‘How to keep businesses open that you have put your heart and soul into’

Some of the mistakes I made after I set up my first business in 2014 still make me cringe. I had quit my job as a lawyer to pursue my dream and looking back on it, I was woefully inexperienced. The business ran into financial difficulty and it reached the stage where we had to call it a day.

I was an employment solicitor in my previous life, but advising from that viewpoint has no relation or practical application to what it’s like on the ground. Years of reading legislation and books did not prepare me for what was about to unfold.

I was ultimately overwhelmed by the amount that I had to address with no guidance or help. I had to manage a liquidation on my own and deal with the issue of outstanding personal guarantees against my name and family home. Most importantly, I had dreamt of setting up my own food business since I was a child and in an instant my dreams fell apart in front of my eyes.

Looking back on it, it was the best thing that ever happened to me.

I write this today as we are now all navigating the coronavirus crisis together. I have read many stories of people closing the businesses that they have put their heart and soul into, so I wanted offer some advice, and I hope it helps.

All new businesses need to focus on two things:

1. Cashflow
2. Profitability

Profitability is like a cancer in the business. Left untreated it will potentially kill you. Cashflow, however, is the lifeblood of the business. Businesses that have been around for decades can disappear if they run into cashflow troubles. That is what is so harrowing about the coronavirus crisis. It has unexpectedly destroyed cashflow.

Woki Ko Kaiju opened in Wapping Wharf – photo by Martin Booth

The first thing we did when Boris Johnson announced the measures was to cancel all our direct debits, alongside picking up the phone to all our suppliers to explain why we had done that. We did that to manage our cash tightly, not to dodge paying invoices.

About 90 per cent were really supportive. After all this remember they did that and appreciate it. They are keepers.

Our landlords at all our sites were fantastic and offered rent breaks. This has the effect of preserving cash. Again, always pick up the phone and speak to your landlords. You will find most are really reasonable and everyone is in the same boat.

………………………………

Read more: Woky Ko launch new vegan concept

………………………………

The next thing that we had to address were our staff who were all understandably worried. The most important thing is to stay calm about things and address them logically.

We have four sites and it was clear that at least one site had to temporarily close as it was not viable to continue trading.

However, we still had a squad of 35 employees. Under law, you are not allowed to change the terms of an employee’s contract unless you have their agreement to do so or you have a clause in your contract allowing that.

So realistically there were only two options on the table: staff redundancies, or a variation of working terms and conditions.

Communication is so important in these situations because your team will be very anxious.

First up, you need to manage expectations so that if the worst does happen it doesn’t come as a complete shock. It’s really important to speak candidly about the situation and that redundancy could be a real possibility. It should always be the last resort though. You as an owner of the business have a responsibility for their wellbeing.

Having spoken to my team, I was moved when we all agreed that the salaried staff would take a cut in hours so that the hourly staff would have enough, thus preserving the whole team.

The dining room at Woky Ko on Queen’s Road overlooks the Wills Memorial Building and Bristol Museum – photo by Martin Booth

That quickly changed with the imposition of de facto lockdown so we had to readjust our strategy as there were no longer enough hours to go around even if we all shared the burden of cutting our hours.

The next thing to address is cashflow. To protect jobs the government has launched the Coronavirus Job Retention Scheme which guarantees wages up to 80 per cent to a cap of £2,500.

The devil is in the detail and there could be a possibility that this money won’t get to you until June. The business still has to pay the wages for now.

………………………………

Read more: 13 photos of Bristol on the last day before lockdown

………………………………

Without any cashflow coming into the business, because of lockdown, you can appreciate that this is a really tough decision and one that might not be financially viable anyway. If you do decide to go for this you need a really robust cashflow plan. The bank needs to see that you have a grip on your numbers.

The government has launched the Coronavirus Business Interruption Loan to help. These will come via your banks, but beware that some will ask for a personal guarantee.

Even though the government will back 80 per cent of the loan you are still primarily liable under a personal guarantee for 100 per cent of it. They will only go to the government if they can’t recover that amount from you first.

You need to really sit down and work out can you afford to take on the debt. Even though it is interest free it will ultimately need to be repaid. Especially with a big personal guarantee against your name that potentially exposes your own personal assets like your family home. Think long and hard about it, especially if you have dependents.

There are grants available at certain levels but we are still waiting to see what the exact criteria of this is and how readily available it is.

Woky Ko’s first restaurant opened in Cargo 1 on Gaol Ferry Steps – photo by Martin Booth

If you do decide to trade but in a different format such as a delivery service then do your numbers to make sure it is logistically and financially viable and make sure there are safe working conditions for your staff.

The government has agreed to a VAT deferral which will help, but for food businesses like Woky Ko, operating a delivery-based format costs money.

If you use a platform or run it yourself, there are costs to add onto your normal operating cost. Also, does your product suffer in a delivery-based format and give people a bad impression of your company? This might do more harm in the long term for your brand.

We decided to operate one site with a contactless delivery service as I felt that’s the safest for our team and customers.

I hope the above helps. The one good thing about all of this is that I believe it will ultimately open a lot of questions about how we live our lives. It is fantastic to see communities coming together, supporting each other and an amazing outcome is a countrywide renewed pride in our NHS.

Let’s support them and each other as much as we can.

Larkin Cen is the owner of Woky Ko, which has four restaurants in Bristol

Main photo courtesy of Woky Ko

Read more: Which Bristol food and drink businesses are still open?