As we continue to work with our clients through the current situation, we're hearing your stories about how you're coping with lockdown and preparing your businesses for the future. In a weekly series, Oliver Bridge is sharing what we're learning with you, so we can all work through COVID-19 together.
The length of lockdown
The main topic of conversation this week has been how long lockdown measures will be in place. Even once we return to the workplace, social distancing may continue for a long time to come.
One of the government's five conditions for easing lockdown is maintaining a low infection rate, which will require consumers keeping their distance from each other in public places. The food and beverage sector will see the greatest impact from this. Consider the infection risk from the following three examples:
1 A restaurant in the city with a high seating capacity
2 A large country pub with ample seating and outside areas
3 A fast-food restaurant that primarily offers takeaway food
Should all these businesses by allowed to re-open at the same time? Each example has a different potential infection rate, so how can we group them all together?
We look forward to more detailed government advice being provided this week.
Navigating inconsistent advice
The World Health Organisation advises people to stay at least one metre apart, while the UK Health and Safety Executive recommends two metres and Belgian authorities say one and a half metres. The German government, on the other hand, are encouraging citizens to wear face masks in public.
With all of this conflicting advice, it's difficult for businesses to know what measures to take, particularly as a multi-national. Some restaurants are placing cardboard dividers between seats in their restaurants, while others are offering takeaway only.
Many of our clients are waiting to find out what the government advice will be when lockdown is eased. Until then, it's important to plan for a range of scenarios and be flexible with your strategy.
Another concern for our clients at the moment is potential inflation, as debt levels increase to cover the costs of economic shut-down. We're seeing supply chains taking on more debt and cost, which will have to be paid for eventually.
Many of our clients are telling us that they, understandably, don't normally monitor the true cost of their products below the gross-margin level. However, when operations are being ramped up, cash needs to be generated quickly to pay for raw materials, labour and utilities. Many businesses don't know how much cash they will generate, or profitability by product or customer. This can make it harder to determine where prices are suitable and with which customers to negotiate.
Inflation will pass up through the supply chain and impact funding. Those businesses that can pass on price increases more quickly may be better off during a funding discussion and those with fixed prices may struggle to demonstrate they have the ability to service additional debt. We recommend assessing your pricing structure, identifying your more-profitable products or services and re-imagining how you move forward into the new normal.
To discuss any of the issues above, contact Oliver Bridge, and check back next week for another article in this ongoing series.
Read last week's article: What our clients are learning from COVID-19 >>