Small Business Advice: How to Survive Brexit
Author: Russell SmithAugust 1, 2016
I’d like to start this blog by saying, this is not a discussion on the EU referendum. We are not here to argue for or against its legitimacy or its effects, we are simply here to look at the facts.
Whatever your feelings of Brexit, put them to one side. We’re just here to offer some small business advice, nothing more.
Brexit has brought with it an economic uncertainty unparalleled in our time. While some are comparing the upheaval to the financial crisis of 2008, it is too early to tell if a recession is on the horizon.
Nevertheless, uncertain economic times bring problems for small business. People stop buying, stocks slide and investors stop investing. This begins to slow the economy — effects that we saw both before Brexit and after Brexit.
In the fallout of the 2008 financial crisis, hundreds of thousands of small businesses around the world crumbled. Small businesses are known to be more delicate and unstable than larger businesses. Many simply don’t have enough clientele, capital or resources to ride out tougher economic times and the crisis showed that.
Just as with the recession though, the uncertainty surrounding Brexit will not last forever.
The key to success in business right now is just as much about weathering the effects of the economic downturn as it is expanding and evolving.
In order to thrive, you must survive.
Implement Zero Budgeting
Tough times call for tough measures.
Traditional budgets are created from previous experience. If you’ve spent £2,000 on stock in the previous quarter, then you’ll set a budget to do so again, but this method isn’t effective for surviving Brexit.
While it is incredibly useful as a time-saving exercise, it isn’t necessarily the best move in times of financial uncertainty. Setting a budget based on past performance is a gamble that encourages money to be wasted. You, or your managers, may overspend or buy unnecessary items.
Zero budgeting takes a more tactful approach. At the start of every quarter, you analyse your current financial and business situation, look at what you need to spend money on and set budgets on for exactly what you need. Every purchase must be justified and have a purpose.
This method is time consuming, but it does have its benefits. It clamps down on excess spending, allowing you to make the most of your budget while reigning in costs.
Need help understanding and managing a zero budget? Our chartered accountants from Leeds can help.
Solidify Your Financial Future
The key to surviving Brexit is stability. You need to know you’ll have income, you need to know you’ll have supplies.
Now is the time to contact clients and suppliers and solidify long-term deals. Many small businesses operate with a ‘freelance’ methodology. They offer their services or products as a one-off purchase to clients and hope for repeat business. However, if client bases are shrinking, this could cause problems.
It’s not always feasible, but striking up deals with clients for long-term partnerships is one way to ensure some stability for your small business.
Let’s say you offer security services. Your bouncers are hired out to a nightclub for one evening. Instead of just taking the money and hoping your staff to do a good enough job to warrant a return to the club, discuss potential contracts and partnerships for the year. Offer discounts or offers if necessary. You might make less per gig than if you worked in that ‘freelance’ method, but you’ll ensure a stable income that will help you ride out the effects of Brexit.
Take our Small Business Advice and Look for International Trade Options
Once Article 50 is activated, things are going to start getting a bit complex for European trade. Uncertainty combined with shifts in trading laws means that business partnerships and dealings with EU member states will likely become tougher — at least until the dust settles.
The problem is, many small businesses in Britain rely on other businesses located in European nations, either as clients or suppliers.
Now, we aren’t suggesting you simply forsake your suppliers and clients in Europe but we do think you should consider changes. Those running a business that deals with international partners should think about looking to trade outside of the European Economic Area.
It’s impossible to say what the outcome of the Brexit negotiations will be, but it is very likely trading with non-EU nations will become easier.
Now is the time to evaluate your sales strategy and supply chains, look to nations outside of Europe that could serve as ideal markets for your business once the post-Brexit barriers start coming up in Europe.
Don’t rely on already withstanding trade deals to hold up against Brexit — while they may well do — preperation is key to survival. Have a plan B.
Need some help managing your business after Brexit? Our specialist accountants for small businesses can help!
Image via Abi Begum / Flickr