Monday 14 December 2020

Running a business in Covid times is impossible

Last night I had a rotten nights sleep. I woke up at about 3.30am and simply couldn't get back to sleep. The reason? I'd heard yesterday that London would be going into tier 3 this week. I run a business and the situation simply gets worse and more difficult. I employ 14  people and I feel a strong sense of responsibility to them. They are facing a Christmas not knowing where we will be and I feel responsible, even though there is little I can do other than ride the storm.

Let me explain what it has been like for us. As we run a physical business, many of our costs are fixed. Mortgages/rent, insurance, water, electricity, maintenance, do not go away. There is no furlough payment for most of our main fixed costs.

Our business has four areas of operation. The Recording studio. This year our turnover on this side is down 60%. The business was closed during the first lockdown. None of our clients seem to have the cash or desire to spend money on recordings, without shows to sell merchandise at. There is no need for demo's because there are virtually no gigs. We were lucky to have a major TV project, that saved the day.

Then there is the rehearsal side of the business. This is also down by 60% for the same reasons.

Then there is the equipment hire side of the business. As this is only busy in from April-December and is based on supply of systems for live gigs, it is down by about 95%. 

Then we have our shop supplying musicial equipment. We actually had a brilliant start to the year, with sales up 100% on the previous year in January and Feb, although these months are small beer in our annual turnover. The music equipment industry normally sells about 50% of its annual turnover between November and December. We ramp up for this in July and August, by buying in Xmas stock. We didn't bother this year. We were early adopters of online sales, but took the decision to not push this area of sales, back in 2008. This sector of the market relies on huge volume and small margins. We offer a bespoke, personal service. Until this year, this has paid dividends. But this year has been a nightmare. In late November, we had a difficult decision. Do we rush out and order a stack of Xmas stock or do we conserve our cash? We had heated discussions. As a bulk buyer there are some very good deals to be had, but we faced the risk of a third lockdown or London moving to tier three and sitting on dead stock for a year. This weekend was frustrating. We had several customers looking for gifts and we smply didn't have the products to sell. Every time a customer comes in and is disappointed, we feel as if we have personally failed. Should we see a second lockdown or tier 3 this week, our decision will be vindicated. Should we stay in tier two, then we will have a very frustrating weekend next week as customers turn up but we may not be able to supply what they want. Many of our customers are also small business owners and they have said the same thing. One guy bought £100 of accessoriesjust to be supportive (we still have plenty of strings, drumsticks and leads etc). He wanted a beginner package for his son, but we simply didn't order them this year. There was no point if we couldn't be sure of being open.

The current situation has turned running a business into a gamble. Do we buy stock on the basis that other people won't and we'll be in a good position? Do we hunker down and save our cash, hoping to survive? We are lucky in as much as with the furlough scheme, other assistance and our previous robust position, we are not in trouble. If things start returning to normal in April, then we should be well placed. We are taking that punt. Many have thrown their hand in. I see other businesses in the estate where we live having all manner of challenges. 

I am not entirely sure that there is sound logic behind the governments strategy at this time. I don't see how "non essential shops" such as music shops are more risky than supermarkets for customers. . Personally, it would seem to me that there is far less risk in a music shop where there are relatively few customers per hour than a supermarket. I get why 500 sweaty people in a small room pogo'ing to a punk band may be risky, but many shows can have their risks mitigated. I understand that the government has difficult choices. I understand the need to keep young people's education going, even though the schools seem to be driving up the infection rate. Surely the logic would be for a ciurcuit breaker lockdown nationally over Xmas, when they are not at school? Few people I know will be having a normal Xmas. If the three week Xmas holiday was used as a lockdown to limit transmission, to buy us time as the vaccination programme was rolled out, I don't thik too many people would argue. 

If London infection rates are 'through the roof', then the government is failing. If they know this is driven by school based transmission, then they are negligent if they don't address it. My worry with regards to tier 3 is not that it isn't needed, but that as a business owner I have no idea how long it will last. The thing most businesses need to thrive is stability. Studios and shops require a lot of investment to function. Buying stock without a clue what the situation will be on Friday, let alone in February next year is impossible. It used to be that I could tell you to the day what stock we would be ordering on for the whole year, unless new products came out. Now even going to the cash and carry to order teabags and loorolls is hard to plan. I just don't understand why it seems that no one in the Boris Johnson cabinet seems to understand this.

No comments: