Will your business be affected?
The economic impact of the coronavirus could be as bad, or worse, than the Global Financial Crisis that occurred in 2008. What are the possible impacts?
- Supply chain disruption.
- Forced closure due to a lockdown, yet still being required to pay salaries and rent.
- A prolonged period of reduced sales.
- Unavailability of staff/staff working from home.
- International recession or depression.
- Travel restrictions.
- Cancelled events.
- Delays in receiving payments from customers.
- Unforeseen consequences and flow on effects that you cannot predict or prepare for.
Some industries such as tourism, education, manufacturing, hospitality, retail and healthcare are likely to be affected more than others. However, most economists are predicting all industries to be affected.
How can you prepare financially?
What can you do to prepare your business for the financial impacts?
- Sell assets.
- Look for alternative income sources.
- Adapt your business to operate remotely/online.
- Negotiate with creditors/suppliers.
- Call in unpaid debts/debtors.
- Improve your inventory management.
- Cut unnecessary business expenses.
- Put new projects/business ideas on hold.
- Plan ahead with a cash flow projection (contact your accountant).
- Talk to your accountant about the recent government stimulus package.
- Set up an emergency fund with cash on standby.
If it’s clear that your business will not survive the crisis then you may need to consider shutting your business early rather than prolonging the inevitable. It’s best to contact your accountant if this is the case.
Setting up an emergency fund
Most businesses are operating profitably during good times and so an event like this is a cash flow issue rather than a long term profitability issue.
For this reason, there are several options to use debt that can help you to take action quickly to avert disaster.
- Refinance your properties to release equity in case of emergencies (usually the cheapest option).
- Seek a business loan (more expensive).
- Consolidate your debts to lower your repayments.
- Switch your loans to have interest only repayments.
- If things are really bad, then a credit mediation firm can be engaged to assist you to negotiate hardship. provisions with your existing lenders.
Email your Home Loan Experts mortgage broker, call us at 1300 889 743 or fill in our free assessment form if you’d like assistance with one of these options.
Why do you need to act now?
There’s a short window of opportunity to take action because there is a cascade of effects that the coronavirus will have on our economy and lenders.
- Bank valuers will likely be more conservative a few weeks from now. This reduces how much you can borrow.
- Bank valuers may refuse to visit properties, making it impossible for lenders that require them to lend.
- Some lenders look at your tax returns, whereas some require interim financial statements or BAS which may cause your application to be declined.
- Most lenders have their staff working from home, inevitably there will be delays.
- Lenders will prioritise loan applications to buy a property, which means your refinance or business loan may be delayed.
- Australia is likely to go into a total lockdown which may cause lenders to stop lending.
- Some lenders require face to face meetings to identify borrowers, which may not be possible.
We believe you have approximately one week, maybe two weeks, to take action before refinancing becomes more difficult.
Turning lemons into lemonade
We’re not recommending that you consider a business strategy that preys on other people’s misfortune. For example, selling overpriced hand sanitiser in times of need is unethical. However you can look for a way to help your customers that helps your business as well.
Your customers still need the service that you are providing, the question then becomes how do turn a problem into an opportunity?
This won’t be easy for some industries or businesses, for others there are opportunities to evolve to thrive in the new economic environment.
Great questions are the foundation of strategy
To develop your business strategy to handle the coronavirus you’ll need to think creatively. You and your team can discuss great questions to help you stop the opportunity in this crisis.
- What will our customers need right now?
- How can we serve our customers remotely? If this isn’t possible, then how can we ensure the safety of our staff and customers?
- What happened to our industry in the past in countries that were affected by SARS and MERS?
- How long can we last with no sales? A minimum of three months, ideally six months, expenses as cash may be needed.
- What should we stop doing immediately?
- What risks haven’t we seen?
- How can we manage those risks?
- What should we focus on right now?
- How can we contribute to society during this time?
- How can we be ready to expand when things return to normal? Often after a crisis there is a quick recovery.
Do the right thing, regardless of the government
Unfortunately, the Australian government has been slow to take the health impacts of the coronavirus seriously. Just because they haven’t acted, doesn’t mean that you don’t have to.
Social distancing is the most effective way to slow the spread of the virus. Our team is now working from home and where possible you should do the same. Limit the contact of your team to other people and enact best practice hygiene for any staff that are still attending work.
You can find some really helpful HR policies and resources here.
Leading in a crisis
In times like this, it helps to use the five key leadership behaviours as a guide.
Model the way
- Follow all basic hygiene rules & be strict with getting your team to do the same.
- Practice social distancing/isolation.
Inspire a shared vision
- Encourage your team to be more productive from home than from work. After all travel time is reduced and so are distractions. Focus on the positives!
- Encourage your team to show just how professional, rational, calm and adaptable they can be.
Challenge the process
- Will working from home work? What will go wrong?
- How can we turn lemons into lemonade? What’s the opportunity in this?
- Are we missing something? Ask them to constructively disagree with what your company is doing.
Enable others to act
- What will prevent them from working? Help them to get what they need.
Encourage the heart
- Fear spreads like wildfire.
- So does calm confidence! So does positivity! Focus on the positive and encourage your team to do the same.
- Openly discuss the challenges you are facing and potentially the financial state of your business.
- Check in on your team. What’s their emotional state? Do you need to call them to see how they are going?
How to get help with your finances?
Email your Home Loan Experts mortgage broker, call us at 1300 889 743 or fill in our free assessment form. Our team is working from home, and are ready to help you during these difficult times.