Strategies and advice for businesses to stay in control through COVID-19 and get ahead of the pack

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COVID-19 Business Continuity – 1st April

Hi, it’s Ashley Thomson with the COVID-19 business continuity update for Wednesday 1st April,

In today’s update I’m discussing three scenarios for business:

Category 1 – Businesses not impacted by COVID-19
Category 2 – Businesses slowing down due to COVID-19
Category 3 – Businesses going into hibernation due to COVID-19

Before I start today’s blog, I think it’s really important to state that this situation is not the fault of any business owner. In the past when a business had a period of slow down, you could often identify the underlying cause – it might have been a questionable decision or misplaced effort that led to the slow down. This situation is different – this is not your fault. Some businesses have been hit harder than others and some business haven’t been directly impacted. One thing is clear to me: the circumstances of who is and isn’t impacted could not have been predicted prior to COVID-19.
Everyone will be sharing the pain. Here are some actions you must take during the ‘Weather the Storm’ period to prepare you for the ‘Adjust to New Norms’ stage

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Category 1 – Businesses not impacted by COVID-19

We are seeing that businesses that service government sectors (federal, state and local governments) and core product and service suppliers to ‘essential industries’ are not being impacted. In fact, some are seeing increased demand.
For these fortunate operators, it’s business as usual – overlaid with sensible hygiene practices and social distancing measures. The biggest risk for these businesses would be a COVID-19 infection that would quarantine their workforce and disrupt their ability to operate.

The key government financial support measures on offer for these category 1 businesses:

  • Boosting cash flow refunds (federal government stimulus)
  • Apprentice wage subsidy (federal government stimulus)
  • Payroll tax refunds, waiver and future deferments (state government stimulus)

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Category 2 – Businesses slowing down due to COVID-19

Businesses in this category are those that are forecasting a slowdown of 30-50%. Some of the businesses I’m speaking with have only had a 10% decrease but we need to be prepared that it could reduce further. Now’s the time to take action.

Key financial support measures on offer for these category 2 businesses:

  • Boosting cash flow refunds
  • Payroll tax refunds, waiver and future deferments
  • JobKeeper support
  • Apprentice wage subsidy
  • Bank loan deferments
  • ATO deferments
  • Government guaranteed unsecured loans: Speak with your lender or broker about applying for an unsecured facility as a safety net. You don’t have to draw it down if you don’t need it.
Strategic approaches to minimising costs during a period of slow down

We believe it is best to discuss each of these strategies with your business coach to determine how it applies in your business and map the outcome in your financial model.

Labour

– Termination – if you have been delaying a decision on terminating an employee, reconsider the reasons you have been delaying the decision. You must have just cause due to their performance or behaviour. For example, an employee who has already had a first warning and is not demonstrating the required effort to improve. (This is still a complex process that needs to be handled correctly in line with Fair Work Australia regulations – speak with your business coach about guiding you through this process)

– Look to right size your labour. When I say “right size”, I mean find the point where your labour capacity is in balance with your forecasted workload; ideally, employees will be busy and not have excess time during their work day.

– How do I “right size”? A coach will work with you to model different options for your specific business. Once you know your options, you’ll be able to implement them with your team. This could include meeting with your team to discuss the current or forecast decrease in sales. Explore reducing work hours to 4 days a week, and position with your team that you may need to reduce further depending on how the business goes. Make sure that any variation to work hours still suits your business; for example, you may still need someone to manage logistics and deliveries every day so don’t give that person every Friday off. Instead, discuss the option of starting later by 2 hours every day.

– Explain to your employees what a salary reduction of 80% or 60% would realistically look like in their current circumstances. See attached: Wage Earner Comparison

– Explain to your employees how the JobKeeper Payment your business may get could enable you to retain an employee on 2 or 3 days a week with the minimum pay of $750 per week, with minimal cost to the business. This is good for them and good for you.

– Remember – for yourself and your employees – everyone is sharing the pain.

Rents

– There are instances of government landlords (VIC and WA state governments) offering 100% rent relief to their small business tenants. This may encourage other commercial landlords to follow suit.

General Expenses – major categories
– Interest and loan repayments: speak to your lender or broker about options for payment deferrals or extensions

– Vehicle and equipment leases: speak with your financer or broker about payment deferrals on lease instalments or balloon payments that may be coming up

– Insurance policies: speak to your insurer or insurance broker about revising your revenue estimates, consider higher excess to reduce policy premiums

– Online marketing: Review your Google Ads/Facebook Ads and pause any campaigns that aren’t generating sales or high-quality enquiries. DO maintain your website SEO activities: the effort you put in now will serve you well when business activity starts to pick up again.

