24 Apr Cocooning a business
The purpose of this downloadable guidance is to give an overview of what, why and how a business might be cocooned (or mothballed) in response to the change in trading environment arising from Covid-19.
What is Cocooning?
- Cocooning, or mothballing, is a temporary suspension of a business and can be the result of sales reducing to zero (or nearly zero)
- All cash outflows where possible are stopped or reduced and the business is left in a state which it can emerge from once the prevailing business conditions improve.
Why would you do it?
If there is a temporary change in business environment like we are seeing from Covid-19 then business owners have the following decision:
- Continue trading (and possibly benefitting) (e.g. delivery companies)
- Move trading online (e.g. universities, schools)
- Pivot the business (e.g. restaurants doing take away)
- Repurpose to produce in-demand goods (e.g. BrewDog hand sanitiser)
- Cocoon the business temporarily
- Solvent/Insolvent liquidation
As Covid-19 has reduced revenue for many businesses to zero (or close to zero) it may be pragmatic to cocoon the business until conditions improve.
The decision to cocoon is likely to be difficult and the following are some thoughts to help business owners make the decision.
Please download our guide for the full factsheet about Cocooning a business.