My Coronavirus Strategy: Part 1 – Reduce Risk

The first post in a short series covering my business and personal finance strategies to survive and thrive the Covid-19 coronavirus.

• Part One (this one): Reduce Risk – in my businesses, investments and personal life.
• Part Two: Increase Earning – to gather cash for protection and to invest.
• Part Three: Invest In New Opportunities – as the extraordinary times lead to extraordinary deals.

Collapsing Markets

My business revenue is collapsing, my investments have been ravaged, and there hasn’t yet been announced any government support for my type of businesses.

But even so, I am feeling optimistic. I have been writing about being prepared for the unknown for years and have (mostly) followed my own advice.

• Serendipity – How To Be In The Right Place At The Right Time
• Be Ready For Anything – Surviving The Turmoil Of Post-Brexit Britain

I am well prepared. But now I need act. So here are my plans. Part One – Reducing Risk.

It Could Get Worse

I am not very good at predicting the future but what we can do is think about the range of possibilities. And as this post is about reducing risk, we need to assume for the worse of those possibilities.

• We have to assume that this is going to get worse. And may last much longer than current predictions.
• We also have to assume we’re on our own. Which means assume no help from the government and a loss of income from our businesses.

So with that in mind let’s see how can minimise the potential damage to:

• My Investments
• My Businesses
• My Personal Life

Reduce Risk in My Investments

In my last investment update in Oct 2018 I outlined my investment strategy:

We are living in uncertain times and I really want a decent amount of money not tied up in long-term investments. To both protect me and make the most of whatever happens.

1. Because I wouldn’t be surprised if there is another recession or stock market crash.
2. And because I want to have money available in case some great opportunities come up.

Well, it wasn’t Brexit that caused it, but the Covid-19 coronavirus definitely ticks both those two!

In that post, I outlined my target allocation as:

• 10% property.
• 50% stocks and shares.
• 30% peer-to-peer lending.
• 10% investments in my own businesses.

Which is almost exactly where I was at in late Feb when the market started to tumble.

I chose the 30% in P2P lending because:

What I am looking for is some sort of easy access investment where I can close out and withdraw very quickly if needed. But an investment that will still make me money and at least beats inflation.

Now is the time to claim those easy access investments.

As of early March, I started withdrawing all my money from P2P Lending. I should be completely out in another three weeks (Touch wood, I will update if there are any problems. If you want more details or want to chat about P2P please comment).

That will give me enough cash to survive a few years if my businesses dry up. And gives me some money to play with to invest in whatever opportunities I find.

Apart from the P2P lending, I am leaving the rest of my investments alone. In fact, I will probably be increasing my stock and property positions. More on that in part 3.

Note: if you are holding cash, limit it £85,000 per banking group. That is how much you are covered by the government if the bank goes bust.

Reduce Risk In My Businesses

I run four significant businesses all of which are suffering from the virus.

• This blog – My most popular posts are around sports betting and Amazon FBA. Both of which are suspending operations.
• Two Amazon FBA businesses – Amazon FBA has stopped accepting new shipments that aren’t for crucial goods.
• A gin business – Bars and restaurants are closed by law.

But that is fine and we can survive it because:

• We have no debt
• We have no staff
• We have no rent or rates

Our overheads are ridiculously low and we can afford a big drop in revenue. But that doesn’t mean we don’t need to take time to examine our current business practices and see where we have risk or unnecessary expenditure.

For instance we spend quite a lot on marketing and adverts. Especially through Amazon FBA Ads. But Amazon FBA is limiting the amount of stock we can send in, so why buy ads and reduce our margin if we will sell out regardless?

A few other things we are doing

• Moving stock to long-term storage.
• Cancelling subscriptions and memberships we are part of.
• Putting on hold new product development.
• Taking advantage of business help provided by the government.

Every business is different. But a global truth is that these are not normal times. We all need to sit down and look through our business strategies and see what you are doing that is no longer relevant.

Reduce Risk In My Personal Life

We have been living as digital nomads recently. Which means we don’t have a home but instead move around a lot renting short-term accommodation.

So my main personal risks are health and stability related.

I can imagine a complete travel ban where no one is allowed to leave their house. So we made the decision to move to the UK from Thailand at the end of February. We have settled into an Airbnb in Covent Garden, London.

Why there? Well the UK was an easy choice. Both our families live there, everyone speaks our language and there is the NHS (the last thing we want is to be quarantined in a Thai hospital with no airconditioning). But where in the UK? A lot of people are heading to the hills, but we have done the opposite and settled in central London:

• Hospitals in London are some of the best in the world.
• Lots of supermarkets and shops in walking distance. All of which are quieter than normal as the centre of London empties.
• The best takeaways in the country.
• Airbnb’s are really cheap now. 70%-80% less than normal. We can live in the type of apartment and location that would never otherwise be justifiable.
• Easy to get to either of our families if needed.
• Lots of nice walks around deserted central London.
• Good internet and phone signal.

We are hunkering down socially isolated. In particular, we are not going to meet up with anyone for the foreseeable future.

As well as choosing a good place to hunker down in. I’m also putting together the cash for at least one year of expenses so we can live the quarantine life for as long as necessary.

In my last post, How To Support Local Businesses During The Quarantine, I advocated for spending more to help support local business. If you can afford it (like me) then please do it.

But if you don’t have that much then saving and building an emergency fund should be your priority. That could mean cutting spending, selling investments or earning more.

In part 2 we will be covering how we can earn more short-term income.

There is a companion episode to The Lazy Entrepreneur Podcast to this post. 58: Survive & Thrive During The Virus | Part 1 – Reduce Risk