10 smart moves for pulling your business through the COVID storm
July 20, 2021
Economic analysts recently reported that by August 2020 as many as half of South African small businesses had closed down due to the national lockdown. A more frightening statistic awaits our economy as, 6 months later, many more find themselves on the threshold of survival as the impact of the lockdown continues to distress small, medium and micro-businesses (SMMEs). As a business owner, knowing how to navigate through incredibly pressurised economic times can be daunting and throwing in the towel may seem as the only solution.
However, Greig Sinclair, business analyst and accountant at Hobbs Sinclair Advisory, says pulling your business through the pandemic is doable. He gives us 10 adjustments business owners and management can make, that could result in survival of the storm.
1. Analyse your sales relationships
One of the first things we’ve noticed through COVID, is that businesses should analyse and adjust their sales channels. You might have had long-standing relationships with your customers and now is the time to be flexible on your terms and conditions. The important thing is to retain your relationships and understand that trading terms may have changed. Your customers are also going through tough times, and, for instance, someone who could manage 30 days payment terms may need more leeway right now, or discounts, reductions, rebates, timing of services or delivery adjustments. Everything around the sale should become negotiable. It’s important to open the discussion and discover a solution to survive together.
2. Costs from suppliers
As much as you adapt and adjust your terms and benefits for your clients, you are also going to have to have a look at your suppliers and do the same. It may be a case of adjusting procurement to help your cash flow, extending your terms of payment, asking for settlement discounts, negotiating delivery, packaging, etc. Understand that we are all in this together and it’s critical for your supplier to survive too.
It’s not realistic to expect your staff members to continue year on year without implementing an increase or, worse, restoring wages to a pre-lockdown state. Yes, times are very different now, but good open communication with your staff as to the health and future of your business is critical, so that they are informed and feel part of the survival process. Giving them the information allows them to make the decision as to whether they want to stay at a reduced rate or look for something else. Not taking them into your confidence can backfire on you in terms of morale too.
Call it a huge shift or a correction, but there is no doubt a big difference in what landlords can expect in terms of their rental returns as they find themselves unfamiliarly on the back foot. It might be a case of looking for rental holidays or rental assistance (in the short term), or, alternatively, longer-term reductions of any future rental escalations. Landlords are very accommodating at the moment, especially if you have a history of being a good tenant.
5. Don’t ignore your tax obligations
Ignoring your tax obligations may as well be issuing yourself a ticket to sink your business. Yes, it costs money to be tax compliant even if you are suffering losses; your accountant or tax adviser is now more than ever your most important asset in carrying your business across the line. Investigate the various relief methods, deferred payments and tax incentives SARS has offered. SARS is essentially one of your business partners, one who without attention and respect can come back in a few years with devastating financial consequences.
6. Cash flow management
It may be easy to bury your head in the sand and hope “this too shall pass”, but any successful business person will tell you that hope is not a strategy. Don’t take your eye off your cash flow. If your business is struggling, you are at a critical stage where you need to pay attention to your day-to-day cash flow, your relationship with your bank, your cash outflows (and where you can get assistance). By staying on top of your cash flow, you will be one step ahead and able to negotiate with suppliers and creditors.
7. Don’t be tempted by low interest rates
Rather attend to working on a new break-even as opposed to getting into more debt. As tempting as it may seem to take advantage of low interest rates and opt for a loan to carry your debt, rather work on the business model itself with the goal of avoiding debt as much as possible.
8. It’s a good time to pay your debts
Although this might seem unaffordable, with interest rates extremely low at the moment, it’s a good time to pay off as much debt in the business as possible. Therefore, if you are in the fortunate position of not having to take any debt on, try your utmost to pay off as much debt as possible. It’s worthwhile, instead of rewarding staff or splashing out, to take the short-term position to pay off your debt and, in doing so, ensure job security, and your business’s longevity.
9. Staff motivation
Every employee across the globe has experienced a change in working and living conditions, which has had a significant effect on mental health. People are under extreme pressure, suffering emotions of loss, anxiety fear and isolation. Your staff’s morale is integral to sustaining your business. Pay attention to staff motivation, communication and mental health, all the while keeping your company’s values and message intact. Instil a sense of belonging through clever and thoughtful collaboration, recognition, trust and open communication.
10. Long-term goals
Look up, scan the horizon and keep your eye on the prize. Although it’s critical to stay on top of the day-to-day management of your changing business as we navigate unfamiliar territory, don’t forget your long-term plan.
Strategise, plan for different scenarios and don’t fall victim to not seeing the wood for the trees.
Greig Sinclair, business analyst and accountant at Hobbs Sinclair Advisory