by Chris Grelis
It is now inevitable that the Australian economy will experience a harsh downturn as a result of the measures necessary to deal with the coronavirus pandemic. As a business owner and leader, it is imperative that you plan how you will proactively respond to this challenge. When faced with uncertainty, well considered planning will help you get through the hard times and thrive when the market turns.
So, what do you need to do to get through the downturn?
Vision of what may happen to your business is crucial, practically this means updating your profit & loss and cash flow forecasts based on a number of different scenarios. Whilst it is impossible to predict what will happen in the future, by examining multiple scenarios, you will have a greater understanding on how to react as real world conditions change.
As part of your forecasting you should also review your overheads for potential savings. Classify expenses based on how crucial they are to the business’ ongoing operations.
Understand the leading indicators that are relevant to demand for your business and make sure you are tracking them. This will give you time to react to changes in market conditions.
Make sure you are having discussions with your clients and suppliers to ensure you understand how they are being impacted by the changed market conditions.
Finally, do a SWOT analysis of your business, be realistic about how your business is situated and be open to what opportunities you can capitalise on. You should also consider how your competitors’ businesses are faring.
Cash Flow Management
Cash is king. To reiterate, make sure you are regularly updating your cash flow forecasts, as conditions are changing rapidly, so it is vital you know how much cash you have now, how much you are collecting, and how much you need to spend.
There are a number of ways you can speed up the collection of your debtors including, invoicing sooner, immediately following up on invoices with a phone call and consider offering discounts for early payment of invoices.
Where possible try to maintain a cash reserve or if not possible arrange for an overdraft facility with your bank, this will give you a buffer period as cash flow declines.
The uncertainty associated with a downturn will cause significant stress for you and your staff, one way you can manage this stress is through your communication with your staff. Talk to your staff about what is going on in the business and what strategies you are implementing to continue operations.
By ensuring your staff understand how the business is to operate during the downturn, they will be far more effective and engaged in implementing your plans.
When you are presented with quiet moments during the downturn take a moment to work on your business, use these opportunities to work on the areas of the business that may have otherwise been considered too hard to action.
It is important to bear in mind these market conditions will not last forever, the economy will rebound, and it is important to prepare now for the rebound. This means developing the products and delivery methods that will be in demand in the future.
As a result of the downturn, there may be opportunities to acquire your competitor’s businesses as they become stressed. Obviously, this will require careful due diligence and integration planning. An acquisition may allow you to gain access to additional customers, and products, whilst obtaining efficiencies with overheads.
The importance of your sales and marketing strategies are paramount during a downturn, so consider what you can do to improve the effectiveness of these functions. This may involve a marketing campaign to target new or existing clients or investing in training to improve the capabilities of the sales team.
Just remember the human race is incredibly adept at adapting to and thriving in new environments, as a species our response to the coronavirus pandemic will be no different. Our underlying ingenuity will not only see us through this emergency but will result in new innovative ideas and ways of doing things. What does this mean for you as a small business owner? There will be opportunities for you to implement real changes to your businesses to make them better than they were before the pandemic.
Undergoing a waste review process will help you to uncover efficiencies that can be applied to enhance your business operations. Bear in mind, waste reviews are about more than just cutting cost, they are about eliminating unnecessary processes in your business.
We are already hearing anecdotes about efficiency gains in the logistics and warehousing industry as a result of changes required due to social isolation.
Fortune favours the brave, so long as you have thought it through and developed a plan for the future. Do not hesitate to call Chris Grelis on (03) 9069 7700 to discuss how we can help you navigate through these troubling times.