The COVID19 outbreak is rapidly unfolding with significant impact on small businesses, especially social enterprises and Indigenous business. Major disruptions to our work and social lives are expected for the next six months. Planning is critical in order to survive an immediate loss in revenue, cash flow constraints, due liabilities, disruption in supply and most importantly impacts on employees. Most of our clients are facing the reality of reducing or pausing business activities.

It is not all doom and gloom. Nimble enterprises are picking up new contracts in adjacent industries related to the COVID19, such as call centres, logistics, essential products like food and hand sanitiser, community services and cleaning areas exposed to COVID19. You can consider both delivery of these services or supplying to companies in these industries.  This is an opportunity to shift activities in the short-term, and even establish a track record for new business offerings that outlive COVID19.

What should you focus on first?

Your weekly budget for the next six months. Update your financials and keep them updated. You need to know if, or when, you are going to run out of cash. A “lights on” budget will help you make the best decisions and compare trade-offs.

Business continuity plan. List the biggest risks to your business over the next six months and develop mitigation strategies. Consider areas of sales, staffing, opex, suppliers and finance, especially key financial covenants. Keep the list manageable to under 20 items.

Talk to your suppliers and debtors. Understand the reliability of your suppliers to determine if you need alternative sources. Discuss flexible payments terms ahead of time, such as payment extensions.

Secure finance to fill cash gap. There are near interest free loans available over the short-term with flexible re-payments, called bridge loans. Explore payment extensions on existing facilities. Understand your options at least a month in advance.

Understand government support. Government is offering tax incentives like refund of payroll withholding tax, ATO concession to manage debt and fillings obligations and wage support for trainees, apprentices and cadets. We expect more wage supports soon.

Take care of your employees. Review your staffing arrangements and consider how you can manage wage expenses, such as redeploying staff, stand-downs, leave in advance or leave without pay. If you absolutely must, let staff go, link them with the correct Centrelink info, as people should lodge an intent to claim as soon as they are out of work. Centrelink payments are now $1,100 per fortnight, but the wait time to receive payments could be months. Here are other government support initiatives.

Make hard decisions now. Make the cuts now that allow you to survive the worst-case scenario over the next six months and/or take the bold decisions to redeploy resources to a new/complimentary revenue stream. If you only have cash reserves of one month like most small businesses, even a delay of one week could spell trouble.

Ask for help. You are burning the candle at both ends trying to manage your business. Before you run out of gas, find out who can support you. Some law firms will consider pro-bono support to non-profits.

Thanks to the generous financial support of Gandel Philanthropy, SVA Upscaler is able to offer free business continuity and restructuring support in response to COVID19 to 6-10 selected social enterprises and/or Indigenous businesses. Email Nathan Sowell at nsowell@socialventures.com.au to apply. Please include your business name, website and overview of your situation.

Guest post by Colin Stimpson, Associate Director, Impact Investing – Social Ventures Australia (SVA) and Nathan Sowell, Manager, Impact Investing – Social Ventures Australia (SVA)