The world of business is a challenging one at the very best of times, but now more than ever, business owners are seeing their plans turned completely upside down due to Covid-19. While the world grapples with the ‘new normal’, now is the time for businesses to be adaptable, inventive and brave.
At Tilney, we have many clients who are involved in businesses and have been working closely with them both from a personal and business finance perspective to help them regroup, respond effectively and forge a new path. Here, we talk to three Tilney financial planners and two clients involved in businesses about their experiences.
Tracy Sian Browne, Director, Tilney Private Office
At the outset, everything seemed to happen so quickly. We were aware that there was an outbreak of a virus overseas, but it didn’t necessarily register that it was going to arrive on our own doorstep. Suddenly, the world stock markets went into free fall, it seemed like the news was changing every hour and we were then in lockdown. Initially, people were overwhelmed as there was a lot to take on board.
For those who are involved with running a business, there have largely been two major concerns – firstly, the wellbeing of their family and loved ones and secondly, the impact of the virus on the future of the company and the wellbeing of their employees. I found that once people knew that their family was safe, they got their financial ducks in a row quite quickly.
Having a real handle on your business’s cashflow has been vital, as essentially, it tells people how much longer the company can survive and gives a deadline by which time any changes have to be made. From there, people have been able to see what Government schemes are available to them, if furloughing staff is necessary, what expenditure can be reduced or removed altogether, identifying other sources of income and the ways to adapt their plans in order for the business to survive.
Protecting your business
Going forward, business protection needs to be considered if it hasn’t already. Business protection policies can sometimes be seen as a luxury when in fact they are often a necessity for a business to grow and keep afloat. You need to think about what would happen to the business in the event of your or another key member of staff’s death or incapacity. Previously, the worst case scenario was what if a key person was hit by a bus, but now it’s what if that person caught the virus, which seems more likely. Covid-19 has made people realise that they need a plan b – we’re not invincible. A financial planner will go through all of the types of protection available and advise which is the most suitable option for you.
In terms of the running of your business and what you produce, it’s clear that to do things exactly the same way that you did before could be a mistake. It seems unlikely that the world will work as it did before. Embracing agile working and getting your staff’s input is key to your ongoing success. It’s important to be robust, agile, adaptable and listen to your clients. This pandemic has sped up the innovation of some businesses, such as the ones featured here, whereas those who are stuck in their ways sadly might not survive.
The same applies to your finances. What might have worked for you before may not work now and might not be viable for the future. One of the benefits of having a financial plan in place is that you can review and adapt it. At Tilney, we always put in ‘what if’ scenarios when planning for our clients.
I think the one thing everyone will take from this experience is what if there is another catastrophe. When using cashflow modelling, we build in a stock market crash to cover this and see how robust a financial plan is. Cashflow modelling is used by financial planners to forecast your future finances. It will also show you how much you need to keep back in an emergency cash fund. Not everyone has the luxury of a cash buffer and sometimes keeping money back in cash is not the right option but if this buffer could save your business, then it could be the most sensible thing to do.
Ann-Marie Atkins, Financial Planning Managing Partner
Many of my clients are business owners or are involved with business and in the midst of this pandemic, it’s so nice to hear just how concerned many business owners are about their staff. It’s restored my faith in humanity at what has been a really awful time.
Clearly, many business owners have had to make decisions around the number of staff they retain and furlough based on business performance and cashflow. If they are furloughing staff, they’ve had to decide if they are going to use the Government scheme alone or if they can afford to make up the shortfall.
Having enough cash
What we’ve found with many businesses is that there can be issues surrounding cashflow as many want to hold onto cash for that little bit longer. A lot of the Government payments should have now been made but prior to this, paying suppliers and contractors could have been a problem, which has had a knock on effect on other businesses. There’s been a definite slow down surrounding payments made in cash and people have become nervous about how they are going to support their staff so they’ve had to take action.
Bucking the trend
This is where I’ve seen business owners who are careering off in a positive direction make brave decisions. These are the ones who have been very agile with everything that has been happening. They have come to me looking for ways to inject more cash into their business to produce more products that are selling really well. One of the ways in which they are doing this is by taking out a Government-issued Business Disruption Loan (if they are eligible). As the interest on this loan is charged at such a competitive rate, it has been a lifeline for many people which can be really useful.
