2020 hasn’t gone to plan, but it’s not too late to revisit that plan, adapt it to the current situation, make it short to medium term and agile, and execute on it to forge ahead. Believe it or not, the current pandemic presents the perfect opportunity to rewrite your strategic business plan. Here are our top tips to strategic planning during an economic downturn for the best chance of thriving through and beyond.
Revisit your business structure
Business owners, CFOs and other executives generally revisit the structure of their organisation in response to growth. However, in the current environment, a change in business structure could help to mitigate impacts of the pandemic.
For example, if your business has suffered a loss of revenue, you might make the change to free up cashflow and improve profitability. Or maybe you’re reorganising internal functions if you’ve had to let people go. Another possibility is that due to social distancing rules and lockdowns at home, you might have decided to tap into a less restricted international market. Maybe you’ve brought on a partner for financial assistance and need to change from sole trader to a partnership structure. Or maybe you’re downsizing and making the reverse change.
It may also be the case that your business structure isn’t as efficient as it could be and you’re paying far more tax than necessary. If the value of the business has reduced then now might be the time to consider any tax effective restructures taking advantage of the small business CGT relief that may be available.
If you determine that a change is required, please consider the following questions:
- What are the pros and cons of each structure and which will work best for your business?
- Will you need to apply for a new ABN, business name or trademark?
- Will your tax obligations change and if so, how?
- Will the new structure set me up for the long term?
If you think a change in structure could improve your position and you’re unsure which is the best fit for your business, contact a William Buck advisor today.
Consider risks that you may not have placed a high priority on before the pandemic
What is currently impacting your organisation that may not have been prior to COVID-19?
Governance around remote working has become a key consideration for many businesses. Do your employees have the correct ergonomic equipment to work from home without injury? Could the business provide equipment either complementarily or through a loan or a payment plan?
Meanwhile, the mental wellbeing of employees, while always integral to management, deserves even greater attention during a global pandemic. Isolation can create feelings of loneliness and depression while uncertainty breeds anxiety. Could your employees benefit from counselling? Have you checked in with them during COVID-19 as to how they are coping and feeling to understand what their stress factors and key issues are as employees? Following an employee engagement check in you can then target your approach to the needs of the employees.
Communicating expectations and changes to employees is also important. Are you doing this effectively? How will you work this into your strategic plan?
Then there’s the COVID safe considerations. If your employees are still attending the worksite, will you need to install hand sanitiser stations, check-in technology, social distancing signs or develop guidelines for how to move around the site?
Lastly, considerations around protecting your businesses Intellectual Property and data with people working remotely. How do you ensure that your key IP and data is not downloaded and removed from the corporate platform?
These are just a few new realities to consider in a rapidly changing world. Have a think about others that might be relevant to your business.
Perform a SWOT analysis
While you might have done this prior to the pandemic, chances are, perform your analysis again and you will uncover new threats and opportunities. In addition to considering your strengths, weaknesses, opportunities and threats, ask yourself:
- How will our current operating model fit the ‘new normal’?
- What are the changing demands of our clients?
- How can we promote sustainability?
What have you learned about your business during COVID-19? Many businesses have pivoted their offerings to clients during the pandemic. The new approach and new client offerings should be considered as part of your updated SWOT.
To more accurately assess your business and to uncover a more complex framework, you could also undertake a pestle analysis, which considers six macro-environmental influences impacting the business. These are:
This tool can provide you a greater understanding of the opportunities available and the limitations of your business and prompt you to consider and plan ways in which to address those.
Prepare to develop a more immediate, short-term and agile strategic plan
Given the speed with which the pandemic and associated geopolitical risks are evolving, short to medium term planning horizons are far more important than longer term which will almost certainly require a shift in focus.
The plan needs to be revisited regularly to match changes in customer demands and a volatile market.
When planning, consider different scenarios for how recovery might play out. For example, will there be another wave, and if so, how will this impact operations? What will the ‘new normal’ mean for my business?
Although planning may be shorter term and more nimble, we encourage business owners, CFOs and decision makers to undertake their strategic planning separate to the day-to-day running of the business. Having the clarity of mind to focus away from the practical operations is still essential to visionary strategic planning as is undertaking an ongoing planning process in consultation with an independent party as well as the relevant business’ stakeholders.
Cashflow is key
During an economic downturn, managing cashflow is key for survival. While businesses that had prepared for some form of disaster will be better placed than most, you can employ a three-way forecast to monitor and manage cashflows effectively.
A three-way forecast will provide you with a framework to assess and reassess your business’s current position and available options. For more information on the importance of cashflow forecasting and ‘how to’ during COVID-19, please read part one of Senior Manager Business Advisory Eric Flammang’s article here.
Meanwhile, there are several State and Federal Government assistance measures available for businesses wanting to free up cashflow. The JobKeeper Payment is the most significant, with eligible businesses receiving a $1500 subsidy per eligible employee each fortnight to assist with wages. From 28 September, this rate will be reduced and two-tiers will be introduced, for full-time and part-time employees respectively. You can read our FAQs on the Government’s JobKeeper Payment here.
The Federal Government is also providing cashflow boosts up to $100,000 for SME businesses that employ staff and have an aggregated annual turnover under $50 million, subject to eligibility.
Commercial rent deferrals are also available, while the Government is offering a 50 per cent wage subsidy for one apprentice or trainee in each eligible business.
And, under the Coronavirus SME Guarantee Scheme, Canberra is providing a guarantee of 50 per cent to SME lenders to support new short-term unsecured loans to SMEs, providing businesses with funding to meet cash flow needs by enhancing lenders’ ability to provide credit.
For more information on the different State and Federal tax breaks and incentives, please visit our COVID-19 Resource Hub here.
Without a strategic plan, your business will lack direction and suffer from a lack of preparedness, especially in the current environment. Developing a plan with key considerations during the pandemic will enable you to drive your organisation to be profitable, sustainable, and thrive through COVID-19 and beyond. Revisiting the plan regularly means you’ll have constant visibility over cashflow and general operations, providing greater clarity as to what and how to improve business performance to enable growth and sustainability.