Hope for the Best and Plan for the Worst…

Hope for the Best and Plan for the Worst….Owning and running a business has never been for the faint hearted but the coming months are going to test the mettle of business owners as never before.

How to maintain your confidence and team spirit when you have to make redundancies may be one of your key challenges.  But keeping a laser focus on your exit plan is going to be more important than ever.  Putting off your exit indefinitely is certain to end in unhappiness for you and your team.

Having taken on debt to sustain your business through and out of lock down you may be forgiven for wishful thinking.  But now (before the raging storms to come) is the time to sit down with your trusted adviser and ask some very tough questions.  How do you need to adapt to survive and thrive.  What alternative scenarios should you be considering for your business and for your exit.  Competition is going to get tougher and tougher as your competitors adapt to a rapidly changing marketplace.

Crucially what can you do now to best protect your business and your personal assets if things go very badly wrong.  Your most valuable assets are likely to be your people, your brand name and cash.  Having brand and cash separated from the risk of your trading activities may be a wise move.  Adopting the twin mindsets of a shrewd private equity investor and a cautious banker will serve you best.  

Locking in your key team members with a really well thought  share incentive will motivate you and your team and align your and their interests.  The last think you want now is to have a key team member leave.  But share incentives will motivate no one unless your exit plan is clearly thought through, credible and really well communicated.  You need advisers who will challenge your assumptions.  

A holding company structure with brand name licensed back to the operating company may be well worth considering.  Beware of doing this without skilled legal, tax and accountancy advice.  You want your structure to be legally water tight and optimal from a tax perspective.  Now is certainly not the time to be paying more tax than you need to.

Providing working capital to a trading subsidiary secured with a debenture in your favour may bear examination.   That debenture could in the future provide a crucial lever for a restructuring that puts you ahead of other creditors if the unexpected should happen.

Hope for the best and plan for the worst the mantra for the winners in the Brave New World.