What should you be doing now for your business to survive a downturn?

Uncategorized

Here is a 10 point practical, fast action list for business owners to survive the COVID-19 downturn and thrive afterwards. 

If this is your first experience of managing in a downturn, then it can be quite overwhelming. The checklist will give you things that you can do now. 

We also suggest 5 Attitudes to prepare your mindset, so things don’t feel as overwhelming.

 

What should you be doing now for your business to survive a downturn?

Follow The Business Owner’s Fast 10 Point Action List To Survive A Downturn to prepare you and your business to survive COVID-19 and thrive afterwards. Being ready for the recovery is important and we list 5 Attitudes for a realistic mindset. The faster you act, the better your position is likely to be.

 

The Should I Own A Business Podcast has listeners and followers from existing and new businesses, and they are asking what they should be doing now

Geoff and I are business mentors working in the SME sector. 

Geoff has many years of experience in disaster recovery, and I have managed FMCG businesses through several downturns.  

Australia has enjoyed a long period of growth, and we were relatively unscathed by the GFC compared to some countries.

We have a whole generation of business owners or managers who have never lived through turmoil such as we see now.

We are here to help and share our experience.

 

5 attitudes to prepare your mindset.

1 Stay calm so that you can think clearly.

Being irrational or making knee jerk reactions will not serve you well in a downturn. Take a deep breath!

2 The sun will come up tomorrow.

There have been many downturns and recessions before, they are not new. 

While government statements have suggested six months of turbulence, that may be over cautious. It could be less, perhaps 1-4 months, not the full six.

3 Do not be too negative.

Being too negative or defensive may harm your business even more. If you are not “present” in the market, you are not likely to get sales. So stay in there and don’t withdraw.

4 Prepare for recovery.

The temptation is to cut marketing and R&D when times get tough, which can be counterproductive when a recovery happens. Businesses that are well-positioned for a comeback will bounce faster and get stronger more quickly than their competitors. Downturns do not last forever.

5 Do not procrastinate and act quickly.

To help you avoid procrastination, we have provided a Fast Action 10 -Point Checklist.

 

The Business Owner’s Fast 10 Point Action List To Survive A Downturn

1 Cash Flow Forecast

Review your budget immediately, starting with a detailed Cash Flow forecast for the next 6-12 months.

Do three versions.

a) what you expect to happen,

b) one that is a little better than you expect to happen,

c) one that is a worst-case scenario.

Knowing when your cash crunches are going to come is vital, so you don’t get shocked by unexpected bills.

Speak to your customers to get any forecast they might be able to share with you.

These cash flow forecasts are very important and they will help you see the real picture ahead.

2 Suppliers

Remember you are a part of a supply chain, so talk to your suppliers straight away.

Agree on a plan with them and see if you can extend the payment terms for outstanding and future invoices.

Your cash flow forecast will help you work out what you can afford to pay and when. 

Review any supply agreements or terms and conditions that exist with your suppliers.

There may be force majeure clauses you can invoke if you cannot mutually agree to terms. 

Get professional advice if you do not understand these terms.

3 Landlord

Talk to your landlord straight away. 

Agree on a plan with them and see if you can reduce the rent.

Your cash flow forecast will help you work out what you can afford to pay and when. 

Perhaps you can agree to reduce your rent payments now, in return for higher payments later in the year.

4 Tax Payment Plan

Call your tax office if you need to enter a payment plan to spread your existing tax liabilities to aid your cash flow.

5 Bank or Lenders

Approach your lenders or bank early.

With a good cash flow forecast and a clear plan, your lender will have more confidence to help you.

If you have spoken with your suppliers, customers, landlord and tax office, you will come across as competent and proactive.

6 Staff and contractors

Consult with your staff and contractors to find out their views or how they can help. They will respect you for this, and they understand the risk to your business and their income. This is a high-stress time for all concerned so always show respect and empathy.

You may be able to stand down casual employees or contractors.

Get professional advice if you are not sure how to change an employees terms or to make them redundant.

Remember though, that if the downturn passes quickly, you will need them back again. Do what you can to keep your staff.

7 Review your insurance policies

If you have a business interruption policy advise your insurer or broker as soon as possible if you may need to claim.

8 Don’t withdraw from the market

Cutting marketing or new product development spending often happens in a downturn.

Be careful that you don’t waste what you have already invested in brand marketing or product development by withdrawing from the market.

Here is a link to a 2009 HBR article How To Market In A Downturn about what has worked in several previous recessions including the GFC.

Companies that put customer needs under the microscope, take a scalpel rather than a cleaver to the marketing budget, and nimbly adjust strategies, tactics, and product offerings in response to shifting demand are more likely than others to flourish both during and after a recession. HBR

9 Find new ways 

Get creative and do things you have not tried before. Everybody will be more receptive, and you might be pleasantly surprised.

10 Keep focused 

Review your cash flow forecast every day and be agile in how you respond. 

Keep a lookout for any new government stimulus package. 

Act fast and decisively-do not procrastinate as you will burn through more cash.

To help, here are the 10 Points in a checklist.

 

The Business Owner’s Fast 10 Point Action List To Survive A Downturn

1 Cash flow forecasts
2 Supply Chain
3 Landlord
4 Tax Office 
5 Bank/Lenders
6 Staff and Contractors
7 Insurance Policies
8 Don’t Withdraw from Market
9 Find New Ways
10 Keep Focused

 

The Should I Own A Business podcast.

Our podcast aims to reduce new business failures, one owner, at a time.

We use our experience as we collaborate with business owners and expert guests to help you prepare to own and successfully manage a business.

 

Brendan Barrow and Geoff Daniel are Co-Founders and Co-Hosts

Listen Before You Leap!