I hesitate to write anything about the impact of Coronavirus. It is by far the worst thing that has happened to the world in my lifetime and the enormity of the situation and the impact that it is having on people’s lives is terrifying.
The debate that is about to commence across the world will be about how to balance the medical challenges of the virus with the financial ones. It would be utterly unacceptable for any government to let the virus run its course in order to preserve the economy, but the financial consequences that the virus is having on millions of people cannot be ignored. Boris Johnson will be remembered for ever as the prime minister who got this decision right or wrong for the UK. I do not envy him this burden.
Regardless of how this dilemma is resolved there will come a time when the crisis will be over and the economy will start to operate again. Your job as a business owner or manager is to do everything in your power to ensure that your business is still there to take advantage of the recovery when it comes. So how can you best do this?
The consensus of opinion amongst my clients is that the income from a good managed letting business will hold up fairly well. There will be some loss of set up fees because people are not moving and some loss of management income because some tenants will not be able to pay their rent. However, the majority of the management income should continue to come in and the business should recover quickly once the virus has passed.
The sales market however will be very badly hit. Income for the next 3 months could be only 20 % of the norm. This means that residential sales agents will need to make some very tough decisions about staffing levels. The choice will be between making people redundant now or insisting that they take unpaid leave and hoping that this will be covered by the government’s promised 80% salary replacement scheme. The lesson from previous recessions is that you need to cut hard and quickly. In addition to salary savings you also need to cut every other possible cost just as soon as you can.
Your next priority must be to conserve your cash. The government has already said that it will accept postponement of VAT, the second instalment of personal tax and may also accept a payment plan for corporation tax- all of which will help your cashflow hugely. However, you also need to speak to all your suppliers about better credit terms and most particularly your landlord. Your landlord will not want to be left with an empty shop to re-let in the middle of a recession so they should be amenable to a reasonable request to defer payment of some or all of your rent.
You cannot shy away from taking this very difficult action. It is heart-breaking to have to dismiss staff and terminate contracts with suppliers who you have known for years but you must remember that the alternative could be the loss of all your staff, not just some of them or the loss of your business or even your home. This action can be taken with as much kindness and empathy as possible but it cannot be shirked or even delayed.
The final lesson from previous recessions is that you need to watch like a hawk for the first green shoots of recovery and get your foot back on the gas quickly in order to take full advantage of an improving housing market. The only comfort that I can offer at this very bleak time is that at some point in the near future there will be people who want to move again, businesses to buy and property development opportunities to consider. You just need to make sure that you are in a position to benefit from the upturn when it comes.
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