COCOONING A BUSINESS

Some businesses are going to need to “mothball” or “cocoon” until the Government considers the Pandemic to be of lower risk and trading conditions improve.

There are four principles to follow:

  1. Prioritise – Focus attention on the biggest cost items and those critical to the future of the business. These are the ones which need attention first and will have the biggest impact (e.g. payroll, rent). Once these are managed attention can be turned to the smaller / less critical costs.
    Communicate – Ensure that relevant stakeholders are being informed of what is going on. Remember to be honest and upfront (even if delivering bad news) as this will help maintain relations with stakeholders.
  2. Negotiate – These are unprecedented times and every business and person will have been impacted by Covid-19 in some way. This means there are no agreed solutions and the opportunity to negotiate and find novel ways of dealing with problems is likely.
    Think long term – Just as important as how you cocoon the business in the first place is thinking about how you unwind what you do in the future. Simply stopping paying creditors is likely to mean there will be a stack of overdue demands when returning the business to operation in the future.  The solution is communicating and trying to find solutions that work for both parties such as incentives, payment in kind etc.

If you would like any further information please contact us.