Decision Making March 28 2020

Like many other business owners up and down the country we are having to make tough decisions on an almost daily basis. Mark my words, whether closed or still trading in some way, business owners will not be able to switch off. Those who have spent years ‘living and breathing’ their businesses day in, day out, will be finding it very difficult over the coming weeks. We are living in unprecedented times and there are no rule books for the decisions we are having to make; we can only do what we think is best, based upon the advice and guidance available.

The decision to keep trading

We continue to trade through our online store and are thankful each and every day for the orders which come in. Our staff are not at work and the business is being operated by the two business owners who also come from the same household. We are not allowing anyone to collect products from our premises and neither are we allowing visitors. In addition there is no-one else in our household, and with the Government still allowing online retail sales, we feel it is appropriate to continue until told otherwise.

This doesn’t negate the worries which we have about our business and the future. Around 95% of our income came from wholesale accounts and this has dried up for the foreseeable future. Yes, we have seen a growth in online sales, but there are still costs to incur and challenges to face, which we thought we would share here in the hope that it helps or at least reassures those in the same position as us.

Quick decision making to take control

We reacted quickly last week once we saw a change in the pattern of ordering from our customers. Even before the decision was taken to close cafes, restaurants, etc we had been reviewing our outgoings and seeking optional payment windows where possible. Since the business opened in 2011 it has been stressed upon us that we stay on top of accounts, and each quarter our accountant produces full management accounts for us. This advice has been followed to the letter and we can quickly make decisions based upon up to date and complete information. By the end of the week we knew the scale of the problem facing us: with payment windows negotiated and costs minimised we arrived at a figure which represented the volume of sales required weekly and monthly to meet costs (at that time it included staff wages). This was an important moment for our own sanity – by arriving at this figure we knew what was required of us. In essence, we had taken back a little bit of control. As Government made further decisions we amended this figure.

As a business owner it is important to take back control as best you can. Do not avoid this issue; contact anyone you owe money to and begin to engage in discussions. Everyone is in the same position and we are all helping as best we can. Do not ignore the issue and do not cancel payments without discussions as this will not help anyone in the long term.

Decisions to support staff

The decision by Government to cover staff wages came as a huge relief. Granted we do not know when or how this will come into fruition but it will happen. We had already decided to allow the staff to work from home but quickly reacted to the Government’s news and placed the staff into ‘furlough’. We had no idea what this meant at the time but surely that is what ‘Google’ is for? We have also decided to top-up the wages of the staff so they will receive 100% of their salary. We only have a small team and their roles have become quite specialist in the business. Retaining their support into the future will be critical to the ongoing success of this business and we want them to know how much we value them. The decision to continue with online sales will help us meet the top-up costs of our wage bill.

Each morning we look at the most up to date advice and communicate this to staff as early as possible. We are fully aware that our team are isolating themselves and will also be finding this hard. By communicating what we know we hope this helps in some small way. We have always used a team communication tool called Slack and this is proving to be very useful at the moment. In addition we use an online phone system called RingCentral which means all staff can access calls, make calls and check messages wherever they are.

Managing credit terms in two directions

As a wholesaler we offer credit terms to our customers. To ensure a steady stream of income throughout the month we collect direct debits at various times. As the restrictions were beginning to take effect early last week we were in the process of claiming payments for coffee supplied during the last two weeks of February/first two weeks of March. We have already seen businesses cancel these payments. We understand that cashflow in hospitality is notoriously bad and at the moment we are being patient with these customers. However in a few days time we will be attempting to claim payments from another group of customers for coffee supplied in March. We will have to wait and see who can and who cannot pay. Again our decision to sell online through this period is to allow us to offer support to our customers who are experiencing financial difficulties.

If you are struggling to pay suppliers then it is critically important to open lines of communication with them. Paying something is better than paying nothing, or even agree a deferred payment until Government funding becomes available. It is the process we are all having to engage in during this period.

We are also aware that our customers will want to order coffee and other supplies before they open again following the lifting of restrictions, and will be looking for credit terms. Once we begin trading again, and once staff are back at work, we will need a plan for dealing with credit terms. We might need to reduce them in the short term, particularly if we see a spike in demand – this is both a blessing and a curse for wholesalers. To meet the demands of any spikes we need to purchase stock, but at the same time we might not see the income come in for a month or so.

Our accounts package has been critical to us during this period giving us up to date and relevant information. We use Xero as an online accounting tool and Receipt Bank to deal with paper receipts. In respect of our business, if there is one message we will be taking away from this crisis it is the importance of accurate and up to date accounting.

The benefit of strong relationships

We also need to spare a thought for those at the other end of the supply chain. In our case this is the coffee farmer. We are already hearing of lockdowns in Peru which are preventing harvests from taking place and containers becoming mixed up at ports. We might see a short term over supply of coffee in the coming months but potentially a longer term lack of supply if harvests continue to be hit. Our decision to buy through our coffee broker, Mercanta, rather than direct has always been a form of insurance policy. We only pay for beans which are shipped from the UK warehouse to our Roastery and as we receive a weekly delivery we only have smallish amounts of stock on site. We are already in close contact with our broker, feeding back our weekly sales along with other roasters, so they can build up a picture of when people might need coffee again and in what quantities.

In most industries decisions are sometimes based upon costs alone, and sometimes based upon quality and service. We have always been advocates for the latter and have strived to build long term and sound relationships with customers and suppliers alike. In these difficult times it is these relationships which are proving to be critical. Small businesses up and down the country standing side by side to find ways of working together and to support each other. You might be able to buy cheaper elsewhere but when the chips are down, it is the support network you build up which is going to help you through the difficult times.

A big shout out to Caffeine Magazine for curating a list of roasters who are still offering online sales.

Similarly Coffee Hit have taken the same approach, promoting roasters to around 25,000 newsletter subscribers.

Brewed by Hand, a supplier of brewing equipment, are offering to drop ship directly to our customers which means we can make sales without needing to hold stock.

These are just some examples of companies trying to help each other. For our part we are sharing some of the income we receive from online orders – customers are asked to nominate a coffee shop and we will donate 10% of the value of the sale to their chosen establishment in the form of free coffee.

We are also being patient and supportive with our customers. This will go away, we will be back in business and by working together we can rebound.