Are You Swimming Naked?
American business magnate, investor, and philanthropist, Warren Buffet said, “Only when the tide goes out do you discover who’s been swimming naked.” In boom times, flawed business models and poor business practices go unnoticed. When the economy is booming, we tend not to worry about our level of debt or expenditure on non-essential items. We don’t think we need a safety net because it’s all blue skies ahead.
Enter COVID-19, the pandemic that changed the way we live, work and play. Our Prime Minister says we are sailing into ‘unchartered waters’ but we might find it is more like a perfect storm. Businesses, big and small, have gone into hibernation and our economy will never be the same. The tide has gone out which has exposed a lot of businesses and sadly, a lot of them won’t survive this crisis. Some analysts predict an avalanche of business collapses and unemployment of more than 10%.
Economic downturns always produce change and some of it will be for the better. We might find workplaces more flexible with staff working remotely from home which will reduce travel time and costs. While the jury is out on staff productivity levels, it might prompt business owners to reconsider the amount of office space they need which could significantly reduce their rent and overheads. Businesses will shed some fat and unnecessary costs. IT systems and staff resources will be under the microscope. They say, necessity is the mother of all invention and we’ve already seen some businesses pivot to adjust to the change in demand and government regulations.
HAVE A GAME PLAN
Of course, this pandemic and lockdown came with very little warning or time for planning. As the shock wears off, it’s time to move into the planning phase and develop a clear strategy. The following checklist serves as a useful action plan:
- Update Your Financial Records - this will give you access to some key numbers including your wages and profit. Current financial data allows you to make informed business decisions such as assessing your eligibility for government assistance. They also help with tax planning.
- Prepare a Cash Flow Budget - there has never been a more important time to prepare a cash flow forecast particularly if your business has gone into hibernation or suffered a large drop in revenue. To make key financial decisions you need to forecast your monthly cash position for at least the next 90 days and don’t forget to include any government grants including JobKeeper payments. Your cash flow forecast will help you identify the need for finance including when and how much you might need.
Monitor the budget closely and update it, as necessary. Don’t forget to consider rent reductions or concessions from landlords, early access to super, trade payment extensions and options for alternative suppliers. There is a saying, “Turnover is vanity, profit is sanity, but cash flow is king!” Now is the time to get a deeper understanding of your finances.
If eligible, apply for Government Stimulus Incentives - Federal Government Cash Boost of between $20k and $100k for eligible businesses.
- If eligible, apply for State Government Grants – they vary state by state but for example, Victoria and NSW are offering $10k payments for eligible businesses.
- Job Keeper Entitlements - with updated payroll records you can assess any entitlements and those figures can also filter through to your cash flow forecast.
- Understand the Loan Concessions provided by the banks (and apply if required).
- Consider eligibility and application for the Tax Office Deferral Options.
- Marketing Plan - it’s time to plan your marketing when you come out the other side.
Post Pandemic Planning
Sir Isaac Newton’s three laws of motion states that, for every action there is an equal and opposite reaction. Assuming demand for your product or service remains steady on the other side of this crisis, for every business that goes backwards, another one goes forward. There will be opportunities to increase your market share and some key areas you need to address include:
Staff - despite the JobKeeper scheme there will be lots of redundancies and possibly double digit unemployment. When the lockdowns finish, it won’t be business as usual and it will take time to crank up the economy. It’s a big engine and it will be a slow burn to restore economic confidence. As a result, you might get access to people with a wealth of knowledge and experience in your industry. Some of them may have worked for your competitors which could give you a competitive advantage. Remember, your current staff, have also been affected and they are a great resource to help you identify potential improvements in the business.
Technology - has played a key role in businesses adapting to the changing landscape. With so many people working from home it has forced the use of technology to conduct meetings and access files remotely. While necessity has forced the change, there could be other software and technology available that could help you create even more efficiencies. Technology has impacted the way professional service firms like accountants, solicitors, architects, engineers, and doctors deliver their services. Who would have thought that GP’s would be sitting at home providing virtual patient consultations?
Marketing - this pandemic has changed the way we live, work, communicate and do business. During an economic downturn, you’ll find that some of your competitors will close down or slow down their marketing efforts. This presents a massive opportunity. In the last decade, the internet and social media have rewritten almost everything we knew about sales and marketing. Could it be time to ramp up your social media activities and what channels work best in your industry? Examine what your competitors are doing in this environment? In today’s internet fuelled world, your website is a main marketing tool.
Website - self isolation has people glued to their phones and the internet. It has changed when, where and how your customers and prospects are engaging with your content. Online activity and sales have gone through the roof in this period and we have seen plenty of businesses successfully pivot and shift their entire focus online. The pandemic reinforces the importance of having an online infrastructure for your business.
If your website is outdated and really reflects your business 3 or 5 years ago, it’s an anchor weighing down your business. It could be time for a makeover or possibly a new website. Look at your competitor’s websites and cherry pick the good ideas (but never copy their content). You’ll probably find plenty of them are simply electronic brochures that list the who, what and where of the business. Think about what consumers will want in the post pandemic period and tailor your content accordingly. Your content should highlight your expertise and you want it to appeal to your ideal type of customer or client.
Make sure you have a call to action on every single page and include social proof of how you solved other customer’s problems. Think about producing a lead magnet with valuable information you can offer prospects in exchange for their email address so you build a database of contacts you can market to in the future. Email is the beating heart of most marketing campaigns and make sure you are communicating with your customers to let them know you are open for business (even if your shopfront is closed) .
This is a life changing event and we have never seen anything of this magnitude in our lifetimes. No person or business is off limits. It’s certainly challenging on a number of fronts, but the successful businesses will make it through this crisis because they are looking to the future. It’s time to be proactive, don’t sit idle and worry about the things you can’t control. Develop your game plan and make sure you implement.
Survival requires an in-depth knowledge of your business, your industry, and your customer needs. Know your numbers! Think about doing a SWOT analysis to assess the Strengths, Weaknesses, Opportunities, and Threats to your business. Document what's working, what’s not working and identify the things that need working on.
Going forward, what skills do you need to make a better business? Can you tap into the new pool of human resources that have come available? Is there technology you’re not using that will help you build a more efficient and systemised business? Think about your online presence and develop a marketing plan. It’s time work ON your business so you emerge on the other side of this tidal wave a smarter and stronger business. Don’t get caught swimming in the nude the next time the tide goes out.
Finally, if you need any help developing your game plan, applying for government assistance, rent concessions, early access to your superannuation, producing a cash flow budget or applying for finance, contact us today. We are here to help you!