As a veteran of the 2008 Global Financial Crisis, and the difficult two years that followed, I know how challenging the time ahead is likely to be for many Kiwi businesses. Those that delay, procrastinate or react too gently will most likely endure the hardest experiences through this time and may even lose their businesses, or worse.
But there is opportunity in every great difficulty. For most Kiwi businesses it is specifically at times like this that owners and employees will need to work harder, longer and with more passion than ever before. The worst possible reaction to the challenge we are all now facing is inaction. Owners should be using this time to make a clear plan for their business.
Preserving and building working capital (cash) is paramount and may make the difference between survival and failure. Here are 11 ideas to get your action list started:
1. Chase all receivables you can collect quickly;
Start your property search
2. List payables that you may be able to restructure over a longer period or delay;
3. Investigate Covid-19 tax benefits from the IRD that you can benefit from right now;
4. Apply for wage subsidies online from Work and Income today;
5. Talk to your bank to assess lending options;
6. Contact your landlord for rent relief;
7. Go through every line of your expenses and cut everything that is not mission critical – be tough and be prepared to make sacrifices;
8. Consider roles for redundancy and get advice on the processes that need to be put in place;
9. Sell unneeded assets or obsolete stock to raise capital as soon as we are out of lock down;
10. Speak to friends and family for financial support; and
11. Create a presentation for anyone you may speak to about raising capital.
If you haven’t done most of these things already, start today because you are already late to the party; many businesses are already four weeks ahead of you.
In almost all the activities above, your best approach is direct communication. This does not mean sending an email, it means picking up the phone and reaching out to your creditors and explaining your situation honestly and asking for payment terms. It means ringing your landlord and having a very candid chat about the help you need to survive. Speak to your staff, too - you will be amazed how supportive your team can be. They know the challenges we are all facing and most right-minded employees would rather have a job at 60 percent to 80 percent of their pay than losing their job in the midst of a crisis. For some staff, though, you will need to make the hardest decision of all, and that is making their role redundant. It is a horrible part of being a business owner, but at times like this you may have no choice.
For most industries, a major economic downturn like the GFC or the one we are likely facing now, removes competitors from the market and there is a redistribution of market share. Some businesses will not act decisively, they won’t cut deep enough or move fast enough and they will perish. As a result the strong will thrive on the other side of this downturn. If you can cut your costs, collect all your cash, and survive you will by default enjoy a new market position with less competitors. The fight and the sacrifice are worth it and like all storms, no matter their ferocity, they all eventually pass. Make the decision today that you will be here on the other side, as a leaner meaner more focused and balanced business ready to launch. One thing is for certain, when the smoke finally settles, market share in most industries will change, some will win and some will lose, and some won’t be here at all. Chose to be one of the winners.
- Aaron Toresen is CEO of business brokerage firm Link.
