Friday, April 17, 2020

Small Business Survival - Control what you can, adapt to what you can't

A brutal business environment, which few of us have ever encountered

Owning and running a small business can be challenging at the best of times.

However, few business owners would have faced a more challenging business environment than the one we currently face in 2020. With the COVID-19 pandemic and the unprecedented government restrictions that have been introduced to limit spread of the virus, there is enormous uncertainty and even anxiety in the community.

Social distancing, the banning of social gatherings, the government push for us all to “stay at home”, the disruption to weddings, funerals, sporting events, the panic buying of some groceries and periods of empty shelves in supermarkets, the closing of national and interstate borders, the almost complete closure of schools and the global economic shockwaves that will reverberate for many years to come – all effects of the war on COVID-19.

There have been many small businesses that have been unable to survive in such a brutal and disruptive environment; consumer confidence is low and job losses have been high, despite the various federal government relief packages that have been introduced.

So let’s look for small business stories that can offer us some hope. Examples where businesses are finding a way to survive and deliver service to their customers.
Plan for the future, instead of worrying about it ...

John Tatterson runs ASA Financial Advisers, a small business located in the outer-eastern suburbs of Melbourne – but servicing clients all around the country. He leads a team of five staff and has been in the financial services industry for almost 20 years. After ten years of working in the business, he became a partner in the business – and subsequently was offered the opportunity to buy the business.

The essence of John’s business is about helping clients plan for the future. Helping them to get some clarity around their financial and lifestyle goals and formulate plans for building and managing wealth to achieve their goals. John has brought the same forward-thinking philosophy to the running of his business. His philosophy is simple, know what you can control and adapt to what you can’t. 

An added complexity to the business environment within which John operates is the nature of the industry itself. The Royal Commission into the Banking & Financial Services industry conducted in 2018 found numerous instances of where banks and financial advisers had behaved unethically. There was subsequently a serious loss of community confidence in the industry. Higher standards and new rules were legislated by the government as a consequence of the Commission’s findings.

John is proud however, that his firm has been abiding by those standards and principles since 2009, well before they were legislated.

I posed John some questions for our interview. He is a softly spoken family man (with two young daughters), who projects a calm and measured approach when discussing and reflecting on his experiences in managing a successful business.  This is what he had to share ……

1.   1. John, you’ve been in the business for almost 20 years and took over as Director and have been running the business now for about ten years. Stepping up from being an employee to the person owning and running a business can be quite a bold step. What was your motivation – why did you decide to take that risk?

Yes Brian, I must admit however that it didn’t occur through my initiation of the process, but rather it was the owner of the business who initiated it. He had been contemplating retirement for some time and he approached me to see if I would be interested in buying him out.  At the time I was very comfortable in my position as an employee, but I could see two potential benefits of taking the risk.  The first being the challenge - which is what attracted me the most. 

The second was being able to run my own ship and therefore alter the course of the business.  This allowed me to relocate the business to a part of Melbourne that I believed was under-resourced with the types of services which we offered. I was also able to develop and implement some longer term strategic alliances, which have provided us with a solid foundation upon which to further build the business over the past ten years………. So in summary, my motivation was the challenge, the opportunity to have more influence and the opportunities I perceived to further grow the business.

 .   2. Managing and operating a small business in these current times with all of the uncertainty and anxiety around COVID-19 is a huge challenge …… What have been some of the ways you’ve had to adjust the operation of your business – how have you needed to adapt?

The most obvious and biggest change we have needed to adjust for is social distancing both with staff and clients.  We quickly needed to purchase the appropriate equipment and software so all staff could work remotely from home. Thankfully we all use Voip phones so it was a matter of plugging our phones into the internet at home and it was all like we were in the office when using the phone system. 

We have also made great use of Microsoft teams to share ideas and files between staff.  In terms of clients, we are now using Zoom regularly for client meetings and Docusign to which allows clients to sign documents electronically.  We have also increased our communication with clients to keep them updated on market movements and also as a source of information on initiatives provided by the Government such as Jobseeker, Jobkeeper and small business support measures.  

   . 3. As an industry, the recent Royal Commission found that there were many financial advisers who were guilty of pushing a particular solution or plan in which they had a vested financial interest and yet failing to disclose their conflict of interest …… What advice would you offer to anyone who was considering consulting a financial adviser?

