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Covid-19 – Coronavirus: Practical Advice for Entrepreneurs

Covid-19: Practical Advice for Entrepreneurs
Covid-19: Practical Advice for Entrepreneurs

Covid-19 Support for Entrepreneurs

Let’s not waste time here. What follows are some practical steps any entrepreneur can take to maybe make this Covid-19 situation a little less financially crippling.

***Updated; 28/03/2020 - with the speed things are changing, this Coronavirus advice for entrepreneurs may become outdated, but will be updated as frequently as possible. The video will be updated less frequently (cos it's a pain in the a**e to edit).***

Minimise Expenses

Personal Expenses

Now is the time to review your expenses and look at what you can cut or reduce. It’s a difficult one because on the one hand, it’s important we support other businesses at this time, but not at the expense of your own financial stability!

Secure your own oxygen mask first!

Just like you wouldn’t go and buy a new car just to make Mercedes a little bit more money if it ended up making you go bankrupt, don’t be guilted into continuing to buy the most expensive meat from the local butcher when you’re struggling with no money coming in. 

If on the other hand you aren’t that badly impacted, or you have a decent amount of money floating around - then absolutely support other businesses (in order of priority- local first, small companies second, national firms third). 

If you have credit card debt, principle of ‘don’t ask, don’t get’ comes into force. Barclaycard are reaching out to customers to let them know that they won’t be hitting people with late payment charges or charging for cash advances. It could be worth speaking to your credit card and loan companies to see if there is anything you can do to either postpone payments, reduce interest rates, etc. 

These are the first steps I always bang on about. Whether it’s in my book or online courses, it’s usually the quickest win to minimise your expenses. 

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Property Costs

These are usually one of the highest costs both businesses and individuals have. 

  • Do you rent where you live? It’s probably worth speaking to your landlord to ask if it’s possible to reduce your rent for a time. There is now talk of the Government stepping in with £1bn of aid to cover 30% of house rental costs. 
  • Do you lease the building you work from? It’s definitely worth speaking to your landlord to ask for a rent free period. 
  • Do you own where you live? Speak to your mortgage lender and request a 3 month payment holiday (heads up though, some call waiting times are being measured in hours…). 
  • Do you rent property out? Whether you own as an individual or company you can request a 3 month payment holiday.

Whatever your property position, there are ways to minimise the current monthly outgoings. 

HOWEVER, keep in mind that a lot of these are temporary measures that will need to be paid for at some point in the future. 

So take 3 month holiday on your mortgage doesn’t mean you don’t have to pay that money back again at some point. 

The mortgage companies aren’t that nice. So workout what the implications of this are going to be for you. 

Some landlords will be willing to give a rent free period, or accept a reduced rent for a time, but remember that you are the customer for their business. You probably can’t afford to continue servicing your clients for free for an extended period of time can you? So why should you expect them to?

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Self-employment Income Support Scheme (SEISS)

The Government have now come out with the plan to support self-employed people (sole traders). They have promised to pay up to 80% of average profits from the most recent tax years, up to a maximum of £2,500 per month. It's going to be a ballache to navigate, so here are the requirements. 

To be eligible for the scheme you must meet all the criteria below:

  • Be self-employed or a member of partnership;
  • Have lost trading/partnership trading profits due to COVID-19;
  • File a tax return for 2018-19 as self-employed or a member of a trading partnership. Those who have not yet filed for 2018-19 will have an additional 4 weeks from this announcement to do so;
  • Have traded in 2019-20; be currently trading at the point of application (or would be except for COVID-19) and intend to continue to trade in the tax year 2020 to 2021
  • Have trading profits of less than £50,000 and more than half of your total income comes from self-employment. This can be with reference to at least one of the following conditions:
    • Your trading profits and total income in 2018/19
    • Your average trading profits and total income across up to the three years between 2016-17, 2017-18, and 2018-19.

So what does this really all mean?

If you are a sole trader, you can now claim up to 80% of your average profit over the last 3 years. If you've not been trading that long, then they'll use the last 2018/19 Self Assessment profit figure. 

