beginning to resonate with you but for some it may just be white noise. Either way, if you think we can help in any way, whether it be a type (a) calculation, or another conversation about something else, then don’t hesitate, at all, to get in touch. We’d love to help in any way we can.
Landline – 01326 660022
Mobile/WhatsApp/Text – 07779799995 – Mike Hutchinson
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