Thankfully since the Royal Commission basically all conflicts have been banned under the new Code of Ethics that came into force from 1st January 2020 - which is an initiative that my practice has very much welcomed.  My best advice in sourcing a Financial Adviser would be to do your research and find someone you trust.  If what they are saying is too good to be true (in terms of promised investment returns for example), then it probably is…… Ideally you should be looking at their education background (qualifications) and be prepared to ask your prospective adviser lots of questions. If they seem to be evasive or vague in their responses, then it’s probably a red flag. If they promise to get back to you to provide information and fail to do so – then you shouldn’t have to be chasing them up – and I’d suggest it’s another red flag.   

 .   4. Financial planning is something that many small business owners can sometimes neglect. What are some general tips for sound financial planning that you might share, relevant to small business operators?

The most common mistake that I see with small business operators is they don’t treat themselves as employees - they pay their own superannuation last which often means it gets missed.  The second mistake we see is not having the appropriate protections in place both from a legal and insurance perspective.  So my general tips would be to invest in yourself and your superannuation and also to protect yourself and your family, should things not work out.

 .   5. You have a small team of staff that you manage in your business. What have you learned about keeping a team motivated and building a customer service focused culture within your business?

The previous owner who I used to work with would say the worst thing an employee could say in a small business is “it’s not my job”.  I think this is what makes small teams unique and helps keep staff motivated - they need to be flexible enough to perform their core functions, but also willing to help other team members find answers when needed. 

I also empower staff to acknowledge to clients if we don’t have the answer, but we will do our best to then find out.  I never ever want one of my team to “bluff” or answer if they are not sure. I expect my staff to undertake their own independent research and to subsequently share their findings not just with their customer, but also with the rest of the team. 

One further lesson I’ve learned, is the importance of taking the time to recruit the right person when you have a vacancy to fill ……. Although technical skills are important in a job, what is just as crucial for me, is that any prospective staff member possess the right personal qualities. They must have integrity,  they need to project a professional manner, they need to be a good listener and they need to convince me that they want to keep learning and improving.

 .   6. What advice would you offer to someone who was contemplating starting up their own business?

You need to have a plan, you need to know why you are starting the business and you need to be able to adapt to change.  Your plan needs to be based upon sound research and not overly optimistic assumptions. You need to ensure there will be strong cash flow – I’ve seen too many great businesses and terrific ideas go under because of the strain of a lack of cash flow. 

The current Coronavirus pandemic has highlighted how crucial strong cash flow and balances sheets are in managing periods of volatility.  You need to know why you are starting the business because if you are not 100% committed then you will find it difficult.  And lastly, you need to adapt to change because the economy and the environment is constantly changing and if you don’t keep learning and keep evolving, then your business will not grow.

 .   7. And finally, what advice would you share with small business owners who were themselves struggling to remain positive during these difficult times?

The message I keep affirming to both myself and my staff is that this Coronavirus pandemic is our generations version of a World War.  And it will eventually pass. If we can keep diligently working our way through this, adapt when we need to and get out the other side with a business that’s in solid shape, then we will be able to cope with anything else that the future might throw at us. 

One last thing I'd like to add Brian .....

The success we have been able to achieve in our business has been driven by building long term relationships with clients. This is achieved of course by knowing your stuff! But it's also about building trust by being reliable and consistent - in other words, always doing what you say you're going to do. When you surround yourself with good capable people in your business who share these same values, then things get easier....... Thanks for the opportunity to share some of our experience and learnings  - I hope it is of some help to your readers.

Wednesday, April 8, 2020

Managing Your Small Business During COVID-19

Tips For Adapting and Coping With the Pandemic

Are you finding it hard to know how you can proactively manage your business during the corona-virus pandemic? Here's some suggestions ....

1. Understand your current financial position

It’s essential to make informed decisions about your business based on your current financial position. Pending restrictions imposed by government, your ability to trade through this period, pay outstanding debts, keep employees or meet existing leasing or loan repayments will be determined by your financial position. Contact your accountant to discuss the various options which may be available and make a plan as to what you need to do to minimise the impact on your business. Cash flow is critical, especially if your existing income and trade has been significantly disrupted by COVID-19.

