The World Health Organisation [WHO] first described the outbreak of Coronavirus on 30 January 2020 as a ‘Public Health Emergency of International Concern’ but now on 11 March 2020 it has clearly been labelled a pandemic. If you are a business that relies on international tourists, that is a considerable amount of time for a small business to have a significant reduction in income [especially if this is normally your peak season for trading].
Certain industries like tour operators, travel agencies, limo drivers, restaurants, hotels, coffee shops have undoubtedly been directly impacted but, the flow-on effect to other industries is now getting very real too … and that is before you start to think about the businesses that now have restricted supply of goods, paused their strategic projects or put a hold on investments to ‘wait and see what happens’.
Health authorities have suggested everyone will at some stage come in contact with Coronavirus, whether now or in the future, and I would say that businesses are no different.
I have asked the team at businessDEPOT to share what they would be suggesting you do as a business owner if your business is being affected by Coronavirus directly, or indirectly through reduced consumer or business confidence.
Review your supply chains and negotiate some room to move – James Solomons
When things are tight you need to be upfront with your suppliers and ask for some leeway if it can be provided. If you don’t ask you don’t get, so try and negotiate some longer payment terms or to reduce standard order levels temporarily.
Don’t panic … we are not robots – Anna Chipperfield
Consider the emotional risk and impact on your team. Different personality types react differently to different situations – some will panic more than others, and some will be more blasé. I would recommend communicating with your team transparently on what is going on and answer any questions they have in advance to show you have it all under control and you have a plan. Prepare a Coronavirus policy or update and review your leave policies to incorporate pandemic situations and make it clear when they could be requested to work from home, self-isolate or take the necessary leave.
Know how much working capital you actually need – Rebecca Mihalic
Whether it’s cases of flu, fires, floods, cyclones, economic crises or whatever, every business needs to know and appreciate the amount of working capital [including cash reserves] they need to always maintain in the business. When your business is growing, so too do your working capital requirements but you may not notice it when the cash is flowing. Work out what reserves you need to always maintain to get through a disaster and go that extra step now to work out what you can access to keep afloat if things do get really bad.
Do you have any insurance to relieve the pressure? – Rob Shepley
Business owners should consider whether they have any applicable insurance coverage that could relieve some pressure – like business interruption insurance. Coverage may not be forthcoming, but it is worth asking the question if you have the cover.
Calculate your cash and profit breakeven point – Craig Harrison
The first thing we do with a client that comes to us in a bit of strife or uncertainty is to calculate their breakeven point. Your profit breakeven point is the level of sales you need to make each month to just breakeven from a profit perspective. Take this one step further though and calculate your cash breakeven by also including principal loan repayments, owners’ drawings or other cash commitments.
Review the levers in your profit formula – John Knight
Once you know your breakeven point you will also know your profit formula. Review the drivers of your profit formula and consider changes where possible. This could be the time to cut costs but I would hesitate to take an aggressive approach to cut costs unless you were already thinking about it [in reality, if you were already thinking about it, then maybe you should do it]. This is not an economic crisis but a health crisis and like the government is saying, it could only be a short-term impact.
Don’t take it all too seriously and think of some gimmicks to draw customers back to your business – James Solomons
Aussies love to laugh at serious issues [like toilet paper frenzies] so take the opportunity to add some humour to your brand and come up with some reason to grab attention and get the customers back through the door.
Review alternative personal income streams – Megan Kelly
From an individual perspective [i.e. the people behind the business], if the business owners themselves have a passive income stream outside of the business that meets their personal requirements then you may be able to reduce what you draw from the business on a regular basis. Please keep in mind that while the share market has taken a hit, it will be a while before that impacts dividends … and hopefully by the time it starts hitting the dividends, the business is back on track.
Sometimes doing nothing is a great option – Bradley Dean
From a strategy perspective, there is always the option of ‘do nothing’. Whether you are getting impatient because your growth plans are not happening or you are wanting to sell your business, sometimes it is ok to press pause and just wait until some of the panic subsides and you can have a less emotional discussion around the pros and cons of your strategic options.
Introduce new suppliers but know the impact on your profits – Rebecca Mihalic
Some businesses are suffering due to a lack of supply of their goods but still have the same demand they need to try and meet – this is compounded by the fact that purchasing from China was already not happening due to the holiday break & Chinese New Year just before the Coronavirus outbreak. You may just have to source from more expensive alternative suppliers, but it is critical you appreciate the impact of this on your revised increased COGS [costs of goods sold] and at what point this is not a feasible option.
Be sensitive and thoughtful – Tyson Cobb
Don’t go trying to intentionally profit from the Coronavirus. Many brands around the world have tried and failed, receiving enormous backlash and brand hate from the public. If your brand is seen trying to make a quick buck in a campaign that distastefully uses Coronavirus as the creative hook, supply chain issues or consumer demand is the least of your worries. The market will be your brand assassins. Show compassion and comfort in your brand and marketing messages, you may just see your brand trust and advocacy increase.
Review your tax instalments – Joe Scuderi
It won’t be long before you are preparing your BAS’s and paying your PAYG instalments again. If your performance has dropped or expected to significantly drop compared to your last lodged tax return, free up some cash by reviewing your PAYG Instalments and varying them down if necessary. And as always, if you cannot meet your commits, do not bury your head in the sand, talk to your advisers and the ATO.
Know your numbers – Paul Tucker
Now is not the time to be distracted … you need to know the numbers in your business on a timely basis to be able to flex quickly when necessary. Sit down and go through your management reports in detail either on your own or with your adviser to truly understand the drivers of your business and what levers you could pull if necessary.
Ask your team what to do – Bradley Conn
When business is tough some of the best ideas come to the surface. If you need to build some room to move in your business or just need some short-term reprieve, ask your team for their ideas and suggestions. Often, they are closer to the day-to-day bottlenecks and roadblocks.
Share market losses are not losses unless realised – Megan Kelly
A loss on the share market is only a true loss if the shares are sold or the businesses involved cannot recover. Seek advice before panicking and turning everything into cash [which obviously has a very low return at the moment].
Don’t leave a dollar on the table – Andrew Chamberlain
So often we see people confused with the complicated tax system we operate within and default to a conservative position and don’t claim back everything they are entitled to. Engage with our specialist teams to review your position and get every dollar back in your pocket at these times that you are entitled to. Things like R&D offsets and fuel tax credit refunds can produce significant refunds for your business.
Whether you consider the government and media response to Coronavirus an overreaction or hype, or not, there is no doubt consumer sentiment and business confidence is taking a hit. Get on the front foot by taking the time to consider what you can do in your business to make it more resilient now and into the future.
The government has also now responded and provided some detail on their stimulus package. There look to be some great opportunities for businesses in these announcements. You can review our take on the stimulus package here.
If you would like to know more about how you can take advantage of the stimulus available or just don’t know where to start, reach out to us at 1300BDEPOT or firstname.lastname@example.org or directly contact one of our team.