Well 2020… to think you were going to be a cracker of a year! How wrong we have been … so far!
It has been a challenging start to 2020. Bushfires, flooding rains, drought, and now Coronavirus … like, what the hell!! Business owners are facing one of the most volatile periods in recent memory, many experts suggest this is much worse than the disruption caused by the Global Financial Crisis in 2008.
As a business owner, we have much to consider. How will we ensure business continuity during this tumultuous time?
How will we minimise the disruption, not only to our business, but our clients’ businesses? How do we collect money from customers, when they are facing the same cashflow crunch that we are?
Whilst we don’t know how long this will disruption will continue, we expect the slowdown to have a substantial impact on business, particularly cashflow. Cashflow, is the circulatory system of any business. The greatest percentage of business failures arise due to poor cashflow or inadequate working capital. Managing cashflow will be crucial as we face these unprecedented challenges ahead of us.
Don’t waste any time assessing your cashflow requirements and the likely hit that your income will take at this challenging time. You need to be realistic and re-assess your forecasts, what is your main source of income? Will a dramatic slow down impact on your income? If so, how? By how much? What will be the end result? Will this impact be so great that you no longer make a profit or at the very least, break even? If so, there is only one solution, you must reduce your costs, now!
The good news for our clients is that for the team at Real Balance, this isn’t our first rodeo. We have been here before, we have survived disaster and mass-disruption. In fact, Real Balance was founded in the middle of disaster and mass-disruption!
No pun intended but we’ve weathered the Pasha Bulka Storm.
We survived the GFC in 2008, we’ve assisted our clients to navigate their way through the worst drought in living memory.
In times of disaster and mass-disruption, you need to remain calm, which is where we excel.
It is time to execute your business survival plan, to enact your crisis management procedures.
Ask yourself the following questions.
Based on your current cost base, how long will my cash reserves last?
The National Rugby League are doing this at this very moment, and the forecast is not good. It has been speculated that, if the NRL competition is suspended they have three months to survive! It is feared that Clubs will not survive in their current form. Your business will have similar challenges, identify them and determine how long you have to survive, if you were to make no changes.
The likelihood is that you won’t survive long if you do nothing.
So the next question is, what changes do I need to make? Where do I need to cut costs? If you need to cut staff costs, rather than terminate staff, is there a better way. Will all your staff accept a pay cut or a reduction in hours to save other staff? In other words, everyone loses a little to save everyone. Airlines around the world, including Qantas, have implemented pay-cuts across the board, even at the Executive level, to alleviate pressure on the airline. The Financial Times in the UK reports that “most airlines face bankruptcy by the end of May”.
These are challenging times, but there are always opportunities if you are prepared to look for them.
Some of the things you should be doing right now are;
- Remain calm, if you lose your head, everything will crumble around you.
- Focus on your core business. What is the one thing you do better than your competitors? What is the one thing that will get you through?
- Nobody knows how long this disruption will last. Have a plan, a three month, six month and nine month plan. Have a clear understanding, how long your cashflow will support you.
- Have a very clear understanding at what it costs to run your business.
- Where do you have opportunities to reduce costs, that will have little impact on your revenue?
- How much do your customers owe you? Get on the phone and ask them for payment now, and then do it every week until they pay. Stop supply if they don’t pay.
- How much do you owe your suppliers? If you are having issues making payments on time, call them and work out a plan.
- Do you have a payment plan with he ATO? Call them and let them know your situation.
- If you require stock to supply finished goods, where do you get that stock from and what is the likelihood that supply may be disrupted? If you are going to have supply issues, how will this affect your income? Can you buy from a local source?
- If you work in an industry like construction and rely on the workflow of other people, how will disruption to their workflow impact on you? What impact will this have on income?
- Have an understanding about how your customers work. How will the Coronavirus impact their businesses? What impact will it have on their business? Accordingly, what impact will this have on your business?
Collate all of this into a Business Continuity Plan.
The important thing to do right now, is get ahead of the curve. There may be some tough times ahead, but make those decisions now that will put you in the best possible place to weather the next six months. Don’t exclude your staff, include them in the conversation and discuss their concerns. They will be scared, they will need reassurance that they are safe.
It reasonable to forecast forward for the next six months, they are going to be challenging times, they are going to be exhausting for everyone, very few businesses in Australia will be immune. It will be hard on the people around you, so when making decisions, be mindful of the impact that it will have on your staff, your customers, your suppliers and their families. Be respectful. Be honest in your struggles. If you need help, do not be afraid to ask for help.
You don’t need to endure this alone our team are here to help you, even if you just want to have a chat and get something of your mind.
For further assistance, please contact the following:
https://www.ato.gov.au
https://www.health.gov.au/news/health-alerts/novel-coronavirus-2019-ncov-health-alert
Author: Shelley Whitton