Dealing with the prospect of loss can be a challenging task. Every business will face painful periods sooner or later, often due to external factors out of their immediate control. Business owners that understand the possibility of stormy weather are the best placed to captain their ship through the crashing waves of adversity and stay the course.

With the spread of COVID-19 and the unprecedented restrictions implemented in response, many organisations are feeling the pinch, with little warning. Revenues in many industries have fallen off a cliff, requiring businesses to cut operations or cease operating entirely, leaving their staff in the lurch for the foreseeable future.

If you’ve experienced a sharp decline in turnover or patronage, you may have started to worry about a complete business disaster. Your existing routines and methods no longer apply. You’re pivoting as best you can to meet new laws and consumer behaviours, but cash is still going out faster than it’s coming in.

Keep in mind that times of crisis will always come and go. What’s important is that you learn what you can to prepare for the next challenge your business will inevitably face. Here are our best guidelines to successfully manage your small business through a crisis, avoid catastrophe and come out stronger.

Acknowledge the Risks

As many organisations have unfortunately already found out, keeping your head in the sand will not make you immune to the spread of a new reality. It’s incredibly challenging to manage a crisis event if you refuse to accept the possibility for the situation to impact your business in the first place. When you do finally acknowledge the problem, it’s often too late to take effective corrective action.

“Acknowledge the environment you operate in and develop a plan to deal with threats to your business”

Having a risk management plan in place is essential. A competitor could change their operating model, a new entrant could steal your customers, or an external event may cause your clients to reduce or eliminate their spend. Acknowledge the environment you operate in and develop a plan to deal with threats to your business.

Keep a Positive Mindset

As difficult as it may be, keeping a positive mindset will almost always be beneficial. Giving credence to ‘doom and gloom’ simply serves to exacerbate an already negative situation. Doing so will likely result in stressed and corrupt decision making, which will almost always be a bad idea for your business, staff and other stakeholders.

“Maintain a long term perspective when dealing with a short term challenge”

Lean on your support network, focus on positive inspiration and the opportunity to improve your business. In the medium to long term, the crisis circumstances will change, so try to maintain perspective when dealing with a short term challenge.

Sure Up Your Cash Flow and Working Capital

Cash is king. Maintaining sufficient working capital is vital to ensuring your business can survive a downturn. Applying for access to an unsecured business loan, invoice financing facility or a business line of credit can be a great way to ensure cash flow flexibility.

While the current funding environment is uncertain, the Australian Government is guaranteeing 50 percent of all new loans issued by eligible lenders to SME’s. This guarantee will cover up to $20 billion, supporting $40 billion in new funding. Loans used for working capital and up to $250,000 will be eligible and will be repayment free for six months.

Identify Problems, Make Hard Decisions and Take Action

Speed matters. You’ll need to identify problems rapidly and make the tough decisions early. Inaction is one of the leading causes of business insolvency. Being aware of an issue is not particularly useful if nothing gets done to solve it.

In the face of falling revenues, cutting expenses must occur to salvage any form of positive cash flow. You’ll need to make a call on what is essential to your businesses’ ongoing operations and what needs to halt temporarily.

Some ‘quick-wins’ include:

• Negotiate payments and reduce volumes with suppliers.
• Stop using any unnecessary services (e.g. electricity).
• Discuss and arrange a commercial rent reprieve or freeze.
• Consider cutting your marketing budget if you’re limited in your ability to provide your products or services.

How about your staff? Unfortunately, you may need to stand down or reduce shifts for your team members if they’re not adding sufficient value. The survival of your business is more important. You can rehire them later if the situation improves – if your business ceases to trade, they’re out of a job regardless.

Take Advantage of Help

There’s no shame in asking for help when you need it. The Australian Government has announced a wide range of stimulus measures to support small to medium businesses and their staff. We’ve put together an easy-to-understand guide to help you understand what’s available.

For more information, talk to your accountant or give me a call and let’s have a chat about your situation and potential funding options. Capital Plus Finance has your back during these difficult times.