Bouncing back from 2020 isn’t going to be an easy road from many businesses. Coupled with looming fear of a longer recession, many business owners will be seeking new strategies in the face of changing times and new market conditions.
For many businesses, paying down debt and other bills will be an immediate priority. For others, supply chain shortages will require diversifying their suppliers. B2B’s may find that some of their previous clients are in administration or insolvent, and you will need to find new customers.
Here are some suggestions you may consider as part of your business recovery:
- Understand your position. This sounds really obvious, but it’s easier said than done. Business evaluations, cashflow forecast, scenario planning and a general assessment of your current Financial Statement needs to happen before you can effectively plan for the future. People still make money in recessions, but it doesn’t happen by accident. Good planning makes all the difference.
- Get Cash. Liquidate surplus assets to increase cash flow such as selling-off old/unused equipment. Can you sell off old/extra stock at wholesale to other businesses who are experience shortages? You can also try and settle accounts owed to you – even if you need to offer a discount to obtain immediate payment. Getting this cash will buy you time, pay down accumulating debt or bills while your normal revenue streams thin, and put you in a more maneuverable position (which is a great place to be in a changing market environment). New changes in policy on delaying tax payments could alleviate pressure in other parts of your balance sheet. In this climate, creating a 3-way forecast really needs to be completed now. If you’ve not already created a plan – don’t delay and call your usual accountant.
- Simplify operations. Focus on maximising your most profitable business exercises to regain cash flow. Put peripheral projects to the side for six months and knuckle down on doing what you know yield revenue. By doing this, you stabilise your position. It also creates more headspace to pivot your strategy if need be.
- Check your eligibility for government assistance and other forms of financial relief. With so many policy changes being spurred by the COVID-19 pandemic, it’s tricky to stay up-to-date on what’s available. We’ve created a list of helpful links on such changes – but please don’t hesitate to ask what your specific business may be eligible for, as new laws are being passed every week.
- Remove wastes: Identifying wastes in your business should have been a priority right now while we’re still under restrictions. Whether you continue to operate at some capacity, or you’ve had to close your doors for a period of time, getting rid of the unnecessary and periodic costs and processes that drain your profitability will put you in good stead for the coming year.
- Negotiate: Contact your banks, insurers and to explain your position. It’s not a guarantee they will be able to provide a mortgage or holiday. But you may be able to agree on payment deferral or a reduction in fees. In addition, you may be able to reduce your coverage if your operations are scaled back (or stopped). You won’t know unless you try. With changes in commercial lease laws, tenants have a good chance of getting the relief they need.
- Adapt to the market: It can be tempting to invest when markets change and new opportunity presents. Consider only investing in new ventures if you have a stable baseline of operations and income. In the short term, many businesses have already shifted to online shopping/home-delivery of goods and virtual service delivery through the internet (if the type of service permits). On a larger scale, manufacturing companies like Ford,GM and Tesla have used their production lines to produce ventilators for hospitals and stockpiles . More locally, many distilleries are producing ethanol for hand sanitiser amid a nationwide shortage. While that’s an option for some, you may find yourself in a position where you’re either completely shutdown or your reduced services (i.e. take-away food) isn’t covering your outgoings. Consider if you’re able to shift what you do offer as a primary service to buffer against recession. Keep your eyes open for new opportunities as change is afoot.
As if often the case in times of crisis or hardship, taking the time to evaluate your financial position and the business landscape goes from good business practice to a fundamental key to survival. Whether some of the above suggestions are relevant to your particular situation – that’s for you to discuss with your accountant. What is universally applicable is that you need to evaluate where you are, and get a plan for the future.
Strategic planning doesn’t just mean making crystal ball predictions about the economy. It really is about assessing where you are now, identifying strengths/weaknesses/risks/wastes and making the necessary tweaks to your business.
If you’re uncertain about your current position or where to head next – be smart and make a plan. We’re here to help. Chat with your usual partner, or if you’re a first time client – book a free first consultation with our Business Improvement Specialist Dean Vane.
Dean Vane: D.Vane@uhyhnseq.com.au