Managing the impact of COVID 19 on your business
A step-by-step approach to managing COVID 19’s impact will help you to plan, budget and implement the best strategies for your business. This will make the situation more manageable and it gives you the feeling of being more in control of the situation. It also helps to you to resist the urge to panic. While some of these steps are obvious, it is helpful to put them into a logical order.
What has been the actual impact of COVID 19 on your business?
- How much have your sales income actually reduced?
- Is your business still profitable?
- Are you able to keep up with your repayment commitments?
- Has access to your premises, staff and suppliers been interrupted?
What is the break-even income?
- What are your unavoidable fixed cost expenses and repayments?
- What would your sales and margins need to be to cover these costs?
- Can you adjust your staffing and purchases to these reduced levels?
What is the gap between the COVID 19 sales and break-even sales?
- How much do you need to increase your COVID 19 sales to break-even?
- If you cannot reduce or cancel your purchase orders, how much extra stock will you have?
- If you can’t reduce your staffing levels, what additional staffing costs will you have?
- What percentage of your business’ capacity is not being utilised?
This example shows a reduction in Covid 19 Income from $100,000 to $60,000 and the business will need to generate $85,000 in sales to breakeven even with a $1,250 subsidy from the Government. If the overheads and repayments are reduced by $5,000 and $2,000 respectively, the breakeven point now becomes $65,000 which is only $5,000 more than the Covid 19 sales of $60,000. The Direct costs in this example are kept at 65%.
What Covid 19 strategies to implement now?
- Reduce all of your non-essential costs as quickly as possible.
- Collect as many outstanding debtors accounts as you can.
- Research and apply for all funding assistance from the Federal and State Government and other sources.
- NSW Government website link https://preview.nsw.gov.au/covid-19
- Federal Government website link https://www.ato.gov.au/General/COVID-19/Support-for-businesses-and-employers
- Align the capacity of your business to the current sales and income levels. This includes purchases, staffing, operations and infrastructure.
- Contact your customers to find out how they have been impacted by COVID 19 and what steps they are taking to manage the situation.
- Monitor how your competitors are supporting their customers with products, pricing, marketing and customer service.
- Estimate how you expect your current sales and capacity levels will change in the coming COVID 19 months with optimistic, probable and pessimistic scenarios. This will require:
- Profit and loss budget with the reduced overheads and repayments for each scenario.
- Cash flow projections with any subsidies from Government and other sources.
- Analysis of additional funding if this is needed.
How to manage the business through the Covid 19 period?
- Continue to monitor the Government websites to comply with the latest requirements.
- Constantly engage and communicate with your customers, staff, suppliers and financiers. The Corona Virus is impacting everyone and it is very helpful to understand and empathise with them and to demonstrate that despite your own problems, that we care about them and can help.
- Explore opportunities to introduce new services and products which will help your customers through this period. This requires lateral, out-of-the-box thinking and needs to address their most critical needs.
- Research and target new markets and opportunities which have been created by COVID 19.
Some examples of new opportunities
- The international tourist market has been stopped. How can tourist destinations, bus and car rental businesses put together new holiday packages to promote to the domestic market and to New Zealanders?
- How can health care businesses provide telehealth services as a new option for patients and clients?
- Cafes and restaurants are now increasing their take-away and home delivery services. How can these be continued and expanded?
- Farmers, wholesalers, retailers and manufacturers are expanding their on-line customers with website sales and distribution networks.
- Many offices have staff and contractors working remotely. How can this create new opportunities to help businesses become more productive, with lower costs and reduced travelling time. Can expensive CBD offices be replaced and/or reduced?
- Are there opportunities to partially or totally convert the face-to-face service delivery into more convenient, accessible and cost-effective options.
When we are very busy, it can be very difficult to have the time and resources to do this. Use this opportunity wisely to emerge with a better, more profitable and streamlined business.