Keeping your business fighting fit during COVID takes strategy and focus. We sat down with some of the nation’s leading entrepreneurs and business leaders to get their advice on what your small business needs to do to survive and thrive.
Here’s how you can get your business financially fit according to the experts
Ben Thompson, CEO and co-founder of people management platform, Employment Hero
To say small businesses have had it tough this year is an understatement. An uncertain outlook as well as depleted financial and energy reserves means it’s going to be hard to push forward. However, the small business community is in this together, and I know we have the collective strength to keep fighting and recover.
So how do we get through this? First, get your house in order by prioritising cash flow, financial planning and compliance. Where possible, lean on affordable automated technology solutions to free yourself from admin-heavy or complex regulatory tasks. Outdated manual processes will sap brainpower, and you need to be mindful of where you are directing your energy and resources.
With that said, ensure you reach out to your personal and professional network. There is no shame in asking for support, especially in this environment, so I urge you to please seek out friends, peers and services like Beyond Blue.
I know small business owners have the weight of the world on their shoulders right now; but please know that you are not alone, and that help is at hand. We can get through this together.
Carolyn Breeze, ANZ General Manager at recurring payments platform, GoCardless
Research from Xero shows that on average, 53 per cent of invoices are paid late in Australia. Moreover, the average late payment time for an enterprise company to pay a small business is 23 days. This is a systemic problem that is only going to be exacerbated by the recession.
To survive, and even thrive in a tough economic environment, small businesses need to look at new ways to manage cash flow more efficiently; maximising predictability and minimising risk.
By automating peripheral processes, like payments and recurring invoices, small businesses can save themselves hours of admin-laden work, and most importantly, guarantee prompt payments to drive more predictable cash flow. Automation doesn’t have to be an expensive or complex process. Using best in class specialist platform providers can be a low-cost investment that pays off in spades.
Financial stability is key to surviving uncertainty, and for small businesses, that’s start with taking control of cash flow by leaning on new solutions to age-old problems.
Brodie Haupt, CEO and co-founder of digital non-bank neo-platform, WLTH
Businesses need to be smarter in order to recover in a post-pandemic economy, as well as rethink the way they operate.
It’s important to work out the non-essential costs and think critically about how you can save time and money.
Off the back of the federal budget, there are now some great grants available such as the JobMaker grant, to assist businesses in staying financially fit throughout this period. Businesses should also take advantage of interest rates while they are low, in order to make some significant savings.
Now is the perfect time for leaders to look at their options, not only in regards to their business, but also personal finances. Refinancing is a great way to not only free up cashflow, but it can also take significant pressure off for the backend of this year and recover in a positive way.
Finally, businesses should spend more time reflecting on ways to support their business culture, especially after this challenging year. With team members working remotely, and the office dynamic changing considerably, leaders should take a moment to think about how they can keep team members better engaged and focused.
David Rennex, CEO and co-founder of AI-powered debt recovery platform, DebtForce
For a small business owner to get financially fit, they must establish stable and secure cash flow foundations to prevent things like late payments and outstanding receivables.
This starts with shoring up customer agreements. With any contract, you need to be precise in what you will deliver and when, and invoice customers soon after your service or good has been provided – if not before.
Create straightforward invoicing terms with a clear policy on late payments. Include this clause in your invoices and payment reminders to reinforce to your customer their legal liability to pay within the agreed timeframe.
As stipulated in your contract, when an overdue invoice tips into debtor territory, you will need to consider your options around how you wish to recover the payment. Given the high cost associated with traditional debt recovery lawyers, it’s a good idea to explore the market and look at more affordable solutions like a tech-based recovery platform.
Over 70 per cent of businesses don’t have access to enough cash flow to cover them after three months. While it might be uncomfortable to challenge your customers on outstanding invoices, the faster you act, the quicker and more likely it is that the debt will be recovered.
Marko Njavro, co-founder of FlexCareers
For many businesses (especially in Victoria) financial recovery right may seem like a pipe dream.
However, there is light at the end of the tunnel, and making strategic decisions now (with a bit of luck) can really help down the track.
Firstly, look at your revenue. An online presence with an e-commerce option is a must, especially for businesses which might be at the mercy of lockdown measures. So, if you are selling multiple products or services, look at promoting value bundles, with strict expiry dates, to get past the decision stall and status quo.
Secondly, there are costs. Where possible, look to roll out flexible working for your team and reduce your office space. If things are looking precarious and staffing costs are the key driver, look at granting staff some equity in the business (via equity options) in exchange for a temporary reduction in pay.
And thirdly, focus on liquidity. Some larger businesses are now on platforms such as EarlyTrade, which allow suppliers to get paid within days by offering a discount to the face value of the invoice.
Whilst this has had some negative press, it is a legitimate funding option, which is often much cheaper than other forms of funding utilised by small businesses (unsecured credit lines and/or credit card debt). From January 1 next year, small businesses will be able to go through a “Chapter 11” style process of restructuring, while the owners are still in control of the business. This should allow businesses with under $1m in liabilities to restructure and emerge in a much better position.
Martin Herbst, CEO of recruitment software solution JobAdder
As an economic recession looms as a result of COVID, small businesses can be more exposed because they run leaner operations and have less cash stored up for a rainy day. When tough times hit, they will suffer if they don’t act quickly and decisively. Thankfully, agility is the biggest advantage of a small business.
As a small business owner, now is the time to rigorously review your strategic focus, including your revenue sources and largest cost drivers. Are your target customers especially vulnerable to the economic impact of social distancing and lockdowns? Where possible, shift your target from more impacted segments (e.g. hospitality, travel) towards segments that are less cyclical or even benefiting from the current environment (e.g. healthcare, technology).
You can also implement tools and technologies that boost your team’s productivity (e.g. sales CRM, accounting software), as now’s the time to make sure your business is running as efficiently and intelligently as possible. There’s a reason why B2B SaaS companies are doing well these days – because all companies are looking to get more out of technology.
Remember, being small and agile can be an advantage. Every crisis presents an opportunity. Now is the time to act.
Michelle Gallaher, CEO of health data analytics company, Opyl
My survival advice for small business owners is to go back to basics and focus on your strengths. Start by honing in on the products and services that have the highest profit margin and demonstrated sustained market demand. Then ‘prune’ those that aren’t performing to safeguard future growth. Look at the costs, services, products and resources that are not delivering to or above expectations, and shut them down.
Throughout uncertain times, remember that confidence, calmness and clarity is infectious. A business that looks and behaves level-headed is attractive; while distressed, distracted and unreliable companies are not. The key here is to hold on to your best and most reliable employees to ensure as close to ‘business as usual’ as possible.
Lastly, recognise that now is the time to make social channels work for you. Social media use is escalating rapidly, and the world is getting more used to eCommerce and the word-of-mouth economy. Take advantage of this, and dominate the digital divide as a sustainable and future-proofed growth channel.
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