I wrote this in August 2018. Not a great deal has changed. We are still in the EU and long may it continue. For many people it is already too late. businesses have moved. $1 trillion is leaving Britain because of Brexit. I personally know good people who have already lost their jobs and are struggling to get work in the supply chains for the automotive industry. I know people who have sold up or retired because they just can’t face the coming storms. I wrote this to give you some understanding of what it is like to run a small business and updated some information on the numbers of businesses in the UK from the Governments statistics. It’s interesting to note that numbers HAVE dropped since 2017.
I sometimes think a life in business is like playing Tomb Raider. It’s a strange analogy, I know. Having spent more hours than I should have sneaking onto my son’s computer in the noughties there are some similarities so bear with me whilst I try to explain my logic.
When you start, the first couple of levels seem easy. You are well signposted, there are plenty of instructions, there’s lots of information available to guide you and give you some clues about which direction to explore in. You can, if you have been cautious, afford a few false starts before you have fully committed yourself heart and soul into the game ahead. Most importantly, you get a huge buzz out of every problem you solve and feel happy as you work your way up, around and through and over all the obstacles towards your goal.
It’s not long before you get on to the harder levels. There are fewer pointers here. You have an idea of where you want to go but in the words of Oasis, “all the roads we have to walk are winding, and all the lights that lead us there are blinding “. Every new level brings with it unfamiliar territory. The problems are harder to solve, the obstacles trickier. There are sabre toothed tigers and baddies with pistols around the corner threatening to end your game. Along the way you acquire new skills and weapons. You make mistakes you lose a life you try again having learned from your mistakes. But here is where the analogy departs for a while because suddenly your business is your life, it has become almost your entire life and now you are immersed the consequences of the decisions you must make are very real.
I am not an academic or an expert or an economist. All I can offer are my personal thoughts having been a co-director of a small business for 20 years. In fact, I have been involved in small businesses since I left university in the late 80s. During all those years we have seen many things. I have experienced dealing with bailiffs at the door and conversely been in the fortunate position of being able to help when others were at a similar low point. There have been times when we had to sell everything we could to help us through cash flow squeezes or borrowed heavily on credit cards to make month end and times when making money was easy and we have been able to happily reinvest in the business to expand and move it forward. We have had the privilege of building a team of people who do their best for us every day. We have been able to borrow to invest and taken many risks and chances, always calculated but sometimes dicey even so. Some paid off some did not. This is life. We make decisions, some are right, some are wrong, some work out, some not so much. Just as in a computer game though, we only have so many business lives. Unlike Lara, we can’t reboot and replay the game once all our chances have gone.
Here is the thing I have learned. However stable a business is, nearly all companies are really only 3 to 6 months away from annihilation. From time to time paperwork will cross my desk from a liquidator winding up a customer or supplier and I always notice the same thing. The implosion after the crisis point is pretty dramatic and rapid.
There are several reasons why a crisis can occur. Bang – a change in government policy. Slap – a loss of an important contract. Biff – the most profitable product is now out of fashion. Punch – a miscalculation of stock. Crash – a sudden dramatic move in currency exchange rates. Kick – a rise in interest rates when over-borrowed. Zap – a stupid misjudgement on an expansion plan.
This is not an exhaustive list but any of these things can happen to any SME with fatal consequences for their business. The liquidators move in. Suppliers switch to self-protect mode. All the value everyone thought was there ebbs away and dissipates like Lara’s energy bar, as the customer base drifts off to competitors, stock is marked down, customers find reasons not to pay their outstanding bills and the accountants and bankers who make their living out of the dead bones of SMEs take their cut. Long standing contacts distance themselves uncomfortably, embarrassed to admit a superstitious fear that failure could be catching. I look at the updates from these liquidators and I shake my head with sorrow as it could be any of us. I doubt I am the only one who sees it this way.
So you see, the life of a small business is fragile. We plan, we build reserves, we look at the prevailing conditions, the things out of our control, and we try to make sensible decisions, we hedge against our vulnerabilities where we can, we look for opportunities to get ahead and hope they pay off. Here is where I come around in a roundabout way to Brexit. The fragility of SMEs means we are heading for some extremely difficult times with Brexit looming. Remember my list of potential obstacles? Well for a proportion of the 5.7million SMEs and even some of the large businesses, Brexit, any flavour of Brexit on the menu, will mete out a number of those blows simultaneously. The companies affected won’t so much be rolling with the punches as knocked unconscious before they have had a chance to even buy gloves. We could do some contingency planning, we are doing what we can, but when there is a finite amount of time and resource and personnel we need to know roughly what we are planning for otherwise we may as well just buy a lottery ticket.
If you voted Leave, you – yes I do mean each and every one of you – have helped to put my business in harm’s way, but not just mine. A great many SMEs will face existential challenges because of a direct effect on their EU sales, disruption in the supply chain, an increase in their input costs or less directly because of a downturn, which will most definitely come, leading to cuts in their customers spending in the short to medium term. 2 years on and I still have not seen a convincing reason which explains why we are voluntarily following this insane path. There is no benefit to me and mine, my staff or my business and after asking the question multiple times, nobody credible has ever been able to cite a specific example of a benefit to my business or my life.
My partner and I are both from working class backgrounds, we started out with no contacts and no capital but lots of bravado. Over the years we have adapted, diversified and changed our business model to suit changing business environments. We have battled and fought and sought the tenacity we needed to keep ourselves in the game. We have reinvested our profits, taken chances, learned from our errors, some of them bad ones. Some days I look at the uncertainties ahead and the idea of giving up, selling what we can and going away somewhere regardless of the consequences crosses my mind for a moment. But I know we are not quitters and we will fight on, one problem at a time, one obstacle at a time.
For many in business however, Brexit might just become like one of the nightmarish corridors in Tomb Raider Level 20 with the jets of fire, a sword of Damocles and a giant boulder rolling behind. There will be too many obstacles coming together in too short a time to negotiate successfully and no amount of stockpiled medi-packs will get us through to the next level. Don’t be surprised if some players decide to just quietly turn the computer off and take up yoga.