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There’s been a huge amount of discussion and debate on social media recently about the financial support that the Government has put in place to help businesses and business owners get through the current challenging environment. Most of the commentary has been incredibly positive, recognising that the various schemes are there to avoid massive job losses and support businesses that are unable to trade because of the restrictions placed on society. Some commentary has been negative, most notably about the apparent lack of support for small Limited Companies where the Director(s) pay themselves a minimum salary and top up the rest via dividends. It’s fair to say that these businesses appear to have fallen through the cracks of the support schemes (not withstanding that it’s a difficult issue to solve).

Of course, there’s been a massive uptake on the various schemes as each of them have gone live, which is completely understandable. After all, what business owner doesn’t want to safeguard the future of their business, their livelihood and their staff. I’ve seen some really creative uses of the schemes, such as using the Bounce Back loan to replace and consolidate existing debt within the business, thereby reducing short term repayment commitments and often reducing the longer-term interest rates. This just sounds like good common-sense business practice to me.

BUT.. I’ve also noticed a massive urgency to take advantage of the available funding without perhaps giving real consideration to the longer-term implications.

Like many of you, I suspect, I try to take a daily walk to avoid becoming stir crazy during lockdown, and often I use the time to listen to podcasts. Today’s audio accompaniment was the latest Private Eye podcast, topically focussed on Covid-19 and which included an interview with the good doctor. During the interview he made reference to a model that medical professionals use when considering patient treatment, called BRAN. It stands for:

B Benefits
R Risks
A Alternatives
N Nothing

So for any potential treatment option, they’ll consider the benefits it could deliver, the risks it might produce, what alternatives there may be, as well as the potential outcome if they simply do nothing.

Dr. Hammond also made reference to the result of UK society’s general poor underlying health on the pandemic, in that it can often make the outcome even worse.

And this got me thinking about how much real consideration is being given by business owners into which of the financial support packages is the most appropriate for the business in question, and having identified the most appropriate, then giving proper consideration to whether it’s actually the RIGHT course of action for the business.

Surely business owners, before diving in to claim an available grant or loan, should consider:

The real BENEFIT of taking on the additional funding; typically providing the working capital to remain solvent, retaining staff, covering non-negotiable expenses etc.
The RISK associated with taking on the funding; will the business be able to trade sufficiently well to generate the additional profit and cash to be able to meet the extra future repayment commitments?
The ALTERNATIVE courses of action that could be taken; reducing overheads, pivoting the business to remain profitable whilst in lock down. Renegotiating supplier contracts and payment terms etc.
The result of doing NOTHING; i.e. continuing to trade without taking on additional funding.

If the underlying health of the business in terms of profitability, cash flow and general viability isn’t good, simply putting in place short term funding may actually result in bigger problems in the long run.

It really worries that some businesses will see the available financial support as a lifeline without realising that, in fact, all it will do is create a bigger problem down the line and that, in fact, the best course of action would be to shut the business now before the problems become insurmountable.

Just as, in a medical emergency, we would consult a professional medical expert before agreeing to a treatment plan, in a business emergency (and boy, are we in one right now!) business owners should also consult a professional, whether that’s their accountant, an experienced business coach, or even both.

If you run a business and you have concerns about what type of support is the best for your business maybe we should talk.