I have also helped business owners to inject more money into their business by using their pensions. This method of raising cash is really helpful to people who are not eligible for the Business Disruption Loan. If you have a Self-invested Personal Pension (SIPP) or a Small Self-administered Pension Scheme (SSAS), which is linked to your business, you can loan back to the business up to 50% of the value of the pension (must be secured). With careful planning, this could be life-changing and give you the funds you need to turn your business around or grow and thrive further. This option may not be suitable for everyone, so advice should be sought.
Reviewing your retirement plans
A number of business sales have come to a standstill during lockdown. It could now be many years before the owners sell and as a result, a number of people have had to re-evaluate their retirement plans. I’ve been working closely with some business owners to check if they still have enough money to fulfil their retirement plans even if their business has been devalued. I do this by using cashflow modelling as Tracy outlined above.
There has been an array of outcomes. Some people’s businesses have been hugely devalued and their cash reserves are dwindling, so we have recommended that they continue to work and hold off on selling for another few years - if it looks like their business will recover over time. For others, their business has operated as it did before with no changes to its value, so their retirement plans are on track. Finally, there are those who have made successful changes to the business which has increased its value and they might be able to sell the business and retire even earlier than they thought.
What to do now
If your business is struggling at the moment, you need to take some time to re-evaluate your incomings and outgoings. Once you know what you can afford, you need to be agile in your thinking and come up with a plan on what needs to change. What products are no longer selling? What’s in favour right now? As you’ll see in the below example, for Hothouse, this meant swapping self-tan for hand sanitizer. You have to be creative here. Next, you need to make sure you have the right technology, support and management in place in order to coach and lead teams and produce any new products.
Even if your business survived the initial wave of the pandemic, you need to think about what you would do if this happens again. You need to ask yourself:
- What worked well in the beginning?
- What didn’t work?
- What changes can I make?
- Can I afford to make these changes?
Answering the last question is where the value of financial advice can really be seen. A financial planner can help you to assess what you have, what you can afford, how long you have and how you can fund these changes.
Zoe Bailey, Financial Planner
I think the whole lockdown period has been a learning curve for everyone. In their personal lives, people have learned how strong and adaptable they are when things move away from the norm and the same goes for business owners.
Having an emergency fund
Tracy and Ann-Marie have already discussed the topic but I cannot emphasise enough that cash is king. The vast majority of my clients will have an emergency cash fund whether or not they own a business because this is the basis of solid financial planning advice. Charlotte Broadbent, the owner of Charlotte Loves, is one of my clients and even before the pandemic, I advised her to ensure she had cash reserves to cover any emergencies. This gave her the time she needed to come up with a new plan for her business.
While it’s important that business owners are agile, adaptable and quick-thinking, it’s also really important that they don’t rush into any decisions which could cause them more financial damage. Having enough money in the bank to support yourself during this down time will allow you to wait it out and not make any rash or rushed decisions. If you need to make changes, you can use the money to cover some time ‘off’ when you can do your research and make educated choices about the changes your need to make.
I absolutely appreciate that having a large cash lump sum is not a reality for many people, but that’s where the Government schemes come in. Make sure you know what you are entitled to. While we might be at the end of the first wave of the virus, the conservative financial planner in me says that we need to be prepared for a second one. The money from these schemes could be held back if you don’t need to spend them immediately in order to build up your cash reserves.
Pensions are still a hot topic
Pensions are still one of the main issues clients are speaking to me about and business owners are no exception. For people who are fast approaching retirement, one of their main concerns has been if they can still afford to retire when the value of their pension has dropped. Others want to know what happens to their pension contributions if they have been furloughed. Business owners are extremely worried about this and want to make sure making the contributions are still affordable during this time.
Essentially, what many business owners want to know is if retirement plans are still viable or if they need to change. Thinking about this can really help a business owner to redirect their energy and focus on what they need to do now.
The future looks quite uncertain for most people at the moment, so it’s important to have a plan but also accept that it may need to be changed and adapted to suit your needs. It’s also vital that you make every decision carefully and with your eyes wide open. A financial planner can help you make these decisions.
