The COVID-19 outbreak continues to impact businesses in different ways, ranging from minimal to existential threat. Government efforts to contain the outbreak through mobility restrictions have caused a drastic shift in consumer demand and behaviour, supply chain shocks and operational disruptions. Many businesses in Victoria, unless deemed as an “essential service” have been unable to operate – unless they are able to do so remotely.
Easing of restrictions in stages will see businesses recover at a varied pace, and this will be majorly affected by geography and industry. There has been talk about the “new normal” post COVID-19, indicating the current experience has reshaped business practices and consumer behaviour – many which will lead to permanent changes!
It is crucial for businesses to focus on what their future will look like, and make vital, necessary changes now. We have been given the perfect opportunity to assess and evaluate how our business was operating before the crisis – change what wasn’t or isn’t working and adapt to what might work better going forward. This forms the start of the recovery process.
1. Determine your financial position and financial health
Before you begin this process, you must ensure your financial statements are up to date. You should also consider that you may need to pay substantial outgoings before you can restart. This may be impacted if there is a significant period before trading can resume, and it may be limited for some time – requiring you to rely on existing cash reserves. This will be a key factor in determining which direction you can take your business in the future.
2. Determine your immediate cash flow commitments
To support business cash flow during COVID-19, governments, financial institutions and some suppliers allowed moratoriums or deferral on payments of taxes, levies, loan instalments, insurance premiums and other payments for a certain period.
These deferrals will need to be paid at some point, so if you have taken this type of relief, these should be listed and included in your cash flow forecasts for recovery.
If you offered payment deferrals to your customers, you should begin contacting them to see if they are in a position to begin repaying you.
3. Evaluate the state of your business operations
Important things to consider here are:
• Are your customers ready to spend again?
• Are your staffing levels right to support the recovery of your business?
• Is you online presence strong?
• How can you improve the efficiency of your business?
• Can your suppliers meet your requirements during the recovery process?
4. Evaluate how your market has changed
COVID-19 may have triggered changes within your market – and many of these will be permanent, so it is important to not only evaluate your business internally, but look at any changes within your market and identify opportunities to change your business to meet the new environment.
5. Reconsider your suppliers
COVID19 may have highlighted risks in your supply chain and you need to ensure that your suppliers are able to meet the future requirements of your business.
6. Review your business and long term goals
Do you want your business to look the same as it was prior to COVID-19; or would you like it to be bigger, smaller, or something completely different? It is crucial when answering this question to look at your strengths and weaknesses as well as assess your opportunities and threats. Make sure your business model is still sustainable and your business goals are realistic – this will link directly back to your target market.
Consider your current customer base, and whether it is still intact…. You may need to change your business model altogether to “strive and thrive”.
7. Reconsider your motivations for being a business
Now is a good time to reconsider your motivations for being in business, and whether you would like to continue. Understanding that the recovery process will be difficult is key – as it may not be for everyone.
8. Identify restructuring, disposal, and merger and acquisition opportunities (if there are any)
Some questions you may like to ask yourself are:
• Is your corporate structure complicated?
• Do you have multiple locations that can be merged into one?
• Do you have underperforming areas within your business that you believe will continue to underperform? If so, can you sell those areas of the business?
• Have you missed opportunities in the past you can take advantage of now?
• Are there opportunities to merge or acquire a key supplier – to minimise supply chain risks?
• Can you acquire a struggling competitor?
9. Review your business strategies and establish a new business plan
COVID-19 has impacted the way we all live, work and use technology – and your current business strategies may now be outdated. When establishing a new business plan, it should take into consideration changes that have affected your customer base/target market. Focus on areas such as: customers (return or stay away), supply chain (is it efficient and resistant), technology (transformation / enhancement), workforce (size and competency) and processes (automated or manual).
10. Can you afford your post COVID-19 business plan?
Once your business strategies and plans are developed, prepare budgets for implementing your plans and corresponding cash flow forecasts. Some ideas might sound great, but can you afford to implement them?
11. Build on lessons learnt during the COVID-19 crisis to improve your performance
For example, did flexible working arrangements work well for your business? If so, it can offer some cost saving opportunities and can be an attractive bonus for staff. On the flip side of this, working from home restrictions highlighted to many businesses that their technology was lacking, and they were not able to transition as seamlessly as others.
12. Identify your technology needs to meet your new business plan
Don’t underestimate the importance technology will have on the future of your business! If necessary, work with independent advisors to identify what technology needs will meet your business plan. Things to consider are: shifting your business (or just a segment) on to an e-commerce platform, analytical technologies that will give you a deeper and quicker insight into customer behaviour, what processes you can automate, and last but not least – especially when talking about technology and going online, the strength of your cybersecurity.
13. Rethink and reconfigure your workplace
When we all return to the workplace, plans need to be put in place to ensure social distancing guidelines can be met, employees are aware of safe hygiene practices and processes and procedures are established to deal with any future incidents. Will you interact with your customers and clients the same way as before? Will you have a blend of working onsite and working from home for the foreseeable future?
14. Negotiate or renegotiate your debt facilities and covenants with your lenders
Your funding arrangements will need to align with the direction you decide to take your business in.
Most importantly, we must stay strong and focus on the future - because this will eventually be over. Creating the road to thrive by following the above tips will help ensure that when things get back to “normal”, you will be one of the ones left standing at the end.
Acknowledgements: CPA Australia