With the recent ‘we should expect a hard Brexit’ announcement from Prime Minister Theresa May, what can business owners do now to protect their business from possible collapse?
There have been assumptions made that Britain would exit Europe in a soft manner. However, recent claims from Theresa May now place this in doubt. Is Britain in for a bumpy ride? Are we going to find the door closed to our usual trading suppliers or customers?
Whilst nobody can accurately forecast what will happen, it may be considered prudent to do a little forecasting based on worst, medium and best assumptions. The backlash from Europe will most likely be short term as other member countries are also struggling. Whether you agree with Brexit or not, Britain may be seen in the future as a strong leader for taking such an unprecedented step and going its own way. More countries may follow as their home markets are collapsing and the pressure on the respective government to do something mounts.
So, here’s what you can do now…
1. Assume A Weaker Currency
We have already seen the pound at the lowest rate against the Euro, dollar and other currencies. Is this a measure by governments? Most likely it’s a profit-taking opportunity created by banks and the major influencers.
It may be prudent to forecast further reductions. Do your sums. What happens if the pound falls even lower rates? You decide how low this could be. A weak pound means supplies from abroad are more expensive, but sales to these countries become cheaper for the buyer. How does this impact your business? Could you find that sales increase but your margins have been eroded?
It would be useful to re-forecast your business numbers and see how different scenarios impact profit and cash flow. If you haven’t done so already, is it worth establishing currency accounts or considering opening accounts in established foreign banks?
2. Undertake A Detailed Review Of Your Costs
This is the time to look in detail at the costs of your business. Can you streamline any processes? Are there any pending staff retirements you could bring forward to allow you to restructure, change roles and responsibilities? Will losing a member of staff hurt your business so much or is there a way of making it work?
Some time ago I was working with a business and we looked at the time it took to produce a particular frame for the finished product. Initially, it took around 35 minutes to complete the process. I suggested that the management team gave the task of reducing this process to the people responsible for completing the task – the shop floor team. I set them a target of shaving 5 minutes off the process time. They excelled, and found way of completing the entire process in 17 minutes – a fantastic achievement.
As you can imagine, this was a process completed many times in a day. The new process saved the company a fortune and the team were rewarded for their efforts. Can your business achieve similar or better results? You’ll only know if you allow the team to try.
By reducing your costs now through streamlining, you are making your business more competitive. This does not mean you should reduce prices as it’s far too early for that. However, if, as a result, you become far more profitable, then it makes sense to consider re-investing the profits to either take your business forward and become more cutting-edge or more profitable. Will new machinery make the process easier, faster, cheaper?
3. Get Closer To Your Key Customers
What would happen to your business if you lost half of your key customers next week? What would you do to replace them? What would you do to try and retain them?
Whatever these answers are, you should be planning on or implementing these measures now. This is the time to speed up the process of customer retention. Customer attrition is a terrible disease that many businesses do not tackle. This is where customers leave you by quietly slipping away over time and you do nothing about it.
It’s worth measuring your current attrition rate and looking at ways to reduce or eliminate it. This may require some time and a lot of testing, but it is worth it, especially if your attrition rate is high. The cost of acquiring a new customer is considerably higher than retaining the ones you have. It makes sense to re-evaluate your marketing to existing customers and set up a customer feedback forum – a private Facebook group can be an ideal platform for this. Perhaps contacting previous customers to ascertain why they do not buy from you would also be useful.
If Brexit is going to create problems for your existing customers to stay loyal to you, then you need to know and do something now. This ‘something’ needs assure them that you can continue to supply with the caveat that nobody can currently forecast how governments will react.
Thinking out of the box, if a large percentage of your customers are based in Europe, is it worth considering and planning to establish a satellite business in one of the countries? This could be as a stand-alone business or is there potential to joint venture with another established company that provides the base for you to continue the business relationships. Will this also provide a steady base for your supplies and remove exchange rate risk?
Summary
No doubt you are already planning ahead and hopefully these thoughts and ideas will help with this. If you haven’t begun the planning process then it’s time you did, even though it’s early days and the future remains uncertain. Your role at the moment is to list as many ways Brexit could impact your business and find ways to combat this threat now. Good luck.
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