The Covid-19 outbreak is rapidly unfolding with significant impact on small businesses, especially social enterprises and Indigenous businesses. Major disruptions to our work and social lives are expected for the next six months. Planning is critical in order to survive an immediate loss in revenue, cash flow constraints, due liabilities, disruption in supply and most importantly impacts on employees. Most of our clients are facing the reality of reducing or pausing business activities.
It is not all doom and gloom. Nimble enterprises are picking up new contracts in adjacent industries related to Covid-19, such as call centres, logistics, essential products like food and hand sanitiser, community services and cleaning areas exposed to Covid-19. You can consider both delivery of these services or supplying to companies in these industries. This is an opportunity to shift activities in the short-term, and even establish a track record for new business offerings that outlive Covid-19.
What should you focus on first?
1. Your weekly budget for the next six months. Update your financials and keep them updated. You need to know if, or when, you are going to run out of cash. A “lights on” budget will help you make the best decisions and compare trade-offs.
2. Business continuity plan. List the biggest risks to your business over the next six months and develop mitigation strategies. Consider areas of sales, staffing, opex, suppliers and finance, especially key financial covenants. Keep the list manageable — under 20 items.
3. Talk to your suppliers. Understand the reliability of your suppliers to determine if you need alternative sources. Discuss flexible payments terms ahead of time, such as payment extensions.
4. Secure finance to fill cash gap. There are near interest free loans available over the short-term with flexible re-payments, called bridge loans. Explore payment extensions on existing facilities. Understand your options at least a month in advance.
5. Explore options with your funders. Most philanthropic funders will be happy to support you. They can provide additional funding, allow you to re-allocate existing funding and extend deadlines by up to a year.
6. Understand government support. Government is offering supports like JobKeeper wage subsidy, boosting cash flow for employers, loan guarantees, relief for distressed businesses, wage support for trainees, apprentices and cadets and tax concessions like refund of payroll withholding tax, instant asset write-off and accelerated depreciation deductions. In Victoria, there are $10,000 grants and tax incentives. We expect more wage supports soon so monitor them here — Commonwealth, VicGov, NSWGov.
We have also put together this guide to the key Government opportunities available to non-profits and charities during Covid-19, which is being regularly updated with the latest information.
7. Take care of your employees. Review your staffing arrangements and consider how you can manage wage expenses, such as redeploying staff, stand-downs, leave in advance or leave without pay. If you absolutely must let staff go, link them with the correct Centrelink info, as people should lodge an intent to claim as soon as they are out of work. Centrelink payments are now $1,100 per fortnight, but the wait time to receive payments could be months. See other Federal Government and VicGov support initiatives.
Make hard decisions now. Make the cuts now that allow you to survive the worst-case scenario over the next six months and/or take the bold decisions to redeploy resources to a new/complimentary revenue stream. If you only have cash reserves of one month like most small businesses, even a delay of one week could spell trouble.
Ask for help. You are burning the candle at both ends trying to manage your business. Before you run out of gas, find out who can support you. Thanks to the generous financial support of Gandel Philanthropy, SVA Upscaler is able to offer free business continuity and restructuring support in response to Covid-19 to six to 10 selected social enterprises and Indigenous businesses. Contact Kevin Lee to apply. Please include your business name, website and overview of your situation.