Founder & Chairman of The Corporate Finance Network, Kirsty McGregor, shares her highly practical advice, for the short to medium term fallout of the EU Referendum, with entrepreneurs of owner managed businesses
The Brexit vote has been a shock to many and I expect few small businesses have plans in place for this outcome. But now is indeed the time to act and plan, plan and plan some more.
Our country is full of wily, flexible and driven entrepreneurs. But they notoriously also live by the skin of their teeth, and many do not have formal plans and strategies. If anything has been learnt over the last 10 years, where SMEs helped to really dig the economy out of one of the longest recessions in history, it’s that, yes, guts and ingenuity are needed by our country’s entrepreneurs, but common sense and a bit of foresight is also required.
Where many failed to predict the impact of the recession over the past decade, and hung on by their fingertips, this time there is no excuse. We do not know the impact of this vote over the next few weeks, months and even years on the wider economy, but as I write this, the currency and stock markets have still had billions wiped off their values. So entrepreneurs take note, follow these steps and shore up your business so that it still thrives during this possible tumultuous time. And if the economy relaxes and the worst doesn’t happen, then you’ll still sleep better in the meantime!
1. Plan, plan, and plan some more. Don’t rely on your gut instinct or good luck. If you never normally use financial projections, start to use them now! Consider how all your major costs and income could be affected and forecast your profitability and your cashflow. A business that has a clear view of the possibilities in the future (even if there are a few different scenarios) will give confidence to the banks and suppliers alike. And should you require a future injection of working capital, you can predict it well in advance and find alternative solutions in good time.
2. Consider your purchases and the short term impact of their cost and, where possible, seek to contract to firm prices. Oil is likely to increase, as are the cost of other commodities and metals, any goods or raw materials that are imported (even if via your supplier) will become more expensive due to the weakening value of the pound, and if you trade overseas, look at your foreign exchange risk and if advised, hedge against it to give you fixed exposure.
3. Assess the credit rating of your suppliers and customers. Spread your risk wherever you perceive a problem. Diversify your purchase ledger and find alternative suppliers if you feel you have any potential issues of restricted supply. Besides immediate raw materials, also consider wider suppliers such as transport companies, utilities, IT support as well as making a practice of obtaining several quotes when renewing insurance policies, or using a broker who can obtain better commercial rates than you can directly.
4. Be brave! Don’t stop innovating. Find new markets, new products and continue building this great country into the most entrepreneurial in the world!