A recession is looming and businesses need to take steps towards recession-proofing their futures.
In our latest blog, our director Jamie Skelding looks at how businesses must act quickly to ensure they can survive the ongoing cost-of-living crisis.
Jamie said with the UK going through a sustained period of stagflation', a time when inflation is high and economic growth is slow, falls in income and rising costs are expected. Businesses need vision with deadlines and self-discipline to help them achieve their goals.
Cutting costs and saving money isn't just about a few big changes instead, lots of small changes to make one big difference.
What to expect
When a recession hits, everyone's income gets squeezed. This means more people will be looking for cheaper rates, creating temptation for businesses to reduce their prices just to keep sales. However, this could be a make-or-break decision for companies, as thin margins lead to greater loss.
Add this to the rising cost of energy and overall running costs of a business, innovative and creative companies could be forced to fold before they have a chance to flourish.
How to prepare
The first and most vital thing businesses can do is to think long-term.
From my experience, it's the companies that make quick short-sighted decisions that fall at the first hurdle. Businesses need to have clear goals and an understanding of how they are going to achieve them. If businesses don't have a target to aim for, their chance of success is far less.
It's fundamental to understand your margins, where your costs sit and your break-even points.
By understanding where your business is now, where it's going and your cashflow needs, you can implement strategies, with the help of an accountant, to make sure the company has access to what they need, when they need it.
I urge businesses to take action now and not wait until it's too late to look further down the track. Cashflow is extremely important for small businesses because it not only covers short-term debt, it provides greater negotiating power, new business opportunities and provides access to capital when needed.
Another area in which businesses can prepare is by examining their margins. As the famous saying goes, turnover is vanity and profit is sanity', it doesn't matter how much you sell if you don't make enough money to stay open.
Steps to take
A recession is as much a period of opportunity as it is a period for simply surviving for many businesses.
The first few steps are all about reviewing, stripping away any necessary spending by asking what value that spend adds to the business and, if the answer is not positive, curtail it.
The second area to review would be to look at processes, finding ways to streamline and improve can help create cost-saving solutions.
Renegotiating contracts and shopping around will play a key role in saving money.
Keeping morale high
If companies tackle these steps in the early days, it will stand them in good stead.
You don't need to feel alone in this storm, everyone is in the same boat. If you can make smarter decisions now when some players inevitably leave the market, you will be best placed to pick up their business.
In adversity, you can find opportunity. I challenge businesses to be bold and brave and make changes before they become a necessity.
Prime Accountants Group has announced Morgan Davies as our new managing director, succeeding the long-serving Kevin Johns.
Morgan formally takes over the role on September 1 as part of our advanced succession planning, which has been taking place behind the scenes for some time.
Kevin Johns
Kevin has worked for Prime for 31 years and has been its managing director since 2015.
As well as holding the positions of Solihull BID chairman and vice-president of the Solihull Chamber of Commerce, Kevin has spearheaded Prime’s fundraising efforts, which have seen the business raise tens of thousands of pounds for charities such as Solihull Life Opportunities (SoLO) and Birmingham Children’s Hospital.
Morgan Davies
Morgan is one of the four original founding partners of Prime from 2007 and steps up from his role as director overseeing our audit and accounts department.
While Kevin is stepping down as managing director, he will continue to work with his portfolio of clients and remains on the senior leadership team.
To facilitate Morgan taking on his new role, fellow directors Jeremy Kitson and Paul Guise will take over his responsibility for audit and accounts.
Succession Planning
Kevin, who was awarded a British Empire Medal (BEM) in the New Year’s Honours list in 2019 for services to Solihull, said: “I’ve planned to gradually retire over the next few years, so handing over to Morgan now means we will have a far more controlled and better transition.
“I’ll still be part of the leadership team, I’m still looking after my clients but I just won’t be leading on the day-to-day anymore.
“I said when we marked my 30th anniversary with Prime that I’ve been leaving for a long time! This is long-term succession planning and a natural progression in any business. I’m passing the baton to someone in Morgan who is exceptionally capable and well-positioned to keep the firm on exactly the right path.”
The promotion comes in a milestone year for Morgan, who has worked for the firm for 20 years and has been in practice for 30 years.
He said: “This is part of a succession plan we have worked hard on. I’ve been audit and accounts lead ever since I’ve been here at Prime, which is effectively half the firm, as well as being part of the senior leadership team.
“The experience that gives you is seeing every element of the business up close. It’s a natural fit, we work closely together and I have supported Kev for years.
“The culture of this company is to develop people and empower them to succeed and grow, and this demonstrates that with aplomb. As I move up to managing director, two very capable directors in Paul and Jeremy move up to audit and accounts – it’s good for everyone within the pyramid at Prime.”
About the Author: Jamie Skelding