– Insource: Bring any outsourced activities in house, such as contracted services like copywriting.

– Subscriptions: Review the invisible services such as phone plans, software licences, email services.

  • Phone plans: look at cancelling any mobile plans for people who are no longer in the business, speak with your mobile provider about getting off any high cost plans and right sizing your mobile plans. The major Telcos (Telstra and Optus) are offering extra data at no cost – find out what you get
  • Software licences: review your software licences to make sure you are only paying for services you need and only for employees who need them. For example, old email accounts for former employees, user licences for management software. Also check that your IT support is only for your current hardware; e.g. you may be paying IT support for a laptop that is no longer functioning
  • Workcover: Recalculate your payroll estimate based on reduced work hours

Other

– Track debtors carefully. There have been temporary changes to debt collection and insolvency during COVD-19. The changes allow more flexibility, which also means more risk.

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Category 3 – Businesses going into hibernation due to COVID-19

For some businesses, COVID-19 has had a far more significant impact. Through no fault of their own, their businesses have ground almost to a halt (and some to a full stop). In these cases, the business will go into hibernation until the COVID-19 crisis is over. While no one knows exactly when that will be, the Australian government has told people to expect 6 months of this. There are still actions an operator of a hibernating business can take to minimise the downside.

Key financial support measures on offer:

  • Boosting cash flow refunds – in many cases, businesses in hibernation are likely to only be eligible to receive the first round of refunds
  • Payroll tax refunds, waiver and future deferments
  • JobKeeper support
  • Apprentice/trainee wage subsidy – for apprentices who were on the books at 1st March
  • Bank loan deferments
  • ATO deferments
  • Government guaranteed unsecured loans: Speak with your lender or broker about applying for an unsecured facility as a safety net. You don’t have to draw it down if you don’t need it
  • Debt collection and insolvency protocols: You have an extension on outstanding payments you owe before letters of demand can be issued
Strategic approaches to minimising costs during a period of hibernation

Labour

– Allow your employees to use their annual leave.

– Look to stand down your employees. There are criteria for when a stand down can be activated so be careful here.

– Explain to your employees how the JobKeeper Payment your business may get could enable you to retain an employee on 2-3 days a week with the minimum pay of $750 per week, with minimal cost to the business. This is good for them and good for you. Even if your business cannot operate, you can productively engage your employees in systems development and marketing so you are ready for when you reactivate the business. If you need help developing your message, your Tenfold business coach can assist.

– Remember – for yourself and your employees – everyone is sharing the pain.

Rent
– Consider negotiating with your landlord (through your property manager, if you have one). There is due to be an announcement on rents on Friday after the national cabinet meets to discuss this matter.

General Expenses – major categories
– Interest and loan repayments: speak to your lender or broker about options for payment deferrals or extensions.

– Vehicle and equipment leases: speak with your financer or broker about payment deferrals on lease instalments or balloon payments that may be coming up.

– Insurance policies: speak to your insurer or insurance broker about revising your revenue estimates, consider higher excess to reduce policy premiums.

– Service supplier arrangements: seek to suspend any services that you won’t be using during hibernation such as office landlines and internet for the office. Be careful not to break any contracts unless there are no costs involved either to cancel the service OR reinstate it later.

– If you have outstanding payments for services like electricity and water, seek to set up a payment plan with the supplier.

– Online marketing: Pause all paid campaigns. Maintain basic website SEO activities.

– Subscriptions: Seek to suspend non-essential services such as staff phone plans, software licences, staff email services.

  • Phone plans: look at cancelling any mobile plans for people who are no longer in the business, speak with your mobile provider about getting off any high cost plans and right sizing your mobile plans.
  • Software licences: review your software licences to make sure you are only paying for services you need and only for employees who need them. For example, old email accounts for former employees, user licences for job management systems such simPRO, AroFlo, etc. Also check that your IT support is only for your current hardware; e.g. you may be paying IT support for a laptop that is no longer functioning. Consider suspending any software licences for users who won’t be active while your business is in hibernation.
  • Industry memberships: if you have any monthly or annual memberships due, seek to defer them. If you have recently paid your membership fees, seek to have them refunded.
  • Workcover: Recalculate your payroll estimate based on whatever payroll is being processed

Other
– Debtors: Continue to communicate with debtors and follow up payments and payment plans. The temporary changes to debt collection and insolvency during COVD-19 will make it harder to collect monies owing. Maintaining good relationships with your debtors may be the best way to get paid.

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Hang in there. The team at Tenfold Business Coaching have got your back.

Ashley

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