As part of the Mercia community we are delighted to share our new resources with you. These resources have been specifically developed to help address the range of challenges which your business may be facing as a result of the COVID-19 crisis.
Great content created just for you
In response to the highly challenging times 2020 has faced us with we have moved much of the great stuff we do with our portfolio companies online.
This has enabled us to pull together some fantastic webinars to help navigate, what for many young start-ups will be, unchartered waters.
Each of the sessions has been delivered by fabulous people from our networks addressing a range of issues from sales and marketing, to operations and financial management, all of which are being put to the test right now.
COVID-19: What does it all mean?
What does it all mean?
These are the words being repeated in households across the nation – because at the moment , Great Britain remains in lock down with a significant number of its workforce working in home offices, dining rooms, sheds and bedrooms.
In response, we invited Patrick Dunne to join us and our portfolio businesses on a webinar to try to help all of us to makes sense of it all.
In the first of our series on crisis management, Patrick, who has extensive experience as an investor and chair, provided some great advice for our portfolio businesses, the full recording of which you can access below.
The feedback for Patrick’s last webinar has been tremendous and we think this comment sums it up nicely -
“ I am sure you have had some good feedback on yesterday’s webinar already - I just put the phone down to an FD I know - he said it’s the best he has heard and really found it useful, insightful and direct - just wanted to pass it on!”
About Patrick - Patrick is Chair of Business (Boardelta) & Social Enterprise (EY Foundation, ESSA-Education Sub Saharan Africa) and author of Boards, and author of the award-winning book, ‘Boards.’
For those of you that are time-strapped, here is some of Patrick’s key advice from the first webinar.
- Continue to look for opportunities – at a time of crisis the role of management is to safeguard the business. However they should always be alert to new opportunities as this will help to create value and protect jobs.
- Set up a task force – where there are a lot of serious issues to deal with, having to constantly update the board can be time consuming. One idea is to set up a small group to deal with and report on triage issues. It can also be useful to distinguish between issues which are for information only and those which require a decision, and have separate virtual board meetings for each.
- Keep records – when decisions have to be made at high speed on the basis of limited information, it is easy to pick holes in them afterwards. Always keep a record of what has been decided and why.
Share good news – don’t be afraid to publicise your success stories as positive news is helpful for employees and creditors alike. But leave out the superlatives and be careful not to sound too arrogant.
- Focus on the important things – do you have the right strategy and the right resourcing model to put it into place? If you are making a decision be clear about what decision you need to take and when, and how you can implement it. Anyone can make a decision but it is not always so easy to put it into practice and ensure that the consequences are as intended.
- Be aware that people are stressed – in times of crisis, people might be more irritable than they would otherwise. Don’t take it personally but instead lend your support.
- Understand the new KPIs - cash, cash and cash are the top three priorities right now. Cash ensures choice and sustainability so preserving cash and getting money in is all important. Also look at your supply chain - you are only as strong as the weakest link in it so consider who that might be.
- Consider requests for time to pay – clients may ask you to ‘help them out’ and if they are good customers, it could be worthwhile to do so if you can. But do try to get something in return, such as a discount on a future order, and think about the sustainability of your own business too!
Scrutinise your contracts - if you have a small number of key contracts then take your time to understand them, and the ‘get out’ provisions within them.
- Keep people’s spirits up – when I worked at 3i during the financial crisis we had an Morale Improvement Plan to ensure we were doing everything we could to help our teams and portfolio companies not just survive but thrive. Once the crisis is over staff, customers and shareholders will remember how you treated them so try to keep people happy. In the words of the late great Maya Angelou, “I've learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.”
COVID-19: Making the right decisions
In the midst of the crisis, managers are facing tough choices such as whether to furlough staff or even mothball the business. Diane Cheesebrough, who has over 20 years’ experience as a business leader and board member, explains how to make sound but fair decisions.
Cash is key right now. The old adage - turnover is vanity, profit is sanity but cash is king - has never been more appropriate. Managers need to ask, how can I conserve cash, how quickly will it run out and how can I make it last longer? This will be a change of mindset for many firms as they will need to switch focus from long-term growth to short-term survival. The key is to get the business through the crisis in best shape and with enough in the bank to give a ‘push off’ at the end.
Create cashflow forecasts. Model two scenarios – what you expect to happen and the worst case where revenue dries up altogether. Start by creating a forecast for three months, then extend it to six and nine months and update it at least once or twice a week.
Watch the video to learn more from Diane about how to cut costs, make decisions on staffing and other practical steps you can take to save your business.
- Draw up a list of debtors. They are likely to fall into three categories – government bodies which will pay, those which might have to extend payment terms and others that might go under altogether.
- List your outgoings – split them between operating and non-operating costs, and scrutinise every single one. Seek payment holidays or extend terms, furlough staff, stop direct debits and pay manually if need be, but protect key suppliers where possible. Amend the forecast to include those mitigations which are agreed but put the others in a separate section. After each section keep a running total and use this picture to frame your decisions. It is vital that you have the resources to get through the crisis and can see any problems coming.
