As a veteran of the 2008 Global Financial Crisis – like many other NZ business owners – and the difficult two years that followed, I know how challenging the time ahead is likely to be for many of us.
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 it doesn’t all need to be doom and gloom. There is opportunity in every great difficulty and lemonade being made, wherever you find lemons.
So, what have we learnt that can make this next few months the launching pad for something great?
Actually quite a lot. There are three themes (say that quickly after a couple of wines) I’d like to share with you: Action, Communication and Market Share.
Let’s start with Action. It is specifically at times like this that you need to work harder, longer and with more passion than you ever have before. Imagine your livelihood depends on it (you probably won’t need to be a Buddhist monk to have the skills to visualise this at the moment). The worst possible reaction to the challenge we are all facing now is inaction. Get to work making a clear written plan. Just write a simple action list of what needs to be done, then prioritise it and start executing against it.
At times like this, preserving and building working capital (cash) is paramount and may make the difference between survival and failure.
If you are struggling on where to start, here are 10 ideas to get your action list kicked off:
- Chase all receivables you can collect quickly.
- List payables that you may be able to restructure over a longer period or delay.
- Investigate Covid-19 tax benefits from the IRD that you can benefit from right now.
- Apply for wage subsidies online from Work and Income today.
- Meet your bank to assess lending options immediately
- Contact your landlord for rent relief
- Go through every line of your expenses and cut everything that is not mission critical – be tough and be prepared to make sacrifices.
- Consider roles for redundancy and get advice on that process this week.
- Sell unneeded assets or obsolete stock to raise capital as soon as we are out of lock down.
- Speak to friends and family for financial support.
- Create a presentation for anyone you may speak to about raising capital.
You see, things are already improving, you just got 11 action items and you thought there would only be 10. Don’t just write these things down though, get urgent in making them happen – and make tough calls.
If you haven’t done most of these things already, start today because you’re already late to the party – many businesses are already four weeks ahead of you.
Next, we move onto Communication. 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, it means ringing…. I think you get the idea. The whole world is going through this right now as is almost every business in NZ, so talk to each other and make a plan, as denial can quickly become deadly.
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 60-80 percent of their pay rather 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.
And then we come to Market Share – and this is the exciting bit. 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 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. Fight to survive so you can later thrive.
LINK Business specialists are here to offer free business support. Call 0800 546 569 or visit go.linkbusiness.co.nz/Covid19/BusinessSupport/