Many businesses have weathered the initial storm of the pandemic. However changing restrictions, a second lockdown in Melbourne and uncertainty surrounding the end of JobKeeper present new challenges for business in a COVID marketplace.
So what happens when September ends? As extended payment terms, rent deferrals and government support measures begin to wind down, businesses need to re-examine their fundamental strategies.
We asked Dermot Stranix and Damien Noack, both Relationship Bankers at Judo Bank, for advice on how businesses can adapt come October.
1. Be honest about your position
“If you ask a small business owner about their business, their eyes light up because this is a dream that they’re building.”, says Stranix. “It’s like a child that they have. No one wants to hear that their child is ugly.”
However, Stranix and Noack agree that making an honest, critical assessment of your business’ position is crucial to developing a healthy strategy in a volatile COVID marketplace.
In order to get an honest idea of how your business is travelling, Stranix says seeking external opinions is key.
“People need to socialise their business with people that they trust”, he says. “That way, you’re far better prepared to communicate with a bank or a new financial institution.”
Noack says businesses should make a “critical analysis” of their assumptions about what their future will look like. This could relate to cashflow, strategy or operational considerations.
2. Stay on top of your cashflow and debt
When current financial arrangements end, many businesses will find themselves dealing with a ‘debt hangover’ with the potential to eat into future cashflow.
“From our perspective cashflow forecasting is absolutely key at the moment”, says Noack. “It’s never been more important, but it’s never been harder. Because you can’t rely on what you used to get.”
Rather than focussing on how things used to be, Noack says businesses should get back to basics by focussing on their “known ins and outs”.
Noack urges businesses to make sure they’re considering their creditors and ensuring they’ll have continued supply when it comes time to reopen.
“Ensure that once the lights are turned on again, you’ve got the ability to switch them on straight away”, says Noack.
3. Keep an open dialogue in your business relationships
Stranix says navigating this crisis is all about relationships.
“It’s about communication and having honest discussions with people that do impact on your business”, he says.
These conversations could be with creditors, debtors or suppliers, or even government.
“Financiers hate surprises”, says Stranix. “They’re not good at parties like that. They don’t like to be surprised by something that they weren’t expecting, where they get forced into making a decision”, he says.
Strannix advises businesses to keep in close contact with their banks and suppliers, so when it comes time to discuss refinancing or extended payment terms, it’s “just a natural extension” of an existing dialogue.
4. Hope for the best, plan for the worst
Noack and Stranix say now is the time to plan for every eventuality.
“It’s about being proactive versus reactive”, says Stranix.
“You’ve got that slight bit of experience this time around”, says Noack. “As opposed to three months ago, we’ve got a slight idea of what the government reaction is.”
“Your contingency plan should have looked like what the pessimistic side is now”, says Noack, referencing the second Melbourne lockdown.
“If you’ve thought about both the good and the bad, then you’re able to adapt”, he says.
Although things are tough right now, Stranix says these challenges will ultimately strengthen businesses.
“Those businesses that do survive will come through in a much stronger position. They’ll be more efficient and they’ll have much more robust strategies. They’ll have a far more loyal workforce that they’ve been supporting through this process. That’s a great foundation to build on”, says Stranix.
NOW READ: Set your business apart from the herd by capitalising on its key strengths
Judo Bank is a challenger business bank, purposefully built to make it easier for Australian businesses to get the funding they need and the service they deserve.
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