- Consider other options. Could you stop some activities and focus on one product, or mothball the business altogether? Even if you don’t need them right now, it is useful to have a list of ideas in the event of another phase of lockdown.
- Ask what staff the business needs. If it exceeds cashflow, consider multiskilling –could the directors do the credit control? Making decisions like these is tough but taking a step by step approach - producing cashflow forecasts, profit and loss and a people plan – is the best and fairest way to do it.
COVID-19: The survival mindset
Brian Davidson of Parkhead Investments joined by David Jones and Nick Carr from Deloitte offer some practical guidance:
Key points from the webinar
- Maximise your liquidity. Look through every area of your costs and challenge every single item. Don’t assume there is any such thing as ‘fixed costs’. Consider the government assistance available, in particular the furloughing scheme but be aware that you will have to pay staff first and reclaim the money later and it is likely to be June at the earliest. Businesses can delay VAT payment – but remember to cancel the direct debit - and ask for time to pay other taxes.
- Ask the landlord for a rent holiday. Their reaction may vary according to the circumstances, such as how easy it will be to find another tenant, and your own financial position but the sooner you ask the better. Engage with other creditors. Be bold and ensure you have the facts at your fingertips!
Plan for different scenarios. Keep detailed short-term cashflow forecasts, including the worst case scenario. This not only helps to keep on top of costs but will put you in the best position to argue your case in conversations with creditors and funders. Keep records to explain the decisions you are making.
- Look at funding options. Draw down on any revolving credit facility, and try to extend existing debt facilities. It is better to have cash available even if you don’t need it right now. If you are struggling to keep afloat, consider taking private equity investment too.
- Communicate with staff. If you are planning to furlough staff, write to all of your employees and tell them what’s happening, notify them you are going to reduce their pay but make it clear that you expect them to go back to full pay after the crisis. Those who invest in their people and lead from front through this crisis will reap the rewards at the end of it.
About the presenters
Brian has over 25 years' experience in leading companies through successful turnarounds. These roles have included CEO, Chairman, COO and Non-Executive Director of companies such as Crown Paints, Fairline Boats, Alexander Dennis, Plaxton Coachbuilders, Scottish Legal Life and BAE. Brian has worked closely with private equity and banks in these roles, where on several occasions outstanding returns have been achieved against initial operational adversity.
David is a corporate finance advisory partner based in Nottingham and part of the Deloitte Midlands-wide team. David advises owner managed and private equity backed businesses on corporate transactions including buying or selling a business, equity release, development capital fund raising, and management buyouts. David is experienced across a wide range of industry sectors, but has a particular interest in the healthcare, consumer business and TMT sectors.
Nick is a Director in Deloitte's Corporate Finance Advisory practice. Nick has 16 years experience principally advising corporates, owner managers and private equity investors on a wide range of corporate finance activities including acquisitions, fund raisings, MBOs and disposals.
Communicating with employees in a crisis
Streisan Bevan provides digital marketing, product development and customer insights expertise to PLC and PE-backed brands across the entertainment, travel and consumer leisure industries.
Fears about the future combined with the sudden switch to homeworking make this a challenging time for employees and managers alike. Streisan Bevan, a former Facebook executive who is now an operations partner at Mercia, offers some tips on how to connect with and manage staff working remotely:
- Understand how they feel – surveys show that while older workers have most at fear of catching Covid-19, the pandemic has had the greatest social impact on 18 to 34-year-olds who may going through a period of grieving for their lost freedom. However, each person’s experience will be different and some may have lost family members. Be open and transparent about how you are feeling and staff will take comfort from that.
- Establish an architecture for decision making – and empower managers to make those decisions. Identify quick wins – what could we accomplish quickly? ‘Meet’ regularly and use video to communicate with the team. Although it is certainly not business as usual, don’t miss the opportunity to talk about the future and discuss plans.
- Learn to manage employees working remotely - ensure they have the necessary equipment, and establish a direct line of communications, such as weekly team meetings. Be sure to take notes – it is now even more important to keep a record of decisions.
- Focus on impact - set clear expectations about the desired outcome and what needs to be done, rather than the number of hours worked. For teams working on critical projects, consider having daily ‘stand-ups’ where each person gives an update, and post a summary on a shared group.
Keep teams connected and engaged – in the current circumstances people are under more pressure than ever. Use online groups to create ‘water cooler moments’ to share experiences. Make sure tasks are distributed evenly and there is a back-up plan if someone needs to take time away. Encourage staff to stay connected and look after their own wellbeing.
About Streisan - Streisan is a Non-Executive Director and Operations Partner providing Digital Marketing, Product Development and Customer Insights expertise to PLC and PE-backed brands across the entertainment, travel and consumer leisure industries. With 20 years of experience working with brands, agencies and ad tech partners at Facebook, Bebo and MSN, she has a deep expertise in activating and optimising social, search, email, mobile, digital marketing, and defining customer-driven product solutions and strategy for a wide range of organisations.
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