2. Check your eligibility for government assistance

The Australian Government has announced several stimulus packages to help business owners manage the disruptions to their business. For sole traders, this includes access to the JobSeeker Payment, which now includes a coronavirus supplement payment and an increase in the income test for partners.

3. Contact your bank and insurer

A new loan deferral arrangement for small business owners is now in place. Contact your bank or financial lender to discuss this arrangement. We also recommend talking to your bank’s hardship team if you would like to discuss the options available if you need relief from any personal mortgages or loans. Visit the Australian Banking Association website for a list of hardship contacts for each bank.
On 2 April 2020, the Australian Competition & Consumer Commission (ACCC) granted interim authorisation to insurance companies and brokers to offer payment deferrals and refunds to businesses impacted by COVID-19. The package allows existing eligible business customers suffering hardship to:
  • defer insurance premium payments for up to six months (for payments due before 30 June 2020)
  • request a refund for unused premiums for any policies they need to cancel as a result of the pandemic – without the cost of administration or cancellation fees
  • receive a credit or refund for unused travel insurance premiums, without the cost of an administration or cancellation fee
The interim authorisation applies to Suncorp, Allianz, QBE Insurance as well as any other insurers or insurance brokers who choose to take part, as long as they notify the ACCC.

4. Communicate with your stakeholders

It’s important to communicate to all your stakeholders about what is happening with your business during the COVID-19 pandemic.
If you have staff, they need to understand what your plans and the likely impact on them. Be as calm and clear in what you are telling them as possible.
Follow up all your debtors to try and get any overdue payments in. You may need to consider negotiating, based on what they are able to pay in the current circumstances. Also communicate with your creditors to see what payments you may be able to defer. Review your trading terms to ensure that you obtain upfront payments (where possible) or a deposit for any new orders.
Keep your customers updated about your services, for example if your business is affected by restrictions, ensure you communicate as early as possible what this means for them.

5. Seek advice on deferring tax payments

The Australian Taxation Office (ATO) can grant you a deferral of certain tax obligations if your business is impacted by COVID-19. Call the ATO on 1800 806 218 or speak to your tax professional to discuss your options. Deferring payments may impact on your eligibility for other stimulus package options, so seek professional advice.

6. See if your business can still operate

As the government has announced expanded restrictions to business activity and travel, check our list of the latest restrictions to see if your business can keep operating or if there are any changes you need to make to fit in with these mandatory requirements.

7. Understand your options in relation to employees.

Familiarise yourself with your obligations as an employer. Information is available through Fair Work (for businesses under the national industrial relations system). This information also covers issues such as when you might be able to stand down employees, redundancy information and changing work hours.
On 30 March, a $1500 per fortnight JobKeeper Payment was announced by the Federal Government to support employers in retaining their employees. One of the eligibility criteria is that you are able to demonstrate that your business has suffered at least a 30% drop in revenue due to the pandemic.

8. Consider whether you can draw on your superannuation

If you are a sole trader whose hours of work or income has fallen by 20 per cent or more as a result of the pandemic, the Federal Government is allowing you to access your superannuation. This is capped at $10,000 this financial year and a further $10,000 next financial year. The withdrawals will be tax free.

9. Reach out for support 

This is an important time to reach out to your networks for support and advice. Being able to identify ways in which you can at least exercise some control over your situation is good for your positive mental health. Keep communicating and stay connected with your support networks and speak with other small business owners to share ideas and explore possible opportunities for more innovative practices. 

You don’t have to work through this alone - don’t allow pride to stop you from reaching out and asking for help if you need it. The last thing you want to be doing is bottling up any feelings of anxiety or despair. Open up and share your feelings with people who care about you - be it co-workers, family or friends. This pandemic will eventually pass + not tomorrow, nor next month ..... but at some point it will pass. 

Yes, you must step back and possibly make some hard decisions in assessing the viability of your business moving forward. But what is even more important, more integral to your ability to lead your business through this crisis, is that you take steps to maintain your own personal physical and mental health. You need to ensure any decisions you are going to make about the future of your business are coming from a place of reasoned judgment- and not one ruled by anxiety nor fear. And if you’re looking for some quick tips on how to boost your drive and energy, check out Self-Motivation
Stay up to date with all the government announcements and any rule changes at