Last reviewed 8 May 2020

The coronavirus outbreak will undoubtedly cause some businesses to fail despite the best efforts of their owners and government support programs. There are, however, things that a business can do to improve their chances of survival and coming through the downturn.

Cash is king

It is a cliché, but it is also true. Cash is the lifeblood of the business. Whilst other financial records like the balance sheet and profit and loss are important, in a time of financial crisis, the cash flow projections are the most important.

Cash flow projections are easy to create, and also adjust, as time progresses. It is often important to create two forecasts for different timeframes. The first for six months to show immediate needs and a two or five-year cashflow projection to show future viability. The six-month cash flow should be created on a week by week basis and updated each week. The longer-term projection can be a monthly cash flow forecast showing monthly income and expenditure.

To create the cashflow projection start with the opening bank balance. Then add the income that is expected to be generated, making appropriate deductions for expected bad debts (which may be higher than recent history) and spreading the receipt of income over the period it is expected to be generated (for example, will 10% be received immediately, 40% in a month, 40% in two months and 10% not at all?). Then deduct expenses as and when they fall due. Include wages, any overtime, commissions and bonuses that are expected to be earned, the cost of goods for resale and other expenses on the dates when they are expected to be paid. Do not forget non-monthly costs such as rates, tax payments, bank fees and interest, etc. In a time of recession, you may find that there are more bad debts, fewer sales, and costs rise. This needs to be considered in the cash flow projection.

This should give a running balance of cash each week or each month depending on the forecast. The projection needs to be adjusted for any changes in business (such as reduced sales or increased costs) as time progresses.

Now may also be the time to consider the terms of trade with your customers. If they are used to paying monthly, perhaps cash on delivery may now be required. If the terms of trade are payment within 30 days, make sure that invoices are paid within this period. Also, consider early invoicing rather than invoicing at the end of the month.

Undertaking cashflow analysis will give a clear view as to whether the business will actually survive the recession. Not every business will survive recessions and this is often the time for hard decisions to be taken. If the business is going to fail it is advisable to stop early before debts that are impossible to repay are incurred. Alternatively, it may be the time to substantially reduce the size of the business to one that is manageable to regrow it when the recession ends.


The cashflow projection will be useful to support applications for credit or overdraft facilities. It will show the amount of working capital required. In addition, banks will want current valuations of assets that can be provided for security for any advances they make.

It is prudent to communicate early with the banks and other sources of finance as they do not like surprises. Early communication gives the finance providers time to assess the business and its prospects for future success; it also gives the business time to be able to answer questions from the finance providers.

In times of business slowdowns banks have a propensity of reducing their lending, or increasing the level of security required. Getting firm commitments early can be prudent. Also, seeking finance early gives the opportunity to locate alternate sources of finance, such as private equity finance, business angels, venture capital, crowdfunding, peer-to-peer lending, and retail bonds. Other sources of finance such as sale and leaseback of machinery, property and other assets and invoice factoring should also be considered to help get through recession.

Expenses and costs

As would be expected now is the time to thoroughly review expenses. Any non-core expenses such as subscriptions, sponsorships and discretionary expenditure can be cut. It is also the time to negotiate with suppliers (including landlords) to look for discounts in return for continuity of custom. Alternate pricing should also be sought from rival suppliers. In previous recessions a discount of up to 15% has not been uncommon. Suppliers equally need to maintain their business and will be keen to retain your business, although they may want to change their terms of trade, including paying cash on delivery.

The delicate issue of staffing levels also needs to be approached. If there are to be redundancies it is best to make these as early as possible and as deeply as required. It is more damaging to morale to keep making staff cuts rather than having one round of redundancies.


Advertising in times of recession is a difficult issue. It is necessary to maintain the business profile, but it is also a discretionary cost that can be cut. It is perhaps judicious to consider who you should market to. Who are your reliable customers, who will pay, are there demographics or market sectors that are successful that you need to target. Do not waste money looking for new markets, unless it is a clear opportunity. Also consider which channels are the successful channels, direct sales through the internet, retail sales from the high street, referrals from existing customers? Focus marketing effort on these successful channels, your core areas of strength, and reduce effort in the more speculative areas.

Effort should be concentrated on customers that have proved loyal and profitable in the past. Recession is not the time to expend money on trying to develop new markets, new products or new customers. But, do not forget, that these customers will be looking for discounts, just as you are looking for discounts from your suppliers.

When supplying customers, you need to be aware of what the product costs you to supply. Often goods and services are priced without regard to actual cost. Even when cost is considered when initially pricing the goods and services, the prices may not be adjusted over time whilst costs do change. Reviewing cost is important and should consider the cost of acquisition of goods or services, cost of manufacture (or staff time in delivering the service) and selling costs. An allocation also needs to be made for overhead costs. Pricing of goods and services is complex (do you use loss leaders, do you seek to sell some supplies that contribute to the margin or is a full profit required?) and it is sensible to undertake a review at this time.

Some segments (such as tourism, ‘bricks and mortar’ retail businesses, etc.) may find the future difficult as there could be significant business changes. Businesses may need to consider how to adapt to new markets. Tourism may seek more local or home-grown customers. High street retailers may consider altering their offering to attract customers, not just retailing goods but offering other services to get the footfall they need. It is a time to be flexible and imaginative.


It is important to communicate honestly with staff. They are often aware of the situation; employees are, after all, intimately involved in the business and can see if customers are not ordering goods, or that goods are no longer being shipped. So, let them know what is going on, how you are going to manage the business and ensure its survival. Let them know what they can do to help keep the business going.

The business owner should not forget to look after their own physical and mental well-being. A business cannot be run if the principals become ill. To keep up your own morale it is important to take a break from work to give physical and mental relief. Also, ignore all the bad news; media outlets rely on bad news to get attention but a lot is just speculation. Conversely do not be over optimistic as that may only lead to disappointment, frustration and a sense of hopelessness when the optimism is unrealistic. It is a balancing act between not being too optimistic and not becoming depressed with the bad news. It needs remembered that all business downturns come to an end. Times may be dark, but business conditions will improve and it is your responsibility to ensure your business is in a position to take the opportunity that this affords.

Each business will find its own way out of the recession, some better than others. As this is not a financial crisis, but a health crisis, there is optimism that the economy may rebound quickly. Good luck!