They will be looking at Net Profit - so if you've pushed a load of costs through to minimise your tax liability, then you're shit out of luck. It's not Revenue they will be looking at. 

If you've not filed your returns yet, here is your opportunity to strip out the costs you may have put through the business - but you only have until the 23rd April 2020 to get them in. 

If you set up as a Limited Company and are an Owner/Manager, and you did the tax efficient thing of paying yourself via dividends, then you're up a creek without a paddle! 

Chances are you've been paying yourself around £720 per month as PAYE and the rest as dividends. That's been the most tax efficient, but now you're paying the price. 

You can apply for the Job Retention scheme - but that means you have to furlough yourself and therefore not work anymore. And you'd only be eligible for 80% of your PAYE, or £575 per month. 

Nobody cares about your dividend payments, and nobody cares about your company net profits. It's harsh and a penalty for anyone who has acted within the law and been tax efficient with their finances. But that's where we are. 

If you make more than £50k net profit as a sole trader, chances are you're incorporated anyway, but if not the Government still doesn't care. Their view is that you should have some savings tucked aside if you're that baller. 

Got to say, I kind of agree with them there. But leaving that group out when you're paying EVERYONE else, seems a bit pointed. Dicks. 

How Do I Claim It?

No news just yet, but basically sit tight and hope for the best as you're not going to be seeing anything before June probably. They are giving people an extra month to sort out their tax filings, then it'll be another month at least before they get round to you. 

If you're a going concern, then you may want to look at the loan option to keep you ticking along. If you're screwed and probably going to shut down, maybe hang fire for a few weeks so you can put your claim in, and then close down. 

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Business Rates

Some industries are being given a business rates holiday. Yay holidays! Check on the Government website to see if you’re included, but at the moment it’s retail, hospitality and leisure businesses in England. 

You can access a cash grant of up to £25,000 that you should be able to get in early April. 

If you don’t currently pay business rates because you qualify for Small Business Rate Relief (SBBR), then you are eligible for £10,000 one-off grant. 

You should be contacted by your local authority, so there’s nothing for you to do here, just wait.

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Business Expenses

Same deal, review what you can reduce and cut out or even just pause. Now is the time to be cheeky and ring companies up and ask if you can suspend your subscriptions for a while. 

Obviously this thing is going to impact different businesses in different ways, but if you’re not able to operate at all then there’s probably a whole bunch of stuff you won’t be using. Give them a call and see if you can pause your contracts.

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Business Interruption Loan Scheme

If you turnover less than £41m then you’re eligible for this scheme. The scheme opens on the 23rd of March and will require you speaking to your lender. You can check on the British Business Bank website for who is involved in it.

What it comes down to though is you can gain access to a loan (THAT HAS TO BE REPAID REMEMBER) or overdraft facility, but that will be interest free for the first 12 months. It’s not actually interest free, but the Government have said they’ll pay the interest. 

Be VERY careful with this one. If you’re a business that has lost business because of isolation, etc. but fully expects to pick up all those customers again and it’s more a case of you postponed your revenue, then fine this might be a good option. 

If you’ve lost customers and aren’t sure if you’ll be picking up the lost revenue again, then this is just taking you into debt to make it through the next 3-6 months. Seriously consider the other options before going down this route.

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Coronavirus Job Retention Scheme

The Government has announced the creation of the Coronavirus Job Retention Scheme which allows employers to apply for a grant to cover the cost of 80% of wages up to a maximum of £2,500 per month. Now this may not help the self-employed still, but it does mean you won't have to fire your staff if you have them, and possibly more importantly, it means there won't be a crap load of people who have no money and can no longer afford your services!

It should be noted that the employer IS NOT responsible for the additional 20% payment to take employees back to 100% salary. So everyone will be taking a haircut of 20% if you earn up to £37,500 per year, and a much bigger reduction in income if you earn more than that. 

Remember the maximum amount that can be claimed is £2,500 so if you currently earn £120k a year, you're in for a bit of a shock.  

