On the 23rd of June 2016 the UK made the decision to leave the EU. As predicted by many economists the UK is now going through a period of uncertainty. The GBP currency has plunged almost 40% reaching its lowest value since 1985.
The UK stock market has also been hugely affected and UK companies which have relationship with European countries or serve clients in the European area have been badly affected. Apart from the economic consequences the UK is also suffering from an internal political crises. The UK needs to negotiate the terms to withdraw from the EU as soon as possible. It seems to me that the UK did not have a plan to withdraw from the EU as the vast majority of the predictions to the referendum result were wrong.
The UK needs to negotiate the following terms with the EU: free movement of people, free movement of goods, free movement of capital and free movement of services. In my opinion, these negotiations are ten times more important than the referendum result. There are many small and medium entreprise owners who are very concerned about the impact Brexit will have to their businesses.
During a recession, banks reduce their willingness to lend money and it becomes more difficult for businesses to borrow. The rate of unemployment increases and consumer confidence decreases. As a consequence, consumers become more selective about what they buy and who they buy from. Adding value to your product and service is very important.
Here below are a few tips for you if you are a business owner concerned with the impact Brexit might have on your business. It may seem obvious, but sometimes many small business owners like yourself are either too busy or distracted to give it much thought. Dont wait until it’s too late.
- Don’t panic: In periods of uncertainty, you must keep calm. Being stressed for not knowing the consequences of the EU referendum to your business will not help you at all. You need to be 100% prepared to make important and quick decisions as time goes by. Being calm will increase your chances of making the right decisions. Also, be careful with what you read. Nowadays anyone can add information on social media. Be aware, there are some newspapers that are politically oriented or have their own agenda by speculating.
- Act: Do not leave for tomorrow the decisions that you need to make today. Not acting now could cost you twice the amount. Not acting now could also cost you the future of your business. This is also a period when you really need to understand the difference between saying YES or NO to a business opportunity.
- Measure the real impact: periods of uncertainty and economic crisis affect different segments and markets in different ways. Some businesses suffer more than others. For some, it could also bring opportunities. Make sure you understand the real impact of the EU referendum on your business. Ask existing clients what impact the referendum result will have on them. Are they willing to keep the business relationship with you? If not, how many existing clients your business will loose? What will be the impact on your business turnover if you lost clients?
- Monitor your financial performance: The best advice I would give to all the SMEs businesses owners at this moment is: Monitor your figures on a regular basis, whether its weekly or monthly. I have seen many business people who only check their finances every 3,6 or even 12 months.
- Reduce your business structure: If you feel that your business sales will be hit due to the economic crises, be prepared to restructure your business downgrading if necessary. Do you really need big premises? Could you not temporarily sub-let some working space?
- Keep focus: This is the time you should focus in your business. You should give all your time and energy to the business. Perhaps this is not the ideal time to look into a new business opportunity, unless it is a very interesting one.
- For SME’s reducing the number of employees should be the last action to be taken: Every time there is a financial crises we hear about redundancies being made amongst big companies. In my opinion, in a SME environment, the impact of sending employees home is not the same as in a big Company. Most SME work in an organized manner, where every employee has a role to play. Having less employees could mean loosing control of the business operations. Not to mention that making employees redundant might trigger uncertainty amongst other employees.
- Don’t let people opinions affect your opinion: some people get more concerned than others when they face a challenge or need to resolve a problem. You should listen to them carefully but you cannot let them change your mind. Follow your intuition. You are in charge of your life and your business and you have experience in your business, not the others. Once again, bear in mind that economic crises affect markets and segments differently as well as affecting businesses in the same market differently.
- You must be a survivor. Fasten your seat belt but dont stop flying. Your business might go through a period of turbulence but you must use all the flying lessons you have learned as an entrepreneur to survive the economic crisis. The period of uncertainty does not last forever.
- Keep up with your marketing strategy: The biggest mistake many business people make when there is a period of uncertainty is to reduce the marketing budget. I always advice my clients to reduce other business expenses apart from labour and marketing. Make sure you make a business expenses analysis to choose properly which business expenses you can reduce.
- Cashflow is King: You already heard many times that cash is more important than profit. That is correct. Sometimes a business can be very profitable and not have money available to pay for its business costs. Make sure your business has a good credit control policy. You cannot forget that during an economic crisis businesses go bust and they dont pay what they owe. You can also outsource a finance company to offer your business invoice discounting services with insurance. This way you can minimize your credit risk. Make sure you keep a tight control of your business stock. Stock means money tied up and only becomes real money when it is sold.
- Evolve to survive: Most of SME’s must always adapt to survive during difficult times. Could your business find opportunities during the recession?
- Ask employees for help: You need to understand that your business is not the only one dealing with a recession. You also need to share your ideas and concerns with all your employees. Always keep them up to date and ask all your employees what they think. They could come up with very good ideas that could help you. This is the time when you need your employees the most.
Most of it is elementary, however we are more likely to see basic mistakes in others than in ourselves. Just calm down, make a self assessment and understand your or your business limitations. This is not the first crisis and will not be the last one, so stay positive and take advantage of it in order to learn and gain experience as a business person.
If you have any questions about this article, please send me an email Rodolfo.firstname.lastname@example.org