SMEs Planning to Survive

SME’s planning to survive

As you emerge from the ‘government life support’ phase and look to plan your future in an uncertain world, preparation is essential.

As we attempt to return to business as usual during what some commentators are forecasting to be the worst economic collapse since federation, businesses will need a clear strategy to help them emerge into what will, for many, be a very different landscape.

It is Australia’s SME’s – those with a turnover between $2m-$50m – that will be crucial in driving that economic renaissance and helping Australia move forward with renewed focus and resilience. SME’s are a key section of our economy, often overlooked in the wider economy and don’t get represented in the way the bigger players do. According to the Australian Government, 44% of employees in Australia work in small businesses and they are critical to the success of those businesses.

Despite the various levels of government support available such as JobKeeper, Cash Flow Boost, deferred payroll tax and the guaranteed loan facilities, irrespective of how quickly the COVID-19 situation improves, plenty of financial damage has already been inflicted on SMEs.

It’s not just your balance sheets and cash, but to the stakeholders with whom you must interact to make a profit: your employees, customers, supply chains and competitors.

Help, in the form of expert financial assistance, over and above financial support, will be key.

Such help can be split into three core stages; react, plan, and rebound.

React

Typically, SMEs are not strong at strategic planning, but this is something you cannot ignore. You will find that the world will have changed considerably, and your business needs to adjust accordingly. We are now almost at the end of the initial reaction phase, which has revolved around preserving cash and using the various government schemes to the maximum to secure as much of your business as possible, but it has also been about negotiating with creditors for as much relief as can be obtained and using the ATO as a lender of last resort.

Seeking professional advice at this stage is critical, particularly regarding short-term cash management, making the best use of government schemes and negotiating working capital facilities if required.

Plan

The current coronavirus crisis is often dubbed as “unprecedented” with little or no data to predict future outcomes. Whilst the economy as a whole has entered into a recession, there are likely to be certain sectors who suffer the most, such as hospitality and tourism. Whilst some sectors will actually thrive, Economists are envisaging a lengthy recession and persistent high levels of unemployment and a lot of businesses not surviving.

To help guard against the worst of such outcomes, SMEs should prepare to move into the restructure phase, which is why it is so critical to involves scenario planning in your recovery plan.

Traditionally employed by large corporates, the disciplines and benefits of scenario planning are equally applicable (and beneficial) to small businesses. Simply by imagining different futures and outline planning for those outcomes – good, bad and somewhere in between – will help create tangible action plans for each possibility, which can then be rolled out when it becomes clearer just what that future pathway is shaping up to be.

We believe that SME’s need to ask themselves a few key questions. Amongst them should be:

• Looking at end consumers, who will be buying? Will there be a lot of them or a few? What will they buy and through which channels?
• Amongst our customers, which businesses will be able to pick up broadly where they left off and which will have greater problems (financially, operationally – e.g. staffing, etc)
• Will all of our competitors still be around (not just big ones, but small ones, too)? And in what shape are they likely to be?

A new segmentation of markets will be critical – seeing customers not categorised by industry, geography or what they buy, but by whether they emerge as strugglers, survivors, or “escapers”

But it will also be vital to ask:

• Will our supply chain be intact? And if not completely, what areas will be weak or gone? How might continuity of supply be affected? How might prices for materials look compared with now?
• What illness disruption might we face amongst our workforce and are we doing enough to protect our staff?

Rebound: Critical success factors 

Well prepared, SMEs will be able to recover faster, particularly when a clearer economic picture emerges towards the end of 2020 and into 2021.

In the meantime, small businesses should identify from their chosen strategy the set of critical success factors (CSFs) that will impact their ability to recover and prosper, before translating them into a core set of dynamic KPIs that tell it how well the business is doing in achieving them. And keep all of your employees updated with your decisions, and the progress being made to maintain their engagement.

By getting to grips with KPIs such as forward cash, customer retention, working capital management and supply chain resilience, there is nothing to stop a well-prepared SME from not just surviving the current economic and societal afflictions, but thriving.

If, after reading this you’re feeling uncertain about the business plans you have in place, and would like to get a better grip on what the future might look like, The CFO Centre are offering complimentary 90 minute Planning Sessions with a high calibre CFO. In this session they will help you to build a bullet proof plan to come out of 2020 leaner, sharper and stronger than before.

The CFO Centre have helped over 500 businesses through the pandemic, with 91% of clients rating our service as “exceptional”.

Please click here for more info, or to book your Planning Session: Home – CFO Centre Australia (wpengine.com)

Written by Nick Crawford and John Paterson
31.7.2020