False Resilience

03rd June 2020

Hiking to the top of a mountain sounds intimidating, right?

That’s why most serious climbers spend months if not years developing the physical prowess and mental resilience to conquer the peak.

But research shows that’s not actually the hard part…

The real danger is coming back down the mountain!

That’s when 75% of accidents occur, according to an analysis of over 5,500 accidents reported to the Austrian Alpine Police[1] over nine years.

Factors such as exhaustion, the physical challenge of walking downhill, loose gravel and uneven ground make the trip back home far more treacherous.

The same, I’m afraid, applies to businesses trying to recover as we emerge from lockdown.

Most businesses, you see, thought that surviving these past 2 months was the real challenge.

They imagined that if you managed to survive a complete shut-down of the economy, and possibly a drastic cut in demand for your services, disruptions to your supply chain, the furloughing of staff and shifting your entire company to remote working…

…Once we started to move back towards normal trading conditions, you were “home free”! You had come through the worst, and how are on the road back to recovery.

Unfortunately, it really isn’t as simple as that.

What we’re seeing amongst some companies is “false resilience”.

A lot of businesses have survived only because they were propped up by the government. They have essentially been put into “deep freeze” for several months.

Once they’re trading again, in difficult economic conditions, they’ll suddenly be confronted by issues they have managed to circumvent so far…

…Like drastic drops in consumer demand - something which might not even happen for a few months, until the initial surge of post-lockdown demand is over, and economic reality begins to bite for everyone!

Then there’s a trend I’ve seen several times as businesses emerge from recession. In the euphoria of the moment, they over-trade

…They feel confident that the economy is recovering and that they’re going to do well.

They forget that they’re under-capitalised, and don’t manage their cash well enough.

A few months later, they run out of money.

For these reasons, I am absolutely sure that a few months down the line, just as things feel like they’re getting back to normal, we’ll see increasing numbers of business failures.

It’s the opposite of what you might expect – but it’s certain to happen.

The truth is, it’s easier to switch your business off than turn it back on…

Coming down the mountain can be harder than climbing up the top.  

That is why, right now, you have to be even more careful than ever, managing your money.

Now is the time to institute strict financial controls

Make sure that you know your numbers inside out so you can make sensible financial decisions…

And do everything necessary to ensure you are financially viable over the coming months.

Not every business is going to survive the end of the lockdown and the “recovery”…

…Let’s make sure yours does.

Get in touch with me today to discuss how we can help you manage your company’s finances to world-class standards. I’ll get right back to you.

Warm regards,

Garry

[1] https://www.telegraph.co.uk/science/2017/07/10/climbing-mountain-real-danger-starts-get-top/

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