Today (Monday 27th)
I am less dazed & confused than I was on Friday I’m pleased to say! I
realise now that I was totally out of touch with the feelings of a large
section of the UK population. It never
occurred to me, as others, that there would be a serious move to leave the EU.
But now, as business owners, we need to prepare ourselves for the uncertainty of the next few months, or even years, as the new paradigm governing our country is discussed, negotiated and put into place.
You will know that we will see a change in government, whether it be ‘just’ the change in PM and the cabinet or a general election leading to a completely different political party taking power. Either way, we can expect our representatives to be distracted for some time. The statement by George Osborne this morning (Monday 27th) is some comfort and some of the more reasoned statements we are hearing from ‘Leave’ campaigners and advisors provide comfort.
You may know that our entire tax and legal system will need to be rewritten, that these changes will affect our trading relationships. We have already seen the financial ups and downs which could continue as various announcements are made along the way and the markets react or anticipate reactions. Any benefits which we may derive from the exit are likely to be some years down the line.
What can we do to protect our livelihoods and the financial future of our families?
Currencies – an immediate impact will be felt by our clients who are buying overseas following the dramatic fall of the pound. Those buying in Euros and Dollars are most greatly affected and we hear that Asia was affected overnight on Sunday 26th. Some commentators believe that the GBP will end up stronger than the Euro but mainly we can expect that GBP will stabilise at a lower rate than prior to the referendum.
Most of our clients where currency is fundamental to their business will have secured their forward position but there are challenges establishing rates to buy at now. Currency management will have to be a pre-occupation for some time to come.
Cash flow – your customers may feel the impact of the economic changes so be sure to keep on top of your customer collections. If you haven’t already done so, set procedures and stick to them. Some businesses may need to take an up front deposit to protect their position.
Sales – how could your sales be affected by this change? What will be the reaction of your customers? Keep close to them to understand their perception. In the last recession we saw large businesses freeze their budgets until they were more certain of their position. Consumer spending dropped too. This could happen again and there is some indication this morning (Monday 27th) that this has started. Try to be the person they need most (I know this is difficult, we live in a very competitive world) and watch the patterns of demand closely so you provide what your customers really really want.
For others there will be opportunities as the need for your skills, services or products increase. And for exporters the lower GBP can be helpful.
Change always brings opportunities so stay alert for yours.
Marketing – increase your marketing activity in the most relevant way for your business. We saw a number of clients through the recession by working with them to identify their strengths and communicating them. Focus on your most profitable activities. If you don’t have a marketing strategy, get one, so you are focussed. Investment in strategy development, with or without a consultant to facilitate this will help you put your efforts in the right place.
Pricing – you may face downward price pressure. Be sure you know what your costs are and set a minimum price for your services or products. Keep a close eye on your mark ups or margins to be sure they do not fall too low. Some may find there will be opportunities for price increases(!) due to the changes in the market place. Be alert to those opportunities and grab them!
Cost cutting – spending in business should be investment. Its not just about keeping expenditure down, it’s about getting value from your spending. Most small business owners are good at keeping overheads down, it’s a necessity at all times. If you haven’t done so recently, I’d recommend you review all your utilities with a comparison agent or on the websites available. When you make the judgement to move, beware contract periods. You need to be aware of how the markets are going so you know whether fixing a price will work for you over the period concerned. As time goes on we are likely to see volatility in costs caused by the restructuring of the market. Its impossible at this stage to judge which way it will go and when.
Borrowing – this is likely to get tougher for a while as banks will lack confidence in the future. There are other sources of funds available from peer to peer lending and invoice finance which may be viable options for your business. Before committing to any borrowing be sure to consider the interest rate implications. Mark Carney, Governor of the Bank of England has said they "will manage the economy with quantitative easing and interest rates may fall, however this may be temporary."
I’m hoping that we’ve all got a bit over-emotional at the shock of the result and will find that common sense will prevail in our government and the EU, so that we don’t throw the baby out with the bath water (as my granny used to say!)
If you feel you need help and support to see your way through, we are always here for one off meetings to clear your mind and make decisions, help you get useful information out of your accounting records or for more regular meetings to see you through this period of transition.
Carole Jordan FCCA is Managing Director of BusinessHeads, Consultants and Accountants in Brighton. She has worked for over 20 years with service based and design led businesses across the UK helping them to turn their ideas into reality and maximise their profits. She is available for face to face or Skype consultations.
Call us on 01273 882200, or email us at: firstname.lastname@example.org and we'll find a time that suits you.
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