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Employees

If you’ve had any staff that have been off due to the coronavirus, then you can get a refund of 2 weeks worth of Statutory Sick Pay. They don’t have to have a GP note for it, so this system is wide open to abuse. Try to make sure everyone appreciates the wider implications of taking money unnecessarily when there’s only a limited pot to go around and support everyone struggling. 

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Tax

This will be reviewed on a case-by-case basis at the moment, but it’s possible to request a 3 month extension on your Corporation Tax and PAYE payments from HMRC. 

It’s not guaranteed, and could be changed at any minute, but now is the time to be cheeky in what you’re asking for. Don’t ask - don’t get. So it doesn’t hurt to keep the cash in your pocket for a while rather than giving it away. Just double check that it’s available to you and that there are no penalties that will arise from it first.

Any current VAT payments for all businesses are now being deferred until the end of June, so another help for cashflow - but remember that it still WILL need to be paid. 

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Maximise Revenue

Additional Products / Services

This is damn near impossible to cover due to the massively diverse range of things entrepreneurs and the self-employed do. But have a think about whether or not it’s possible to add a product or service that will allow you to continue serving your customers, and create an additional revenue stream for you. 

Some businesses just won’t be able to do this. However most will be able to do something to bring in at least some revenue. 

If you’re a Personal Trainer, you’re unlikely to be able to turn yourself into an Online Fitness Expert overnight, but if you stay focused on your existing customer base maybe you can transition to remote training. Your clients are likely to be stuck at home, bored, and still want to workout. So offer live PT sessions, group training sessions, or homework out programming. 

If you are a dog groomer, think about how you can add protocols like asking owners to drop the dogs off outside to minimise contact, and disinfecting the dogs feet outside before you pass them over to the owner (assuming that’s even possible - I’ve no idea, just making that shit up). 

But if we do end up in full lockdown, how about doing some training on how to groom your dog from home. Again, maybe forget world domination right now, but instead focus on your existing clients. You might think you’re shooting yourself in the foot for when things go back to normal as clients will just do it themselves, but let’s face it - they could do it themselves now. They don’t want to. 

Shoot some videos of the best ways to groom the dogs, sell some grooming products or supplies, loan out some brushes (that have been disinfected). You could even do a video call where you walk the owner through grooming the dog at home. All these things are chargeable, and likely to keep your customers coming back once things are over. 

These examples are stupid and might not actually work, but think outside of the box a bit for how you can keep at least some revenue coming in while at the same time minimising your expenses. That will decrease the impact the current situation will have on you and your business. 

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Insurance Payouts

A lot of people kicked off about the Government just ‘suggesting’ people don’t go the pub, because it would save the insurers from paying out because they weren’t forcing the pubs to close. But actually the insurance industry have come out now and said that this suggestion is good enough to count as a forced closure. 

However, it’s worth checking that any business interruption policies you have in place actually cover you for pandemics. An awful lot of them won’t, so definitely have a read through your terms and conditions or speak to your broker to see if they can give you any guidance.

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Universal Credit

The self-employed have been given access to full Universal Credit at a rate that is the equivalent to Statutory Sick Pay - a whopping £94.25 per week. There is talk that this will increase by a further £1,000 a year, but that still only equates to £113.48 per week. But it's better than a slap in the face with a kipper. 

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Keep Calm and Carry On

We are, let’s be honest, potentially screwed and a lot of companies and entrepreneurs will not recover from this. The Government is keen to help where they can, and your customers are likely to want to help you survive this as well. 

But you aren’t a charity. Figure out how you can help your customers and give them a realistic price for that service. You’ll probably find your customers are keen to help support you. 

Feel free to play on the heart strings of a smaller business doing it’s best to stay afloat. It’s true, as well as compelling. 

But keep in mind, that this too shall pass. At the other end of this particularly dark tunnel there is an environment of decreased competition and the opportunity for you to grow your business. 

Nobody knows how long it’s going to last, but it won’t last forever. 

Ask anyone currently lying in a hospital bed if they’d give away all their money to be back 100% healthy - your health is more important than any amount of money. 

Keep your chin up, don’t panic, keep plugging away, and most importantly - stay safe.

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Further Reading