Will My Business Get Coronavirus?
Will My Business Get Coronavirus?
Who would have thought at the start of 2020, as the New Year kicked over, that we would be tuning in to hear phrases like ‘social distancing’ and ‘self-isolation’ everywhere you go. Right now it certainly seems like the whole world has been turned upside down with this global pandemic.
As we are constantly being updated with numbers of cases on the rise, the big question a lot of business owners are asking is - “Will my business get Coronavirus?!”
I honestly don’t know the answer, but it is possible.
So what can you do? The first thing we recommend is that you take a step back and look at the situation objectively rather than in a panic. Hysteria is a powerful player in times like this and it takes some discipline for you as a business owner to stay focused.
Here at Nine Advisory we have spent the last week systematically working with all of our clients looking at what we can control, rather than what we can’t control.
Whilst there is a lot of information being provided by health experts for us to ensure our personal well-being, we want to provide you with the key steps that you need to take within your business to ensure financial well-being and longevity.
Our overview will help you look after yourself, your business, your staff and your customers. This pandemic won’t last forever and it will be the smart, attentive and calm business person who will make it through successfully. In fact, during each crisis of past times there have been many businesses who have thrived on the opportunities that arose during times of disruption. Change always brings opportunity if you look for it.
Here Are 6 Steps You Can Take Right Now To Virus-Proof Your Business
Unit Economics
Get very clear on your current gross profit margin. Many businesses we talk to confidently tell me a number that is often proven wrong after a few months of reliable data. It is critical that you understand the unit economics within your business – this means knowing exactly what happens to every dollar that flows in the top of your business and how much of it is left at the EBITDA line (earnings before interest, taxes, depreciation, and amortisation).
This is understanding what you are left with after everything takes its share throughout your business machine.
At Nine Advisory, our modelling framework takes a bottom up approach:
Fixed Costs - understand clearly the costs that you have to pay, even if your doors are closed. Include lease and loan payments that may not appear on your profit and loss.
Variable Costs - for every $1 of sales you make, what are the associated costs (time and materials) to produce, package and deliver the service or product
Revenue - DO NOT open a spreadsheet, add last years’ sales, click and drag right (oh yeah and add the mandatory 20-30% growth!). Never model your revenue with financial data, always start with your non-financial assumptions - these will then generate some revenue data. Simply put, model out your volume and multiply by price. For example, if you build websites, then the number of websites x average price of your website. Then measure your assumptions!!
Deal in Facts
Just like we are being urged to do with our personal health during this time, don’t make business decisions on gut feel or hearsay - use facts.
Rely on accurate data within your business, both financial and non-financial. Ensure you have the best possible systems and processes to give you the most accurate and up to date information about exactly what is going on in your business.
Have a process by which you regularly review and analyse the data to help you understand exactly what is happening in your business. Keep your team in the loop too, helping them to stay focused.
Leverage Government Stimulus
The following are the key items that relate specifically to business (I have left items out that are not directly relevant).
Federal
$25,000 PAYGW rebate - make sure you have spoken to your accountant about this opportunity here to ensure you maximise your rebate
Apprentices and Trainees - Wage subsidy of 50 per cent of the apprentice’s or trainee’s wage paid during the 9 months from 1 January 2020 to 30 September 2020, up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter).
States
NSW - Payroll Tax Relief for March, April and May 2020 and are raising the threshold from $900k to $1m from 1 July 2020. You still need to lodge but you won’t have to pay!
QLD - The Palaszczuk Government is offering $500m in loans to support workers in businesses affected by coronavirus and payroll tax deferrals
Up to $250,000 loans, interest free for 12 months - APPLY HERE
Deferral of payroll tax lodgements and payment obligations until 31 July 2020
WA
Payroll Tax deferral - deferral of payment obligations until 3 August and have a $17,500 grant for business paying between $1m and $4m in annual wages for FY19 or FY20 - APPLY HERE
VIC - The Victorian Government has yet to announce a stimulus package in response to COVID-19.
SA - South Australia Government announced a $350 million stimulus package that will include current infrastructure projects being brought forward, as well as new projects around road maintenance, housing, tourism and health. The details of the package are not yet available
TAS - Tasmanian Liberal Government has prepared a $420 million stimulus package
Payroll tax waivers for the last four months of this financial year for hospitality, tourism, seafood and exports sectors (Other businesses with payrolls of up to $5 million will be able to apply, based on the impact of virus, to have their payroll tax waived for April to June 2020);
$20m in interest-free loans to the hospitality, tourism, seafood and exports sectors to be made available to businesses with a turnover of less than $5 million to purchase equipment or restructuring business operations and will be interest free, for three years
Payment Terms
Review your payments terms to ensure that you are not working for free. If you need to, make sure you are getting a deposit upfront before you start paying your staff and suppliers to produce something for which you are NOT going to get paid (or at least for a long time).
There is significant government stimulus coming that should help many of your customers' cash flow needs so you don’t feel bad for asking. Maybe you can point them in the direction of the economic assistance if they don’t have proactive advisors doing this already.
Look for opportunity
Amidst uncertainty comes opportunity. Remember that! Think about your customers needs and what might not be getting satisfied as a result of the current environment. Talk to your customers about what they really need right now and see how you can support them. Is there an opportunity? Something your competitors won’t or can’t do that you can do? Recognising the needs of the market is essential right now.
Look at this example of perfume giant Louis Vuitton - they have transformed three of its factories almost overnight to start supplying hand sanitiser - a great example of an agile company positioning themselves to supply what the market needs (and look good in the process!).
Take action
Knowing what to do is simply not enough. You will need to make some tough decisions. As long as they are based on the facts, and not fear of the unknown then you are on solid footing. To avoid making rash decisions we recommend finding two or three key advisors during this time who can offer a non-emotional perspective. Run every major decision through them and meet with them regularly to workshop the opportunities as they present themselves.
At the end of the day, it’s business as usual at base level. Build processes, empower your teams, understand the market and the current trends, evolve your business to meet the needs and continue to look at the data.
Article written and originally published in collaboration with Process Creative.
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