What a strange year 2020 turned out to be. And, as I write this, it seems the seas in 2021 will be as rough.

For many small business owners, the impact of lockdowns has been massive. For some Brexit has added another pressure. Just staying afloat may seem like a tall order.

And that is where you may start to look at where to cut costs. It may be tempting to cut what you see as superfluous. But, as a small business owner myself, I ask you to stop and think before you make any rash decisions.

One area that you might be tempted to cut back on is insurance. I have seen business owners particularly reduce insurance on people; life insurance, keyperson insurance or shareholder protection.

But these are not nice-to-haves – these can be vital. You wouldn’t stop insuring the desks and laptops in your office. So why stop insuring the people? Furniture can be replaced; people are the commerciality of your business.

What if something happens to you or one of your key members of staff or one of your shareholders? And if you are the sole director, what if the worst happens and you die and the business has to be wound up and redundancy payments then have to come out of your estate?

I am also seeing that life insurance companies are not keen on taking on the over-55s right now. In some circumstance’s providers have even started to decline giving quotes. So, if you stop your life insurance temporarily to help cashflow you may have problems re-starting, particularly perhaps if you do contract Covid-19; we really do not know how providers will respond to that and the implications of long Covid.

And even once some sort of normality resumes, who knows what the rates will be like. We are generally advising business owners to keep the cover they have, as you never know what is round the corner.

Another cost business owners are often tempted to reduce is the marketing budget. But remember people can’t buy from you if they don’t know you exist. You need to keep on keeping out there. Maybe you can look at more cost-effective ways of promoting your product or service, such as the targeted use of social media.

Whichever method you choose, it is worth noting research by Harvard Business School which shows businesses that are successful in the long term don’t cut back on marketing budgets when the going gets tough.

That rough sea that we, as business owners, need to navigate in 2021 will be a lot easier to manage if we have the right equipment in place. We need a decent boat and crew, and the back-up of a life raft. To mix my metaphors, as they say, don’t risk throwing the baby out with the bath water. One day we will make it to calmer waters.

No individual investment advice is given, nor intended to be given in this article and liability will be accepted in respect of any action you may take as a result of reading this article. If you are unsure you are urged to take independent investment advice. 

This article first appeared in UnLtd magazine.