Now could be a great time to invest in the stock market. That being said, you should make sure that you still have enough money in your cash reserves for emergencies after making any sort of investments. Think about if that money could keep your business afloat if this happens again in the future. If it’s tied up in an investment, you may not be able to access it quickly. Also, as with any investment, the value may go down as well as up, and you may get back less than you originally invested.
If your business struggled during this period, take the time to look at what went wrong and what went well. If you are in any doubt, think about contacting a business adviser who can give you some help. While it sounds really cliché, it’s important to be kind to yourself. If your business survived, that’s a massive achievement in itself and is so impressive!
Charlotte Broadbent, owner of Charlotte Loves Ltd
What I do
My business is multi-hyphenated and I have multiple revenue streams. I call myself a personal stylist (specialising in dressing and coaching corporate and high net worth clients) but I’m also a fashion TV presenter, a style blogger, a fashion lecturer, an impact coach and a key-note speaker on Dressing for Success. I also deliver a variety of fashion boutique presentations. My whole business revolves around people, face to face encounters, bringing the joy of style, colour and confidence to everyone I meet.
Prior to March of this year, I had only carried out a handful of client consultations via video calls. Being a personal stylist, it’s quite a tactile role. I’m physically helping people in and out of clothes, analysing the effect of the clothes on the client’s body. With the TV presenting I’m in a studio, I’m in the shops when I’m presenting new trends or I’m in an office when I’m coaching or delivering seminars.
Overnight, lockdown changed the whole ‘styling industry’ landscape. Demand dropped (I lost £15,000 worth of bookings in one week and had no income). People scrambled to develop their plans to deal with the new normal. Suddenly people weren’t going to work, all big events were cancelled – no weddings, no work conferences, no holidays – and they couldn’t get to the shops, were dressing down, losing jobs and income, cutting back on everything other than essentials. The college I lecture at shut, boutiques shut. Being quarantined meant I couldn’t get to the TV studios. People were afraid and didn’t feel in control.
Luckily, as I had been working closely with Zoe prior to this, I had an emergency cash reserve which I could call on. As I run a small limited company, I was not eligible for the Government’s Self Employment Income Support Scheme (SEISS). If I hadn’t had the cash lump sum, I don’t know how the business would have survived.
I looked at my business model – could I still deliver all my services remotely and virtually? Quickly I realised that I could still deliver premium services such as colour consultations, body shape analysis and virtual shopping remotely on platforms like Zoom or Facetime. I developed look books and mood boards on an online platform called Milanote. I’d take a brief and a budget and instead of shopping face to face with clients, I created their wardrobe with images and links carefully curated on Milanote. I communicated this development via my newsletter and bespoke emails to clients who I thought would benefit. I transferred from occasionwear dressing to focussing on sportswear, loungewear and athleisure – stylish comfort. This in turn transitioned into dressing clients for video calls, dressing from the waist up, sharing beauty tips and hair tips too – essentially coaching people to ‘style yourself happy at home’ using all my quick, effective tips for how to look good on screen. As this developed there was an appetite for these tips to be condensed into motivational virtual webinars to inspire corporates working from home to dress effectively and appropriately to improve self-confidence, mental wellbeing and to inspire their teams. For example, I encouraged people to wear colour and harness the energy that colour provides (red for energy and blue to relax and so on).
What happens next
As I speak to more of my corporate clients, it seems that many of them are going to be working from home for the rest of the year. Additionally, many businesses are looking to save costs on expenditure like rent, so it seems that more and more people are going to be working from home. While I can’t deny that it’s better shopping with a client in person, I’ll definitely keep the virtual shopping, colour consultations & body shape analysis going. One of the upsides is that it means I can reach a truly global audience, helping them to feel fabulous and look great at home and on screen.
We’ve just launched a global E-diploma for women’s personal styling on which I will deliver virtual lectures to help train aspiring stylists. Classes are 100% virtual and demand is high so this will be a growth area for 2020.
My virtual ‘Style Webinars’ will be a vital part of my business that I aim to expand upon this year. It’s interesting because I never foresaw this as an opportunity before the lockdown.
