Small business owners are being urged to make changes to their business models to survive and thrive in the post-coronavirus economy.
Industry groups argue the pandemic will have such a long-lasting impact on our daily lives that owners cannot expect to return to business as usual once restrictions are lifted.
Federal and state government assistance, together with six-month loan deferrals, will help keep the lights on for the time being.
But owners should make important decisions today to ensure their business can survive once the stimulus tap is turned off in September – with ABS data showing 72 per cent of businesses expect the coronavirus will eat into their cash flow over the next two months.
Chris Baskerville, a partner at insolvency firm Jirsch Sutherland, warned of a “humongous spike” in bankruptcies down the track if business owners do not cut costs today and adapt to shifting consumer trends.
“Regardless of all the stimulus that’s out there, if you push your loan out six months, you’re going to be paying compound interest on the interest you didn’t pay month by month, so one of our messages is: Deferment can be detriment,” Mr Baskerville told The New Daily.
“In six to eight months, you will need an injection of capital to pay off the debt, and you’re going to need an injection of capital to kickstart your business again, and I think a lot of business owners will find that an impossible task.”
Mr Baskerville said business owners must “flatten the insolvency curve” by facing up to difficult decisions as soon as possible.
Fail to do so, he said, and there won’t be enough liquidators in Australia to service all the businesses that need help down the track.
“Some of those decisions are: ‘In six to eight months’ time, I can’t actually see my business being in any better shape, even after applying all the stimulus, so we’re probably better off shutting it down,” Mr Baskerville said.
“Or [deciding to] put your business into a holding pattern formally, with a protection from its creditors. We call that a holding DOCA (deed of company arrangement).”
Mr Baskerville’s comments come after research commissioned by advocacy group Business Australia uncovered a huge spike in Google searches for information on bankruptcies and business support.
Searches for “business closing down in Australia” were up 9900 per cent year on year in March, while searches for “cash-flow support” and “how to do a cash-flow forecast” were up 800 and 350 per cent respectively.
Business Australia’s chief customer experience officer Richard Spencer told The New Daily the data showed business owners were desperately seeking financial assistance and advice to keep afloat during the crisis.
He said cash flow is the most important issue for businesses right now and advised owners to:
- Reduce “lazy costs” such as expensive insurance policies, software and publication subscriptions, and energy bills (through lower consumption and switching to more competitive providers)
- Talk your landlord about a possible rental reduction or payment plan
- Identify “core competencies” that you can maximise. “One of the best examples there, at a large corporate level, is the way Amazon were able to separate Amazon Web Services as a core competency and sell that as a separate product,” Mr Spencer said. On a micro-level, it could refer to cafes converting into neighbourhood grocers
- Explore different tools to “tell your story”, such as content marketing, podcasting, video and PR
- Communicate clearly, openly and honestly with your employees, and develop clear stand-down procedures to better manage layoffs if you are forced to make them
- Look at your organisation through a “post-COVID” lens, and ask yourself how you can adapt to changing consumer behaviours
- Make sure your organisation is set up for cashless trading
- Apply for all the government assistance you are eligible for. The deadline for JobKeeper enrolments has been extended to May 31.
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