The COVID-19 pandemic sweeping the world has thrown global economies into disarray, casting doubt over the future survival of many businesses. We have already seen many businesses close their doors and the harsh reality is that some may never re-open.
However, what we really need to keep focussed on is the many opportunities for growth that will present themselves on the other side for those businesses that can adapt now.
In times of major upheaval, there are always opportunities. Adapt to survive, so that you can thrive later.
Business Adaption
Many of our clients have already adapted their business model, product offerings and product delivery to minimise the impact on their business as much as possible. Some are working from home, internet streaming has taken over everything from meetings to yoga classes, while others go all in on delivery.
Mark Stitt, the founder of Fit College, along with his team very quickly and successfully adapted their face-to-face Certificate III and IV in Fitness classes to online virtual classrooms, providing uninterrupted education delivery.
Rhiannon Smith, owner of Lil Canteen, started using the Bopple App to receive orders and payments and added a Wellness range to her products, including immunity shots – something we all need right now! Rhiannon is now also offering her customers wholesome healthy meals to purchase in bulk and enjoy from the comfort of their own home.
Both adaptations are aimed at maintaining (or increasing) income – an essential step in adapting to survive!
What adaptations to your business will you make or need to make to survive? It’s no longer business as usual. Adapting your business to suit the conditions is part one of survival.
Assessing your Financial Strength
Another part of business survival is assessing your financial strength.
There is a real possibility that our country could go into total lockdown. Some of you have already suffered a mandatory business closure.
How many of you have forecast your turnover (which could be $0) versus expenses and outgoings for the next 6 to 12 months? How many of you have worked out how many months you can survive without any income? Do you know where your break-even point is and what you need to achieve at a minimum to keep your doors open?
Business Survival Forecast - 3 Simple Steps
A simple calculation that you could undertake would be:
1. How much (in dollars) are your fixed monthly overheads and outgoings?
Rent, electricity, insurance, telephone, debt commitments, wages, etc.
2. What is your current working capital position?
Working capital is the capital used in your day-to-day trade; your Current Assets less your Current Liabilities. Put simply, your Cash plus Debtors and Stock or Work In Progress, less Creditors, Bank overdraft, and ATO and Employee liabilities (GST, PAYG & Superannuation)
3. How many months does your current working capital cover your fixed monthly overheads?
This is worked out by dividing your working capital amount from Step 2 by your fixed overheads from Step 1. This simple calculation will show your financial strength, telling you how long you can close your doors for and not run out of money – if the answer is less than 6 months, then you may have some problems.
Why 6 months? This is the amount of time that is being used as an indication of how long the COVID-19 pandemic could last.
If your fixed overhead coverage is less than 6 months, what is your financial survival plan?
What is your break-even point so you know the minimum monthly sales you will need to achieve?
How will you achieve those sales?
Have you worked out how to adapt your business model to keep your income where it needs to be?
Have you applied to your bank for a freeze on all mortgage, business loan and equipment loan repayments to reduce your monthly fixed outgoings?
Have you spoken to your landlord about rent relief or a reduced rental arrangement?
Have you registered or applied for any part of the Government (both State and Federal) stimulus packages including the QRIDA or SME loans and the JobKeeper Payments?
We can help you determine and calculate your monthly outgoing coverage and break-even point. We can also help you with a monthly cashflow forecast and plan, considering all the Government announcements that you may be eligible for to show you how you can survive the current situation. And we can help you apply for the assistance you might need to ensure you do survive this period.
If you can build a financially strong business, you will be perfectly positioned to thrive during the recovery that will follow once the pandemic is under control and yesterday’s news!
Please call to discuss, we are here to guide you through these incredibly challenging times.
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