What do you do when your niche is gone? Helping your hospitality and leisure clients survive
The hospitality and leisure sector has faced an uphill struggle over the course of the coronavirus crisis and the many months of lockdown. Businesses are either closed or operating with highly reduced capacity, and that’s having a catastrophic impact that may well result in cash-poor business failing to survive the current crisis and economic recession.
With lockdown measures continuing to be tightened, the next six months are likely to be challenging, and the hospitality and leisure will bear the brunt of any shutdowns.
If your accounting firm works with businesses in this sector, your clients will be in dire need of advice and proactive solutions to their challenges. So, what can you do to help?
The impact of Covid-19 on hospitality and leisure
The hospitality and leisure sector has been hardest hit of all UK SMEs by this current pandemic, with businesses losing on average 54% of their monthly business income over the early months of lockdown up to April 2020, according to research by Aldermore Bank.
The enforced shutdown of hotels, pubs, bed & breakfasts, tourist destinations and theme parks that began in March has taken a toll, with some revenues dropping to zero for a prolonged period and business owners having to dig deep into their cash reserves to cover their pre-existing fixed overheads and other operating expenses.
The Government’s Coronavirus Job Retention Scheme (or ‘furlough scheme’ as it’s been dubbed) was a lifeline for many businesses in the sector. Eight in ten workers were furloughed in the UK accommodation and food services sector, according to a survey by the Office for National Statistics (ONS) – but the furlough scheme will end permanently in October. With this financial support gone, many businesses will be left with a large payroll bill to pay, no working capital to cover these costs, and the potential need for painful redundancies.
Helping clients to weather the storm
Business owners will turn to you, their trusted adviser, to help them weather the ongoing Covid storm – and that puts pressure on your firm to come up with a positive course of action.
So, what can you do to help evolve, reinvent and revive your hospitality and leisure clients’ fortunes when their current niche, or niches, are in such poor shape?
Here are some key actions to consider:
Isolate the client’s current niche/s – you’ll know each client’s business model already, but take the chance to talk through their aims, the niches they want to focus on and the main areas of the business where they are facing current challenges.
Review their historic data – look back over the client’s historic sales data and revenue numbers and see where most of their trade is actually coming from. This will help to pin down options for other promising niches and revenue streams.
Take a deep dive into cashflow – cashflow will be a huge pain point for many clients, so get granular with their cashflow statements, aged debt, spend management and other factors that are impacting on this negative cashflow position.
Run scenarios and forecasts – projecting sales, revenue and cashflow numbers forward in time will help you to get a handle on their potential future position. Run different scenarios (zero revenue, 25% revenue, 50% revenue etc.) and look at strategies and tactics for coping with each possible scenario.
Innovate within their current niche/s – consider ways for the business to generate sales and revenue streams without being fully open to the public. For example, could a wildlife park or an art gallery offer paid-for video tours, via Zoom, to generate some income and keep their brand in the consumer’s mind?
Diversify into new niches – based on your analysis, help the client to formulate a strategy for targeting a new niche, to diversify the business. So, could a gastro pub diversify into home delivery meals and appeal to the stay-at-home consumer?
Assist with access to finance – whether it’s extending their working capital, or funding the growth of a new niche strategy, clients are likely to need additional finance at this time. Helping them source the best routes to funding will be an essential part of your role, providing them with the cash in the bank to help drive their recovery.
Any innovation or diversification within the business will need some rock solid guidance from your firm. You’ll be partnering with clients to work out budgets, set sensible and attainable sales and revenue targets for new niche/s or projects, and keep the business on the path to recovery.
This is all far easier to do with access to the right tools, research and professional advice. At Thomson Reuters, our tax, audit, and accounting products help your firm deliver better decision-making, collaboration, and compliance.
This is far easier to achieve when you have the professional support of Thomson Reuters and our mix of tax, accounts and practice management tools. These tools ensure your firm is in the best place for decision-making, collaboration, and compliance .