The COVID-19 pandemic has impacted businesses and the economy in ways we could never have predicted. The Office for Budget Responsibility has predicted the pandemic will have a bigger impact on GDP and economic output than the 1920/21 depression.
Businesses in the secondary production sector, including construction, engineering, manufacturing and energy providers, are in a unique position. Many were required to halt operations during March’s lockdown, with construction sites closed and planned on-site work cancelled. This resulted in lost revenue, which was only partly remedied by the option to furlough employees.
As businesses continue their slow recovery, they may be required to cut costs and implement short-term measures to ensure their long-term survival. With the rollout of the vaccine, there is light at the end of the tunnel. Here, we round up the best ways to ride out the coronavirus storm and come out stronger on the other side.
Consider equipment rental
Buying and maintaining the equipment your businesses needs to deliver its products or services can be expensive. If there are tools you need for a small number of infrequent projects, it’s not cost-effective to buy the equipment outright and maintain it.
In addition to the capital outlay required to buy the equipment and the ongoing maintenance costs, there are additional costs to consider. For instance, how will you store the equipment? Large machinery will require storage of a suitable size and condition, which doesn’t come cheap.
In January 2020, the construction equipment rental industry was projected to grow 11% by 2023. That number looks set to increase as businesses protect vital cash.
Renting equipment, like a hydraulic torque wrench, gives your business peace of mind in a stop-start economy. The current lockdown hasn’t forced construction, manufacturing and related companies to halt their operations like the first lockdown. But there’s been an undeniable knock-on effect with projects once again being postponed or cancelled as businesses try to manage their cash flow. That in turn affects your business’ income. By renting equipment on a per-project basis, you’ll only be investing in equipment you know you’ll be using, without the additional costs of maintenance and storage.
Balance cost-cutting with smart investments
Research from Harvard Business Review shows that businesses which focused on cutting costs during previous recessions were the least likely to be successful following the economic recovery. Their post-recession profit growth is two-thirds less than businesses who choose to balance money-saving measures with smart investments.
When we talk about smart investments, we mean in your products and services. The effects of the pandemic mean businesses and consumers alike have less money to spend. But this doesn’t have to mean less work for your business. It means you have to work smarter and harder to stand out in your market.
If you’ve identified a gap in the market or a shortfall in your competitors’ offerings, it’s time to invest. Perhaps the flexibility allowed by equipment rental means you have access to machinery that helps you complete projects faster. A number of manufacturers successfully navigated the 2008 financial crash by buying ailing competitors. Fiat bought a majority stake in Chrysler, which had declared bankruptcy. As a result, the business strengthened its market position and has even defied the odds during the coronavirus economic crisis, posting high profits that exceeded its own estimates.
Re-consider your office spaces
The work from home order that came with the March 2020 lockdown highlighted the disparity between businesses that had invested in digital transformation and those that hadn’t. One year on, most businesses now have the right technology and processes in place to enable remote working. As a result, many business leaders have been re-evaluating their office needs.
Office space costs a lot of money, and that’s essentially money down the drain if it’s unusable. Office space in London costs, on average, £500–£1,500 per person, per desk. Even in more affordable cities like Leeds, your office could be costing £450 per staff member.
Some modern businesses have no office – like multi-national digital organisation Automattic, whose 950-strong workforce is remote. This can work well for digital businesses, but it may not suit all organisations. There are a number of options available for companies who require an office in the long-term.
Giving up your current office rental while your workforce is remote can help you save money. You can either operate without an office until your employees are able to return or use this time to move to a smaller space. Flexible and remote working looks likely to outlast the pandemic, so a smaller office space might be more suitable – and cost-effective – in the long term.
The coronavirus pandemic has impacted businesses in ways we never could have imagined. Riding the storm is no easy feat, but by making reductions in the right areas and investing money in measures that will make your business stronger, your business can survive what is predicted to be the worst UK recession in over 500 years.