Mind The Gap

There is a huge amount of uncertainty around when, how, and to what extent businesses will recover from the Coronavirus pandemic and shutdowns. In the face of all of these unknowns, it is more important than ever to stay positive and prepare for whatever may come next.

While I can’t predict the future, that doesn’t mean I can’t help you to prepare for it. There are some broad phases emerging. The length and timing of these phases may be difficult to predict with any certainty, but the principles behind them will help you adapt and stay ahead of the game.

The main challenge as I see it is that there are three phases for the financial support schemes, and three phases for the recovery of your business – but these phases are not going to overlap perfectly.

As a result, you need a careful plan to bridge between the phases. You need to be able to switch between them as circumstances change.

Below, I set out when you can expect your most challenging period to be, and then four strategies to help your business survive.

To jump straight to these strategies, click here.

Note that all the charts are denominated in months - hence we are looking at a 28 month period here. You can assume month 1 to be April 2020 to bring these trends to life for your business.

The Three Phases of Coronavirus Business Funding

There have been an impressive suite of options made available to support businesses so far (for more details, see the summary here). We are now getting a clearer picture of the length of time these will be available for, and what may happen afterwards.

As you can see from figure 1, the phases are:

  1. Cash In
  2. Cash Neutral
  3. Cash Out
Figure 1 – 3 Phases of Business Funding v2

Figure 1 - The Three Phases of Coronavirus Business Funding

Phase 1 - Cash In

The initial phase of business support – going from zero to having the mechanisms in place to get financial assistance to your business.

The main categories of support are loans, grants, and expense support.

Grants are one-off cash payments, which have likely already been received. Loans are one-off cash advances which will need to be repaid in the future. Expense support schemes such as the furlough programme (CJRS) will taper off by the end of October.

Be sure to maximise your support from these schemes while they are open, but be aware that the cash you receive will need to cover a significant period of time.

Phase 2 - Cash Neutral

Once the initial period for the various schemes has expired, there will be a gap before your loan repayments and business rates begin.

This is the time to make your organisation as lean as possible. Aim to build up your cash reserves ahead of the final phase.

This is about preparation for future cash constraints and for whatever other surprises the immediate future may hold.

Phase 3 - Cash Out

The final phase of business support is when payments fall due and your business is in the position of net cash outflows.

Any deferrals of tax payments to HMRC, repayments of loans under the Coronavirus Business Interruption Loan Scheme or Bounce Back Loan Scheme, and business rates will all fall due in around 12 months from now.

These are significant payments, but they are at least a known quantity. Turn that to your advantage by planning your expenditure carefully. Ensure you are able to cover these liabilities and maintain sufficient headroom for your regular working capital requirements.


It is hard to say for certain when the phases will begin and end, but we do know the following:

Loans under the Coronavirus schemes have a 12-month repayment holiday. This means you can expect to start making payments one year after you receive the cash advance.

Government grants will likely already have been received. If not you should follow up with your local council as soon as possible.

Deferrals of tax payments will be subject to the repayment plan you agree with HMRC but are likely to be due by the 31 March 2021.

Business rates are pending a full review later this year to redesign the scheme. All things being equal you should expect to start paying something from April 2021.

The Coronavirus Job Retention Scheme is set to pay 80% of your employees’ wages until the end of July 2020 (subject to the £2,500 monthly cap). This will taper down between 1 August 2020 and 31 October 2020 at which point it will end.

The Three Phases of Your Business Recovery

While uncertainty remains about the timings of the Business Support phases, there are significantly more unknowns around the path to recovery of your business.

What we can be certain of is that it won’t happen overnight, and the end point is likely to be somewhere below where your business was when all this began.

As per figure 2, The three phases that you should prepare for are:

  1. Low-to-No Sales
  2. Recovery
  3. New Normal
Figure 2 – 3 Phases of Business Recovery

Figure 2 - The Three Phases of Coronavirus Business Recovery

Phase 1 - Low-To-No Sales

This phase covers your business under full lockdown, and for any length of time where we may experience a partial reopening.

Whether or not your business is directly impacted by the lockdown measures, until there is a full reopening of the economy you will experience indirect effects to your trade.

You should aim to have your business “hibernated” for as much of this period as you can. Aim to keep outgoings to a minimum and preserve your cash for when you can reopen.

Phase 2 - Recovery

This phase represents the time during which the economy is reopened with minimal restrictions on trade, but recognising that there will likely still be some restrictions on activity.

Expect continued social distancing measures, cleaning protocols, and PPE requirements amongst other things.

This phase is likely to be characterised by two things for your business – slowly increasing revenue and severely reduced productivity.

