LEXIT: Which business are you?
Have you got your Strategy Thought Through?
As we move into June and the country is tentatively opening for business, it is a crucial time to reflect where our businesses are and who needs which kind[s] of support and leadership.
Different journeys that different businesses have been on leaves them and their wider industries facing some shared, some overlapping and some different challenges.
Common to all has been governmental business support to enable continued trade where possible through March April and May 2020.
- Furloughing of staff
- Access to Self-employment support
- Easy access capital
Each of these being phased out over the next months will see a repositioning of the UK economy in a ways that have not been seen in living memory.
In the business community our hope is to pump prime and deliver a V shaped recovery but recession looms, Brexit is back and costs across the board are set to rise. However, there are opportunities as well as threats. Our suggestion is map your business into the UK landscape. Where do you sit, who is in a similar place, who is in your potential network, where to you need to connect and how?
- Think through a focused plan
- Give yourself a V shaped hope.
These are the businesses who have been in the right place at the right time with the right product [s] to market.
Supermarkets being the obvious example. But others would include Glaxo, Astra Zeneca, NETFLIX, AMAZON, APPLE, VODAFONE etc
The issue has been meeting the customer demand that shot through the roof overnight. The challenge for thrivers is clear, sustain the performance but doing so in a balanced way.
The customer needs to feel supported going forward not taken for granted during a phase when there was no option from whom to buy.
Innovations introduced during the lockdown period need to be sustained and leveraged asap while the sensitivity / malleability of the customer is at receptive levels. For example, a strong push toward cashless payment in the supermarket seems doable and a cost saver seeing head count reduction.
These businesses need to attend to staffing as do all businesses as there will undoubtedly be head count reduction. But the fortunate position of healthy cashflows ought to trigger not just dividend payments but also 2030 innovation linked investment.
These are our favourite stocks, the healthy blue chips that have strong businesses, have had a loss of turnover but anticipate fully recovery by 2023. It is a case of using cash reserves [usually a debt ratio of 30% or less] to ride out the storm.
Examples would be BP, Shell, Whitbread, Vodafone, Easyjet
Whitbread for example launched a rights issue that was well taken up in late May and placed them in a strong position to capitalise on market recovery and or boost [staycations drive demand in the UK market] as it emerges.
The biggest question marks hang over these firms. They will no doubt thrive or dive. They are the firms whose faces fitted during lockdown such as Pelton the high end [previous derided] exercise cycle, e-gamers such as Fanatic and even the BBC. The latter had seen a big uptick in figures but with no additional source of income and cuts demanded, rapid turnaround innovation will be needed to retain anything like a similar footprint by 2025.
The challenge here is to not confuse a market driven by temporal demand with one that truly reflects the sustained customer base required to drive into a challenging decade.
Three issues will be ditching a pivot at the right time, rapid innovation and liquidity. It may be that high degrees of collaboration are sought amongst this strategic group.
These are the businesses that were on borrowed time or cash or both and the lockdown has simply brought forward their demise.
The high street being the obvious location as well as the hospitality sector.
In many instances, it was the debt from multiple private equity rotations that killed the business.
LEXIT means breathe, re-group and power forward across UK plc. It is a question of keep the faith, hold your nerve and enable the V shaped recovery we all so desire.