When faced with an alien, rapidly changing, and threatening environment it is human nature to go into survival mode. The Covid-19 lockdown and its impact on the economy has been pretty frightening to business leaders, shocked that the world can change so rapidly. But we are now about eight months into this new situation and in many sectors business has partially stabilised.

The current situation has given businesses a licence to innovate. Many teams have had to scale down, work split shifts, or make other changes. This has provided a benefit – management have had to get closer to day-to-day operations and have directly experienced the good, the bad and the ugly aspects of their own activities.

Here I draw on some direct experiences during 2020:

1. Winemaking is essentially manufacturing combined with the vagaries of farming. One client was already on a journey of expanding its sub-contract wine making operations, when the lockdown stopped all of its “tours and tastings” activities that were its main revenue stream. There was a switch to web-based selling, with regular communications going out to its customer base. An expansion in “factory capacity” was needed to address 2021 business levels, and we became aware that strong government funding was available in the sector. A successful grant application was twinned with a BBL to cover the cashflow balance. Now the business has the capacity to meet its 2021 customer processing needs and the shortfall in retail income has been partially infilled with grant money.
2. A composites manufacturer has always bought in sub-assemblies from a European supply chain, as it lacked the necessary equipment. However, a margin improvement could be obtained by bringing the process in-house. This would mitigate some Brexit risks by “re-shoring” and also reduce stock-holding levels. Again, they found there was strong grant funding available and a good relationship with Lloyds Bank led to lending support for the project. Preparing the factory space was made easier by lower activity levels, and staff were happy to be “un-furloughed” to work on the project. Some new jobs were created.
3. R&D is a major investment in many businesses. An electronics client usually ran new developments serially but had come up with two good new product ideas. Aided by a strong balance sheet, they decided to recruit more staff and run the two projects in parallel. Interviewing and recruiting proved to be easier than normal, with furloughed candidates available and keen to move. “Zoom” and “Teams” have become the new normal, with most of the teams working from home. One project is now nearing completion and the R&D tax credit claims will provide further support.
4. A distribution company had come up with a product idea about five years ago and created a subsidiary to develop and produce the item. This turned into a “problem child”, with insufficient experience and using “spare” resources that were unreliable. It took up hours of debate in management meetings and wasn’t profitable, and yet nobody was brave enough to kill it off. The Covid-19 situation made the management focus on what they were good at and close down the distraction at last.
5. Traditional international sales visits and trade shows have suddenly stopped, leaving a major challenge in how to communicate with current and potential customers. Several clients have engaged videographers to produce informative content for their websites, email marketing campaigns and social media activities. Online video conferencing is not the novelty it once was and will help achieve environmental improvements through travel reduction.
6. Video has other uses too: There has also been an investment in practical content such as installation guides, fault-finding and maintenance activities – all of which is available to global customers 24/7. When travel resumes, many of the customer support activities may have been cost reduced.

So, in summary, the reasons to improve your business have not gone away and some changes have been accelerated by outside factors. You cannot keep your heads down forever in survival-only mode. By making your changes now, you may yet gain an advantage over your stagnant competitors. Provided you can finance your ideas, there must be ways in which you can:

• Open up new revenue streams
• Remind customers you are still in business
• Increase capacity
• Revisit make-or-buy decisions to enhance margin and value-add
• Re-shore activities for lead time, flexibility or cost reasons
• Invest in R&D to produce new or better products
• Reinvent your processes, delivering greater productivity
• Get rid of non-value-adding activities in your business, focus on what you are good at
• Redesign and/or down-size teams to meet your future needs, work in new ways
• Invest in technology to engage in different ways with customers
• Give better customer support through the use of technology
• Find new ways of working to achieve green ambitions
• Obtain government support and funding where available
• Utilise bank support to spread the cashflow forward to match the benefits

More on Nick Tiley

Nick founded Cambridge Financial Direction Ltd in 2013, providing portfolio FD services to SMEs in East Anglia. He has a degree in Production Engineering from Cambridge University and experience working in senior operations and finance roles over the last 30 years. He is also a member of the ICAEW Manufacturing Advisory Group.

^{*The views expressed are the author’s and not ICAEW’s.}