JobKeeper 2.0 May Not Help Us with Lockdown 2.0 – What You Need To Do To Prepare Your Business
Our thoughts go out to families who are dealing with any of the health impacts of Covid-19, the impacts of the blasts in Lebanon and the families behind the businesses in Victoria who have to shut their doors today in a lockdown which is much tougher than we have seen before. Even though, we have a small number of clients in Victoria who are affected, we have many clients in Qld and NSW that will be affected as they have shops, office, warehouses, suppliers and customers in Victoria. Economically we will all feel this and we recommend that all business and investors prepare for some significant volatility in trading conditions over the next 6 to 12 weeks and the continuing disruption and uncertainty for the next 12 to 24 months.
What we have learned in the first Lockdown is that businesses recovered quite quickly. On average many of our clients experienced demand spikes and very good trading conditions in May and June which offset dips in March and April. Businesses that were able to adapt their business model quickly were the best performers and on-line sales performed very well across multiple categories. We know and understand that many businesses cannot operate on-line. Overall, based on an analysis of the average sales data from our clients, the year has mostly ended flat for our clients. While this gives us confidence that we can recover quickly after the shutdown, it is too early to say that everything is “Back To Normal”. Our concern with these spikes in May and June is that they were largely driven by the substantial amount of stimulus available (Jobkeeper and JobSeeker) in the economy.
The recently announced JobKeeper 2.0 is dependent on a significant decline in trading conditions in both the June and September quarters. These conditions are quite restrictive and it is likely that the majority of businesses on JobKeeper will lose access to the scheme at the end of September unless the Government makes changes.
On the 19th March 2020 we sent out a note to our clients asking them to put their business into Preservation Mode for a period of 6 to 9 months which takes us through to December 2020. So even though your shop, office, practice or warehouse may be open for business in your state/territory at this moment, this circumstance can change quickly and you need to be prepared. You are running your business for the long term and it is important that your business is alive, strong and stable at the end of the saga. We are now recommending that you really think about your business being in some form of “Preservation Mode” until December 2021.
Prepare your business with the following key steps:
- Conserve capital – You should be aiming to have sufficient capital available to cover an 8 to 12 week period of business expenses with reduced sales. We are testing with our clients a Business Resilience Model we have developed which calculates an estimated amount of available capital considering various scenarios. There are various ways to secure additional capital if required.
- Plan to operate without Government Support – Jobkeeper has been a lifeline for thousands of businesses however, the support is being reduced. Assess the likelihood of having access to Jobkeeper 2.0 and have a plan to operate your business in an uncertain environment without Government support from September 2020.
- Prepare your employees – Ensure both you as the business owner and the employees are mentally prepared and ready to adapt to the continual state of change that is very likely during the next 12 to 24 months. Preparations should be in place for any one or a multiple of the following events occurring:
- Having to shut your business either because of a government mandated shutdown or due to an employee or customer having Covid.
- Significant employees not able to come to work due to illness or quarantine restrictions.
- Not being able to travel domestically or internationally.
- Restrictions being placed on your supply chain.
- Demand for your product and services decline due to poor economic conditions.
- Customers being unable to pay.
- Debt management – Summarise the debts that you have incurred over this period which can include deferred rent, ATO extensions and new loans and ensure you have an affordable repayment plan.
- Be savvy with spending. This continues to be a time for “needs not wants”. Business growth requires calculated risk so make sure you understand and can cover the downside if the sales from that product order, new staff member or investment don’t eventuate.
We are looking forward to supporting our clients through this challenging period. Please call or email us to discuss with a Macro team member today.
Date published: 6 August 2020