My advice to other business owners
If your business is struggling in the current climate, you need to assess all of your revenue streams and know exactly what is coming in from where. Check where the money is going out from too and assess if this expenditure is absolutely necessary.
While I had to act quickly, I still needed to be conscientious. Before I made any changes I did my research, I spoke to people and I looked at what I could do virtually.
It’s so important for many businesses to become tech savvy. When you have a new service, use your website, database and social media to promote it. Research what technology will work for you, your clients and your staff.
The key thing is to try out new ideas, avoid the fear of failure and not expect that the old way will continue to work in the new world.
Fiona Lazenby, Commercial Director at Hothouse
What I do
I’m the commercial director for Hothouse which is the company that owns, manufactures and distributes St Moriz self-tan. While I don’t own the business, I am hugely involved in its running and development. I am also a personal client of Ann-Marie. St Moriz is our biggest brand, but we also produce and manufacture haircare products and children’s toiletries – we can pretty much make anything within the hair and skincare arena. We sell to most retailers in the UK and about 23 countries around the world. Everything is manufactured within the UK.
When the lockdown was announced, our major customers like Boots and Superdrug were only focused on selling essential items. Luxuries like self-tan were taken off the radar. We were about to hit our busiest season for tanning and then it just stopped, so we knew something had to change.
We had manufactured hand soap and hand sanitisers in the past, so we had the formulations in the bank, ready to use. Seeing the upward trend in buying these products, we knew we had to switch our attention to these. Mel Brownlow, the Managing Director of the company, and I sat down to work out how we were going to do this. We had to buy new packaging, and come up with design for a new brand within the space of three weeks. In the first two weeks, we got the sales team to actively presell these products while we waited for the component parts to come in. There was a limit on what we could buy – it was hard to get bottles, caps and alcohol. Within hours, we sold everything that we knew we could produce. We then had customers coming to us asking for 1 million units a week. The biggest struggle we had was keeping up with the demand. We sold over £2.5 million within a matter of days. We were only restricted by the time it took to buy packaging and ingredients. Otherwise we could have kept going and done more.
We have had record months because of our change in focus. The group currently employs 75–80 people and I am immensely proud to say that we have not had to furlough or let any employees go because we changed the direction of the business.
What happens next
We plan to continue with the hand soap and sanitiser production. While we’ve sold everything we can get our hands on, we are managing even more customers than before, including the NHS. Covid-19 is not going away anytime soon and as such, neither will the demand for these products. It’s inevitable that more of our competitors are going to produce these hygiene products too, but nevertheless we expect to keep this side of the business going.
The health and safety regulations that have come into force have had an impact on the business which is likely to be ongoing. All office staff are working from home but warehouse and quality assurance staff are still working in the factory. We have provided them with all the correct protective clothing and equipment and have to manage social distancing in the production line which has meant we have had to stagger shifts, so we’ve been open for longer.
My advice to other business owners
The world is a very different place to what it was six months ago and it’s vital to do something creative if you are to survive. Sadly, I’ve seen so many other businesses close without even trying anything different.
It helps being in a good financial position to begin with, which we were. As all of the financial planners have mentioned here, make sure you have cash reserves if you can. We were able to pay all of our suppliers quickly and they knew this. This meant that we were often at the top of the queue for receiving goods as they knew that we could deliver. Money talks, so don’t hold this cash back when you need to pay people.
Before, the process of creating a new product and getting it approved by a buyer could take up to 12 months. You need to be quick, nimble and dynamic, but still keep a clear and cool head. We were honest with the buyers and said if they want the product, they need to help speed up the system. Also, go directly to your local governing bodies to ask for help. They can really help get things moving and want to help you succeed if possible.
Speak to Tilney
Tilney is committed to helping those individuals behind businesses of all shapes and sizes to respond to their current situation and plan ahead. If you would like to speak to a financial planner about your business or personal finances and any concerns you may have, we can arrange a free consultation over the phone or internet. We can’t give you advice during this initial consultation, but we can give you some guidance, let you know if we think you and your business would benefit from financial advice and explain the costs involved. You can book a free consultation online or call us on 020 7189 2400.
Nothing in this article is intended to constitute advice or a recommendation and you should not take any decision based on its content.
This article was previously published on Tilney prior to the launch of Evelyn Partners.