False economy?
Last time we identified the 3 phases of this viral economic crisis:
Survival
Make the boat safe
Set up to get racing again
Whilst unfortunately a number of businesses have already gone under, it feels as though most people are through the first phase of pure panic and are trying to work out how far into phase 2 we are. It seems likely that Australia is heading out of the virus black hole at the moment, but clearly there are large parts of Europe and North America in particular with a significant amount of work to do yet. It is also unclear as to whether the virus is really on a proper retreat yet, or merely waiting for everything to open back up again, before striking hard again.
Some things are becoming abundantly clear. The economic impacts of this pandemic are likely to bite extremely hard, and continue for years rather than months, and to think that all businesses will be able to simply “return to normal” any time soon is pretty unlikely.
I have recently read others describing this next 3-4 months in Australia as a “False Economy”, given the number of businesses being propped up by various government incentives. There is no doubt that this makes the end of September another massively important date in this crisis period. There are large numbers of businesses surviving purely on the generosity of government subsidies, rather than under their own steam.
In some cases these business were probably struggling to thrive even before the virus hit, but are now being made to feel the inadequacies of their positioning or strategic decisions over the last few years in a much shorter time frame than would normally be the case. Others have had perfectly good businesses stripped away from in front of them, now desperately flailing around trying to work out how to get going again. It has however given every one of these businesses an opportunity to review their activities, without necessarily having to resort to immediately slashing wages in order to survive.
At the very least it is enabling businesses to avoid the cash flow nightmares of multiple redundancies at a time when they can least afford it. More helpfully than that, this is a fantastic opportunity which needs to be well planned and taken advantage of wherever possible. If you are in this cohort of being able to avoid redundancies right now, then this means you have got “extra” people available, and at the very least are getting a good subsidy of your wage bill to free up cash flow for continuing operations. What the government would dearly love is for businesses to use, as far as is practicable, this extra time and money to set your business up to survive past September in the first instance, but ideally well into many more Septembers.
There is no text book answer on how to trade a business of any kind through a global pandemic. Everyone is learning, and the real survivors out of this will be those that invest in their business by trying new ideas, failing, learning and getting going again quicker than their competitors. The key to this is going to be building resilience into your business. Resilience is not just holding more cash than the next guy; it is also knowing what to do with it, and when; and also making sure you have the right people on your team. There are numerous examples of businesses “pivoting” rapidly at the moment and enjoying astonishing success. It doesn’t really need to be so dramatic, although if you can, maybe you should try! Simply reviewing how you do business, challenging the assumptions you have worked on for years may well give you a good enough opportunity to delight your customers and return more quickly to profitability.
It is also crucial to realise that everyone is learning at the moment, and most customers are likely to be going through exactly the same process…so maybe team up with some of them to try some new ideas, at least perhaps warn them you are trying new ways to make life better for everyone in your value chain, and beg some patience whilst everyone tries to find this elusive “new normal”. Customers are almost certainly keen to find new ways to do business with you – equally in B2B or B2C, so it is probably time to finally implement a proper investment in digital improvements, new products, or develop new channels to market to fit with these shifts in customer desires.
So to sit back and wait for September to roll around and horde as much cash as possible in the vain hope that all will magically be well, is the worst kind of False Economy one could contemplate…at least the False Economy created by all of this government support has a clear and valuable goal of trying to get as many of our businesses as possible through this economic crisis and trading profitably into the future with all of the resulting job opportunities and tax revenues that delivers. Make sure your business is not making its own False Economy, but is investing in how to adapt and thrive in an extremely challenging environment.