Revenue will start to recover, but will be held back by a number of factors:

  Demand may be suppressed by people being fearful

  Demand may be suppressed by the impact on incomes in a recession

  You may experience bottlenecks – either in your own business or in your suppliers or customers – as everything becomes that much more difficult

Productivity will suffer due to the following:

  You may experience more regular employee absence due to illness

  Physical distancing in your workplaces will reduce your efficiency

  You will have spare capacity and resources as you maintain them ahead of phase 3

As a result, it is likely that this will be a significant loss-making period for many businesses.

Phase 3 - New Normal

This is defined as the new end state for your business and the economy – as good as the recovery period is going to get. From here on, you are back to growing your business in any way you can under whatever conditions now exist.

Two things are crucial to keep in mind here:

The new normal will be lower than the old normal. Even if you return to the same rate of growth that you experienced previously, it will be from a lower base given that you have lost a significant period due to the lockdown. More likely, however, is that you will experience a double whammy of a lower start point and lower growth. You should plan accordingly.

The risk of potential new waves of Coronavirus is not going to go away soon. Apart from making people nervous and reducing demand, this means that you need to keep your business robust enough to survive another period(s) of lockdown and recession.


The timing and length of these phases cannot be known at this stage, but consider the following when planning ahead:

  The government strategy appears to be gradual relaxing of the lockdown over the period between now and early August. All of this is of course assuming no further spikes in infections

  If your business is seasonal, you should reflect this in your planning. A small shift in the timings can have a disproportionate effect on a seasonal business

  Consider in particular the issue of Christmas. People may want to do their Christmas preparations earlier than usual this year to avoid a risk of a December lockdown affecting their plans

  Will the winter flu season be more difficult than usual, and will this affect your business in any way?

The Danger Zone

The phases do not line up, and cashflow will be a problem if you don’t address it.

The problem period could be prolonged and will interfere with the recovery of your business if you don’t plan your course through it.

Figure 3 illustrates how serious a problem this could be for your business.

Figure 3 – Mind The Gap v2

Figure 3 - The Cashflow Problem

Strategies To Help Your Business Recover From Coronavirus

To give your business the best chance of survival, you need to recognise that the initial waves of support from the government were only the first step. They won’t be enough on their own to get you through. You need to think very carefully about the next few months/years and plan accordingly.

Here are four practical rules to help you get your business back on its feet after Coronavirus:

1 - Plan

I cannot stress this enough. Without a plan, your business will struggle.

  Know which phase you are in at any time

  Know what it means for you to be in that phase – what specific actions do you have to take?

  Understand how you are going to transition between phases – including going backwards if that is what is required. What are your lead times? What resources do you need at each step? Do you need to invest in any changes?

  Manage your cashflow strictly and at a detailed level. Review it regularly with easy-to-use reports and take corrective actions quickly. Make as many of your costs variable as you can and switch off anything that is not essential.

  Prepare for the worst and hope for the best.

2 - Look To The Future

  Be aware of your new growth curve and adjust your targets to match

  Adjust your business to match these new targets. Ensure it is the right size for the world you now find yourself in

  Maintain investment where you can, but make sure it has a quick and sizeable return. Consider investing for the medium-term rather than the ‘lost period’ of the next few months

  Should your business sit out part of the recovery period? Is it better to wait until conditions are right for you to return in a more efficient way? Jumping quickly is not necessarily the right strategy for everyone.

3 - Listen To The Present

  Forecasting your demand is always both difficult and important. Now more than ever. Forecast it and monitor it closely, as it will have changed.

  Listen to what the market is telling you and don’t fight it. What is it that people want now? Has it changed? Can you change with it?

  Look to other sectors and other countries that have emerged from lockdown earlier – what can you learn from them?

  Run trials, test the market, and respond quickly. This is the best way to work out what is going to work for your business while keeping the risk low.

  Measure and track everything. Establish some key measures that will help you stay on top of your business and the market and have it updated regularly. Review it and act on it quickly.

  Build in some ‘circuit-breakers’. If it looks like you have moved too quickly from one phase to the next, listen to the data and slow down/go back. Not all of your decisions will be right, so correct them before it’s too late.

4 - Be Flexible

  Adjust your cost base to be as variable as you can by reducing fixed costs

  Diversify your business to spread the risk of future shocks in one sector

  Have a plan in place for any future waves of infection

  Build up some financial headroom to be able withstand future shocks

Running a business is not easy, and challenges won’t come much bigger than this. Come at this problem with your eyes wide open and as prepared as it is possible to be, and you will come out the other side.

I wish you the best of luck.


For more thoughts and tips on Coronavirus or general business advice, visit our blog here.

To find out more about pulling together a survival plan for your business, email ian.corner@cornerfinance.co.uk – I am keen to help as many businesses as I can in whatever ways I can.

Article by Ian Corner

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