How to be sure your business is financially secure after COVID
Almost a year after the start of the COVID-19 crisis, and then vaccination campaigns are starting in some countries and are imminent in Europe, we realize that the economic repercussions will be felt until 2021, and maybe the following years. You've probably thought a lot about how to secure the future of your business. Here are some ideas on how businesses will survive the pandemic.
Keep a close eye on your financial situation
If the pandemic had only lasted a few months, the vast majority of companies could have bounced back without leaving any feathers. But the arrival of the second wave and the prospect of a third caused a long period of disruption. Unfortunately, this means that some businesses simply won't bounce back. It is therefore necessary to take a step back and examine the financial health of your business. Some difficult decisions may be necessary.
You need to re-evaluate all of your overheads and cut expenses as soon as possible. If your income decreases, then it is necessary to reduce costs to maintain a balance. Stop all non-essential spending and divert budgets that aren't contributing to the long-term viability of the business. You might also consider outsourcing some of your non-core activities while identifying potential new sources of income.
To judge the health of a business you have to look at its profitability. If your business model is correct, you should be able to downsize the business if revenues decline in order to remain profitable. If you can keep a profitable small business, you will have come through the crisis successfully. Being able to adjust up and down while making a profit - at higher or lower activity levels - is the key to entrepreneurial success.
Your greatest asset is your team of collaborators
Many companies have been able to stay open thanks to government aid which financed 80% of their salary costs. Now that TWSS has been replaced by EWSS - with its more stringent eligibility requirements - there is bound to be a dramatic drop in eligible businesses and claims. Companies that can no longer benefit from it are looking to see what other help could be offered to them.
Programs such as TWSS have been an immediate and indispensable response to compensate for the total shutdown of certain businesses and the catastrophic effects of foreclosure on certain sectors and types of businesses. There is now a need to pivot businesses, adapt revenue models, reduce overheads and make other organizational and model changes that will enable our businesses to withstand such external shocks.
If you are still dependent on this government assistance, it is likely that you have not been able to adjust properly. So you need to focus on transforming your business.
Many companies have had to cut wages as part of their survival strategy. This measure may concern employees essential to the company. However, keeping good staff will be essential for the relaunch or growth of your business. If you too have had to reduce the pay of your key employees, it is important that you have a clear plan to allow them to return to their pre-crisis salary levels. Talk to them and show them your plan to increase their pay again, otherwise you risk seeing them leave your business when you need them most. You might consider offering growth stocks as part of this plan. They are a great tool for involving key members of your team of collaborators.
Economic recovery, how to prosper in 2021
Many business owners have worked very hard this year for little reward. Competition for tenders has been fierce and opportunities few. Validated projects were canceled at the last minute. But make the necessary decisions now and you will be fine. If your business is viable, your decisions will pay off.
Take some time now to develop a business plan for 2021-2022. It is hoped that business will return to normal at some point in 2021. Even if not, what is your plan? What are you going to do to create a market? You will need to consider all the avenues to make a profit, as banks and investors do not support companies that make losses.
What to do if you need cash?
Consider cost accounting. It is important that your business has cash flow, but be careful not to over-rely on borrowing. You are creating a liability for the business and you will need to start repaying this loan as soon as it arrives. It is better to reduce costs.
It is sometimes more strategic to favor an overdraft instead of a loan. If you don't have an overdraft facility, ask your bank for one as soon as possible. Even if you're not using it, it's best to put one in place. You can usually get an authorized overdraft equivalent to one month's income.
If you need capital, there is a lot of new money available for businesses, and you will be able to borrow if you have a clear plan for growth. Your revamped business plan will be essential in showing how your business can be profitable despite the challenges posed by COVID.
If you need loans or investments, here are some avenues to explore:
- P2P lenders such as Linked Finance, Grid Finance and Spark Crowdfunding
- The loan program for future growth
- The working capital regime
- Your local corporate office and Enterprise Ireland currently have some interesting expansion support. In particular, EI's Sustaining Enterprise Fund, which provides funding of between 100,000 and 800,000 euros without repayment for the first three years. Up to € 200,000 of the fund is potentially non-refundable.
Deferral of tax debts
You also have the option of storing your tax debts. Income allows businesses not to pay VAT or payroll taxes without incurring fines with the implementation of reimbursement plans for any deferred payment.
Make sure you continue to file your returns on time, and meet your tax obligations even if you don't make any payments.
COVID can also create opportunities
It is important to be positive and to consider that interesting opportunities will arise from this situation. Companies will have gained in flexibility.
There is no doubt that we are heading for a recession. But your business can survive a recession if you have optimized your overhead management, outsourcing, etc., if you have adopted a model that can grow and contract as needed, if you know how to be proactive and use real-time data to inform your decisions.
Also, many governments like ours are using quantitative easing to get out of recession and it is working. the EU and the state will inject money to ease the recession. It will go to state services (education, health, etc.), through agencies such as Enterprise Ireland or the Local Enterprise Offices, and to banks. Public agencies and departments will be well funded. Interesting opportunities will then arise in the form of calls for tenders.