Opinion: What past battles tell us about keeping retailers in business

Those I spoke to reported weekend trading down anywhere between 20% and 50% year on year, a pattern also seen by the hospitality sector. With trade for many retailers now set to drop to virtually zero, we face a situation none of us have seen before.

For retail leaders heading into these nightmare times, and for government and society more generally, what lessons can we learn from previous turnaround battles?

The first, and most important, is that the KPIs that matter to your business have changed completely. Success is no longer about profit, or margin, or return on investment. Your world is now all about cash. It isn’t a lack of profit that drives a business under, it is a lack of cash.

For that reason, the two most important questions you can ask of your business are how much cash do we have right now, and what is our ‘burn-rate’? In other words, how long can we survive?

Each of those two KPIs prompts an action plan. To stay in business for longer, you can either source more cash or reduce the daily cash outflow of your business.

“The two most important questions you can ask of your business are how much cash do we have right now, and what is our ‘burn-rate’? In other words, how long can we survive?”

The first of these challenges is where your investors and lenders come in. Can you secure more liquidity from any of these sources? The early signs from investors are mixed. Many are worried about putting more cash into portfolio businesses, and for those retailers who are Plc’s the current market turmoil makes raising cash there a difficult prospect.

Lenders, and particularly banks, are more likely to be helpful, particularly to the extent that they are leant on by the government and the Bank of England. But retailers I talk to report that the banks are overwhelmed, with literally hundreds of thousands of small businesses approaching them for help at the same time.

If there is a single bit of advice I would give, it is not to wait to seek more funding. Get in front of the bank, explore new sources like the government’s British Business Bank, talk to investors. None of these is guaranteed to solve your problem, but some might. They all take time, however, and so the right time to start fundraising is now.

This, of course, is also where direct government support would be incredibly useful. This week, we’ve seen the first moves towards that support, with very big financial commitments made by the chancellor and much-needed action on business rates. It remains to be seen whether the current package of measures is enough, however, and as ever the devil for small retailers will be in the detail.

There is a palpable sense from the government that this is a rapidly evolving area, and I hope for more direct, cash-based and employment-supporting initiatives soon.

The second part of your cash strategy, of course, is to reduce the daily and weekly outflows to maximise your ability to cope through this period. In some senses, that’s quite straightforward. All discretionary expenditure or expenditure on things that can be done later gets stopped straight away.

From there, however, it gets more difficult. Who will you stop paying first? An obvious answer is your tax bill, and it may well be that an aspect of government support is to enable that. From there, however, you get into danger of causing long-term pain for short-term relief.

“Quite apart from the commercial implications, there are moral considerations to holding back payments and laying people off”

If you stop paying suppliers, or ration your payments between them, will they stop doing business with you (or, indeed, go under themselves)? If you reduce hours for your staff or lay people off, will you lose key skills and expertise?

And, quite apart from the commercial implications, there are moral considerations to holding back payments and laying people off, too. They may be the only options left available, but they are never easy or pleasant ones.

My advice? Consider your business through the lens of those two KPIs: how much cash you have and your burn-rate. Divide your leadership team’s efforts between the two.

And good luck with both – we are all going to need a bit of luck, and a good deal of support from each other in the retail community, over this dark time.