Everyone is painfully aware that 2020 has brought untold challenges to the hospitality industry. Business directors should be taking a well-earned and much needed rest over the holidays and congratulating themselves on their resilience. But they should also be using this opportunity to take stock and prepare themselves for the year ahead. We’re not out of the woods yet.
It should be emphasised from the start that the hospitality needs urgent, additional support from government. It is good that furlough has been extended until April but for real help for our sector, we need VAT to remain at 5% on food and soft drinks for another year.
We need business rates cancelled until 2022 and we need more government grants of meaningful amounts of money. We are also in dire need of a smart system whereby rent can be waived but also landlords supported. At the moment, the burden is squarely on the landlords who aren’t always in the position to be able to waive rent and lose income. The solution should come from government.
On top of continuing to lobby for support, these are the essential ways business owners need to prepare financially for 2021.
1. Get your books in order
You can’t change your financial position until you know what it is. Find the energy to do this now. Make sure your books are up to date and go through them with your accountant or finance director to ensure you are fully up to speed. You need to know exactly what is owed to suppliers, landlords and HMRC. You need to understand your profitability (how your business has fared this year) and your statement of financial position (which incorporates your historic performance to demonstrate the health of your business). All this information must be in hand when entering into any discussions with banks, investors, or creditors. Your financial data will also give you insight into which of your income streams are providing returns and how resources might be best allocated for the coming year.
2. Communicate with your suppliers
Suppliers to the restaurant industry are going through similar challenges to restaurants themselves, given that their customers are unable to operate as usual. The best way to navigate discussing debts is to be human and understanding, communicate early and often and explore solutions together. For instance, a supplier might accept a small discount on a debt if you can settle it immediately, or they might spread it over a longer period to help you navigate cashflow. Are there ways that you as a restaurant might help a supplier expand the visibility of their product to new customers by sharing with your following? The more that small businesses can help each other out, maintain good relationships, avoid hostility and further actions being taken, the better.
3. Get ahead of the game with HMRC
Precisely no-one likes dealing with tax. It can be intimidating but pull off the plaster. HMRC does not want to put your company under, and particularly whilst these issues are in the headlines, they will want to be seen as accommodating. There are payment plans available that have longer terms than usual (now up to 24 months). PAYE is historically harder to secure a plan for than VAT and Corporation Tax, but it is still worth trying should you need to. HMRC are also open to consolidating debts. Engage sooner rather than later.
4. Be open to opportunities. Evaluate the pivots you have made and whether they should become a permanent part of the business
The world and the hospitality industry will not return to the way it was after the vaccine is rolled out. Be at peace with that and explore what the developments of this year might mean for your business going forward. Using your up-to-date accounts as well as input from staff, suppliers and customers, work out which if any pivots should become permanent features of your business. For instance, if you set up delivery – is it profitable enough to continue long term? Do your staff enjoy doing it, do your customers love the product? Is it worth making tweaks, for example looking for a different delivery partner with a lower commission or a nationwide reach? Should you invest more in digital marketing to grow awareness? If something just isn’t working, cease doing it.
5. Understand you have finite resources. Allocate accordingly
Work out what resources you have and include your own energy in that. You do not need to and should not take every possible opportunity. Those you do should be thought through and written into a business plan with measurable objectives and allocated resource before committing. This can feel like a pain but it will keep you on track, inform and enlist your partners and steer you clear of any energy draining activities or misunderstandings. Be prepared to pay for the services you need to achieve success in your projects. Spending properly at the start can mean huge savings and greater, quicker returns down the line.
Hussein Ahmad is client lead at Viewpoint Partners.