EXPERT ADVICE ON INSULATING YOUR BUSINESS DURING THE COVID CHALLENGE
‘Economic uncertainty’ is a phrase we’re hearing more and more frequently as the fallout of the COVID-19 pandemic continues to unpack locally and across the world.
With significant social and economic disruption at its peak, there’s never been a better time to turn to the experts for answers, especially when jobs and livelihoods depend on smart, considered decision-making.
To assist business owners in navigating these uncertain waters, Isuzu Trucks sat down with Senior Business Advisor, Chris Downie, to discuss the impact this pandemic is having on Australian businesses.
A Senior Consultant with over 30 years of experience in the automotive industry, Mr Downie has revived many a distressed business by applying sound business strategies founded on a strong understanding of the sectors and industries he’s operating in.
First up, what is the current economic outlook for small- to medium-sized Australian businesses?
The economic outlook, in a broad sense, has certainly taken a fair dip, but it will work its way back.
We will begin to see some of the markets starting to claw back in the third quarter of the calendar year. For the fourth quarter, I would like to be optimistic and say that it will return to its normal running rate, but realistically, it will probably be somewhat down from those levels.
It’s going to take a good six months to get some real solid momentum back into the marketplace. Some businesses will be greatly affected and take a long time to recover, and others will boom, and some that have already boomed will drop back.
The example I like to use is if you are a freight business, and you deliver kegs of beer to clubs, you are shut down now. But the guy who has been delivering the toilet paper, he has been running flat out, in terms of freight movement. One is going to adjust, they’ll start to normalise back up again as clubs reopen, that type of freight will start moving again, and the other one which is where we’ve seen a spike in demand, it will start to normalise again, it’ll start to level down.
Watch: Chris Downie on the major COVID challenges on businesses and what businesses can do
What are the fundamentals businesses need to address right now?
There are essentially three key pillars to remember: staff, customers, and the business itself.
With your staff, it’s important to keep that communication flow. Whether you’ve got staff on stand down, whether you’ve got staff on reduced hours and JobKeeper, or whether your staff are running flat out, it is key to keep that communication going.
Keep in contact with your customers. Ask yourself, “How can I help them right now?” How can you keep their businesses moving during this time to benefit from the good times?
Finally, the business itself… Track and watch your key indicators daily and understand what is going on across each of the areas of your business.
Maintain some form of marketing and advertising. Let your customers know that you are open and that you are there for them.
And then plan for that upside. Put some planning in place and key actions into motion as the market starts to swing back up again. Take the time, do a little bit of stargazing and think about what your business is going to look like in the future, and how you are going to plan it to move it towards that.
How can businesses best safeguard against recession?
The biggest challenge right now is one magic word… cash flow.
This situation has emphasised just how important cash flow is to businesses. That is being able to sustain or keep the doors open and to have the cash to pay the bills and to pay your staff.
If we learn something out of this, which we should have never lost, is the importance of a solid balance sheet with liquidity and with cash availability.
When this scenario kicked into hyper speed, and the pandemic went into hyper mode, cash was and still is king.
Watch: Chris Downie on how businesses can make the most of the government’s stimulus package
What are the advantages of utilising the current stimulus measures for businesses?
For businesses that are cash rich, there are many advantages. For example, the instant asset write-off of up to $150,000. This is very beneficial for businesses that have the cash available, because if you do your sums on this, the tax benefits and savings are quite significant. I would be recommending investigating this stimulus measure for those businesses that have got good cash availability.
Then there is obviously the Jobkeeper payment, if your business has slowed, you can adjust your people’s hours down to the Jobkeeper amount as well.
Are there any downsides?
I suppose one way of looking at it is, if your business is eligible for JobKeeper, you may need to ask yourself, “What is the health of my business? Will JobKeeper get me through?” This all comes back to the importance of good cash flow forecasting and adjusting that cost base of your business to be able to survive.
The other measure to be aware, and wary, of is the government-backed bank loans. You can go to your bank and get up to about $250,000 approved with a six-month deferral on interest, but the danger is these loans have a three-year payback on a 9.5 per cent interest rate. You may wish to get approval for these loans, but only draw down if you really need to use it.
What are the options when it comes to staff and job retention?
There’s the JobKeeper payment, of course, and if your business has slowed, you can adjust your people’s hours down as well.
Once your business has been deemed eligible for JobKeeper it might be worth engaging your staff to do a bit of housekeeping around the business. Spring cleaning your business to get it ready for when the upswing comes. This is a great move for those businesses in hibernation.
Keep staff engaged. People appreciate that they have gone on JobKeeper and have been retained in your business, so it’s really important we keep that communication flow with our people. We want to capitalise on a strengthened culture that’s been created during this pandemic, and we can use that in the future for our businesses.
Three key adjustments businesses can make to ensure they recover well?
Firstly, use your staff. Use your people and get them engaged and involved to start planning how your business is going to look post pandemic. Get their input. While business owners and leaders have ideas and lead and drive, let us take this opportunity to get the input of engaged staff.
Secondly, plan. Have a number of scenarios based on the rate of recovery. Plan for a V-shaped recovery, that being a fast decline and sharp rise, but also plan for a U-shape, where recovery is more prolonged. It’s important not to consider the market as a whole here, think about your relevant business area and sector and how that sector will react. Some recoveries will be V-shaped, and some will be U-shaped.
Based on your business, plan either scenario and then base your cash flow requirements and forecasting around that plan. Because if you see a massive upswing in opportunity in your industry, make sure you do something about getting the borrowing available to be able to capitalise on that opportunity.
Thirdly, focus on your customers. Keep in contact with your customers. Ask yourself, “How can I help them right now?” How can you keep their business moving during this time to benefit from the good times? Retain a level of marketing advertising too—your customers need to know what you are doing and what you are offering at this time.
Trying to plan for your business? Find out more about the various stimulus package measures here.