Survival and starting again

April 14, 2020 - As the twin crisis takes it’s grip on SME business, desperate owners are turning to their trusted advisors.

Broadly, there are 2 separate problems they want answers for: How to survive and how to start again.

For many immediate survival is centred around the raft of Government support and stimuli. Jobkeeper payments, PAYG reduction, payroll tax waivers, land tax relief, bank loan freezes, tenancy evictions moratorium, early release of superannuation. Essentially this is a compliance exercise. Fill in an application and wait for approval.

This will allow most people to ‘hibernate’ until it’s safe to emerge. Cut costs to the minimum, get some income support and bunker down.

But starting again is going to be a whole different problem.Things aren’t going to go back to ‘normal’ like a on-off toggle switch.

Some businesses in some industries are going to find their feet much quicker than others. Businesses that rely on consumers discretionary spend are going to struggle.

It really highlights the need to be able to properly forecast. This is not a compliance exercise.

Forecasting is a planning tool. It is a creative process using analysis, estimates and assumptions to predict ‘A future’. (Nobody can predict THE future).

Good forecasts allow you the user to drill down into the granular detail to examine the analysis underpinning assumptions and test their ‘reasonableness’. (things like sales volumes, pricing, wages, materials, capacity, utilisation etc)

Best practice is to run scenarios, of the best, worst and likely case. It forces you to think strategically of the future and gives you the ability to anticipate, evaluate and navigate.

This allows you to have contingency plans in place “if this or that happens” to mitigate and seize opportunities, rather than be reactive and hope things work out. (NB hope isn’t a strategy)

Make sure you trusted advisor has sufficient expertise in forecasting and knowledge of your industry or the likely scenario is that you’ll feel like you’re blindfolded as you fight for survival.

Survival and starting again