A recent study by the Office for National Statistics showed that nearly 40% of businesses in the UK had a substantially lower turnover as a result of the coronavirus pandemic. Whilst the government has started to lift some of the strictest lockdown restrictions, disruption will remain a common theme for some time. Many businesses are adapting their practices to continue trading. As you review your options, we look at what paths are available to business owners determined to continue their develop and thrive in spite of the disruption they face.
Reviewing your vision and strategy
For businesses looking to adapt and reposition, you may also benefit from reviewing their vision and strategy through our One Page Plan process. This is a condensed business plan which focuses business owners’ minds on the key areas that will make an impact in the business.
Considering your options
As businesses consider their options the diagram below shows what paths are available:
For businesses which have been negatively impacted and are considering how to adapt, they have two main choices:
- Continue providing the same product / service in broadly the same way to the same customers (e.g. restaurants providing take away service); and / or
- Repurposing or pivoting the business to provide a new service (which is now in high demand) to a new customer
In either case, the benefits of adapting are clear. Repurposing enables the business to open up new revenue streams and be seen as agile and innovative. Alternatively, placing additional focus on an existing product / service can help a business stay profitable or at least lessen the negative financial effects of COVID-19.
In the case of repurposing there may also be an additional benefit of strengthening the values and reputation of the business as it has risen to support the community in a health crisis.
Deciding which choice to make
There are many factors a business owner should consider before deciding how to adapt. These include:
Continue providing the same product / service
- What is the current demand for my product / service and how will that change over time?
- How can I adapt the business to continue serving these customers?
- What is the financial impact (revenue and costs) of this choice?
Repurpose / Pivot
- Are any of the current products / services which are in high demand (e.g. PPE, accommodation for NHS staff) which the business could repurpose to serve?
- What is the current and future demand of this product / service?
- What is the financial impact (revenue and costs) of this choice?
The optimal strategy could be to both continue trading and repurpose. In this case the business owner should consider whether the business can do both activities or have to make a decision between the two. In any case, the business owner needs to confirm that they can ensure the safety of all staff and stakeholders no matter what decision.
Having considered the two choices above, there may be an obvious outcome. However, if not then this may be a good opportunity to raise it with the wider team to get their views and find creative solutions – some of which may have a lasting positive impact once the pandemic has passed.
When a business chooses to continue to trade it means that there is still demand from the customer and (somehow) they can deliver that service. The obvious example is a restaurant that now provides take away food or a pub providing alcohol sales for take away. However, many businesses can continue to provide a service where it may not be immediately obvious. A hairdresser for example may still be able to sell their product range online, provide an online tutorial for basic hairdressing and even do virtual hairdressing appointments. Several other examples are shown below:
|Business||Different Channel||Different Product / Service|
|Restaurants||Takeaway food and drink||Provide packed meals for healthcare workers|
Online product sales
|Online / tutorials on how to cut hair|
|Social clubs / pubs||Takeaway food and drink||
Virtual quiz / bingo
|Schools / Universities||Move classes online||Offer new courses|
|Personal Trainer||Provide virtual exercise sessions||Online training tips / exercises for customers|
Repurposing and pivoting
When a business chooses to repurpose, this is to address an increase in demand for a product / service as a result of COVID-19. Some of the high-profile repurposing’s have been to address the UK Government Ventilator Challenge (e.g. McLaren and Dyson) however there are many smaller examples which are likely to be more relevant.
|Business||Repurposing / Pivoting||Example|
|Hotel||Accommodation for healthcare workers||Best Western Hotels / Britannia Hotels|
|Sports Centre / Leisure Club||
Pop-up hospital / healthcare facility
|Deeside Leisure Centre
Lincoln Leisure Centre
|Restaurants||Provide packed meals for healthcare workers||Leon|
|Distilleries / Micro brewers||Alcohol hand santiser||
|Dentist||3D Printing valves for respiratory masks||Cherry Tree Dentistry, London|
The decision to repurpose a business should consider the relevant government department / trade body / relevant organization to ensure compliance with the various regulations and laws – especially if manufacturing healthcare equipment. Determining what products / services are in demand and which your business is best placed to fulfill may be obvious but may also require some thought.
Many of the examples above also have a positive PR impact, however, for a business owner trying to find a way to keep their business operating it is important to find a substantive pivot with sustainable financial performance. Of course, when repurposing a business may have a new supply chain and a new customer. These should both be identified along with the financial considerations (cost of materials /
inputs, set up costs and operating costs) before going ahead with the project to ensure that it is feasible.
Determining the selling price for the new product / service can be a sensitive decision. Some repurposed businesses have decided to give away their product (e.g. BrewDog producing hand sanitizer is giving it away to the NHS) and in other circumstances the business is free to select the price. Whilst high demand can often lead to pricing power, in these exceptional circumstances it is key to remember the wider context of the crisis and the potential reputation impact of setting prices too high. Some businesses have clearly taken the view that giving back to the community as well as the likely reputational enhancement are enough.
When repurposing a business, it is worth remembering that there will be a new product and customer. Whilst there may be ample demand, this is also an area where the business lacks expertise. Therefore, it is important for a business to take advice and make sure the supply chain, the competencies required to provide the good / service and who you are selling to is all have all been considered.
Adapting to the unusual environment we find ourselves living through is clearly a vitally important exercise. Doing so will help businesses develop; protecting existing revenue streams and potentially opening up new ones.
Get in touch using the form below if you are planning changes in your business. As Chartered Accountants and Business Advisers, we have the tools and resources to help you successfully implement your strategy and reach your goals.
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