3 Integral steps every business owner should take!

1. Know where your business financial position is at and build deep knowledge of the next 90 days of your business and cash flow.

• • Review your profit and loss and balance sheet. If your financials are not up to date, the most important investment you can make is getting them up to date this week. You can’t build a financial plan to deal with sudden changes in your business if you don’t have an accurate starting point. You can’t make this assessment based on financials that are 9 months old (i.e. you can’t rely on your freshly prepared set of 2019 financials and tax returns).
  • Carefully review your cash flow for the next 90 days. If you don’t have a 90 days cash flow plan already, invest some time and money and prepare one.
  • Build a list of your financial commitments and fixed costs. Take steps to reduce those.
  • Understand the trends of your lead business performance indicators and note any divergence from your business plan (you’ve got one  - haven’t you?), being careful to understand the reasons behind that divergence.

2. Build 3 scenario plans – best case, worse case and likely case

• • The economic world and your markets have changed in the last 2 weeks, both positively and negatively (industry dependent). Understand those changes and gain an understanding of the key revenue and cash flow implications arising from those changes. Build new assumptions for your budgets and cash flows and understand the impacts on your financial future.
  • Look at your cost structure, what costs  can you reduce or eliminate to reduce your cash and profit burn.
  • Build a best case, worse case and likely case “3 way forecast” (Profit and Loss, Balance Sheet and Cash Flow forecast). Understand the impacts and shortfalls occurring in your financial future. This is critical to understand any solvency issues you may have  and what restructuring steps you need to implement overcome them. If you don’t have the skills to do this, seek and invest in professional help to do this for you.
  • Understand what state and federal government loan, grant and other funding packages may be available to your business. Talk to your bank and other financiers to see what payment relief may be available to your business. It is important to note that any deferred commitments won’t go away and your cash flow planning needs to carefully understand the future impacts of these deferrals so that you aren’t deferring them and creating a bigger solvency problem.

3. Make an action plan, action it and be accountable to it.

• • What you do now is critical to a smooth landing from any economic impact that Covid-19 may cause your business.
  • Communicate your plan.
  • Find someone to be your sounding board and to review your plan and ensure it’s achievable. By finding someone to be your sounding board who understands your business and plan, you will have someone to turn to in times of concern and uncertainty who will help you navigate your way through these troubled waters and who will also hold you accountable to your plans and actions.

If you would like a copy of the executive summary to the 2020/21 SME Research Report, please click this link.