"Looking after the customers who have immediate needs or modifying them where necessary will help your business."
The steps below apply equally to all firms, regardless of whether they are responding to the immediate crisis or looking to learn long-term lessons as to how they can run a better business:
(1) Financial position
• Assess the current impact on your business
By understanding the impact on client leads and sources, pending cases, liquidity, cash flow, profitability and the balance sheet, you will be better positioned to make informed decisions about the future.
• Understand your revenue streams
Look at the make-up of your business – specifically how much revenue is generated by new business against non-indemnity and/or renewal transactions. Also factor in lapse rates. This will allow you to better understand the impact and size of any deficit in new business and target your strategies appropriately to address this.
• Understand your cost base
Careful consideration needs to be given to expenditure. Take care to avoid knee-jerk reactions, such as cancelling all services immediately. Recognising, listing and prioritising current costs is a worthwhile exercise. From this you can establish which business costs will have a material effect on the business if they are reduced or removed.
• Forecast sales levels and revenues against different scenarios
Given the current economic outlook, it’s prudent to have a bearish view of the market. Take the current business position and extrapolate a number of likely ‘what if’ market scenarios that impact your revenue streams. By undertaking this stress testing exercise you will better understand the critical points in your business model, along with the timing of financial issues likely to arise. Plans can then be drafted to address or mitigate these issues.
(2) Business Volumes
• Protect current and pipeline business by engaging, reassuring and supporting customers
Looking after the customers who have immediate needs or modifying them where necessary will help your business. Staying engaged means customers are more likely to approach you to understand the implications before cancelling a policy. This benefits both parties – an open conversation can be had with the customer about their evolving needs, whilst potentially avoiding or mitigating the impact of a cancellation on your business.
• Generate new business from your existing customer base
Tap into existing customer relationships – suggested areas could include:
o Clients approaching the end of a product term;
o Remortgage opportunities for clients on standard variable rates;
o Revisiting clients sold a mortgage product with no protection or GI.
• Support customers with a view to the future
Customers will be looking to their advisers for guidance and advice in these troubled times, not necessarily linked to a product. Therefore, consider giving advice on a pro-bono basis. Such an approach may pay dividends in the future through enhanced customer loyalty.
(3) Costs & Liquidity
• Talk to suppliers about the support available
Approaching suppliers to ask for payment holidays or reductions rather than outright cancellation may allow for services to continue whilst mitigating the immediate cost. However, caution is advised as a balance needs to be struck to avoid building problems for a later date. Consideration should also be given to suppliers that may be struggling too and only able to offer limited support. Furthermore, when services are cancelled, ensure you have fully considered the operational and legal impacts on your business.
• Discuss rent payments with your landlord and insurance cover
Explore whether your landlord can reduce any of their services. This may reduce their own costs and could be factored into any rate reduction. Also consider current insurance policies. If the business property is vacant for a period of time this may have an impact on cover.
• Engage your bank about finance options
Talk to your bank about financial help, if needed, or leniency on any existing loans or overdrafts.
• Consider your business structure
In addition to support mechanisms being offered by the Government, consider if there’s anything else that can be done. Significant care must be taken, but examples could include:
o Reducing director remuneration;
o Dividend suspension;
o Deferral or suspension of bonus payments.
The coronavirus pandemic will have impacts right across society long into the future. It’s a lot for advisers to take in and respond to. For anyone who is feeling overwhelmed, it’s important to remember that you’re not alone. Quality networks can increase the chances of success by working in partnership with firms to formulate a tailored plan that’s right for them.
