We are in uncharted waters, the wind has deserted us, and we’re being battered by a once-a-century storm. So should businesses just batten down the hatches and wait for the storm to pass? Or are there things you can be doing during this ‘hibernation period’ that will set you up for success when things turn around?

Survival = buy some time

The survival stage will be different for every business facing extreme challenges. Obviously your first priority is to cut unnecessary costs. Beyond that, being able to find creative ways to generate revenue is crucial - businesses that can innovate and adapt, such as the dine-in restaurants that have morphed into a home delivery model, will be better placed. Look to access any available government assistance - specifically the recently announced JobKeeper payments, as well as the ability to access unsecured loans to help with cash flow.

Revival = prepare for turnaround

How well your business emerges from this mess will depend on how well you can weather the storm, but also on how quickly you can adapt to the post-COVID-19 landscape. By necessity, we’ve all been purely reactive over the last few weeks; but things will turn, and proactive businesses will be best placed.

It's surprising how many businesses don't know their numbers, and don’t have a plan to improve their position going forward. While situations can change quickly, rendering much of your planning irrelevant, the businesses that will bounce back best are the ones with existing plans that can adapt to meet the changing landscape.

5-point revival action plan

Here are five things that every director should address in order to allow you to move forward, and ultimately be set up to capitalise on the turnaround. Unfortunately these points won’t help businesses that are likely to go under, but those who have a 50/50 chance of survival will definitely benefit from this roadmap going forward.

1/ Understand your current financial position

The first step is to understand where you are, which involves a review of your financials and business fundamentals. Are you in a loss position? How much cash do you have in the bank? What’s your ratio of liabilities to assets? What needs to change to overcome the key threats?

Determining previous performance provides a sound platform for planning ahead to improve your situation. A business performance assessment will identify historical trends that give perspective to current performance. You can then put a plan in place to get back to a more profitable and equitable position, and develop benchmarks to ensure your ongoing performance stays on track to meet your objectives.

Larger businesses should undertake a financial diagnostic review which is tailored to the systems and processes of the business.

2/ Determine where you want to be

What is your vision for the business? Where do you want to be in two years’ time? Have you set clear targets that the business is united in aiming for? 

The key tool here is a 3-way forecast, which combines data from your P&L, balance sheet, and cashflow projections. The results will help you develop a plan to move towards your targets.

3/ Regular review meetings / management reporting

This is the game-changer for any business looking to revive their business and be best placed to take advantage of the eventual turnaround.

Regular review meetings provide ongoing monitoring of actual performance in the context of your budgets, forecasts and benchmarks. This highlights where you are on track, and where corrective action is required.

I’ve listed the many benefits of regular review meetings in another post. But don’t underestimate the power that comes from gathering all key decision-makers together at a set time each month or quarter, guided by your accountant or business adviser, so you all have absolute clarity about your position and understand the actions required to stay on course. 

4/ identify business operational inefficiencies/opportunities

Your accountant or adviser should periodically review all systems and processes within the business to give you an external, independent perspective of the bottlenecks, challenges and potential gains that currently exist. This would also include assessing the FX exposure for importers.

5/ Hibernation housekeeping

This hibernation period is a great time to tackle those ‘important but not urgent’ projects that you have been putting off, but you know will benefit your business. These can include:

• Review your processes and documentation. You should conduct regular internal reviews of your processes to ensure you are taking advantage of new technologies and reflecting the changing external landscape. Can you do things more efficiently? Can you improve your integration between software to save time and effort? And are the instructions for employees as clear as possible?
• Review your product and service offerings. What is missing? What needs to change? What offerings can be culled?
• Improve your data. Get your bookkeeper, financial controller or CFO to revisit your ‘dashboard’ of management reporting information. Can your regular reports be improved to give directors a better handle on your financial position? Also, look to clean up your client database so you have more accurate data, including details that will enable better segmentation and targeting.
• Online audit. Conduct a review of your website and all social media activity. Is your website up to date? Can you add videos or FAQs to help your clients? Where are the gaps in your social media activities - eg are you developing quality content (articles, videos, special reports) in addition to shorter and more general posts? Can you give your clients a behind-the-curtain view of your business and people to help strengthen their connection to you and their trust in you?

Frank Ruta is director of Naptix accountants and business advisors. We help small businesses GET BIG. Call (03) 9982 4440 or visit naptix.com.au.