How to strengthen your business after COVID-19

The COVID-19 pandemic dealt repeated blows to thousands of small and medium-sized business owners. Perhaps you’re one of them, and watched your hopes of profit and growth fade. Matt Byrnes, National Head of Restructuring Advisory at Grant Thornton, is an expert in turning businesses around after adversity. He believes now is a good time to turn your business around and improve its chances of surviving the ups and downs of economic uncertainty. Here’s his advice to help you stabilise and strengthen your operations.

Prepare to make difficult decisions

Has a business downturn left you overstaffed? However hard, it might be time to reduce your headcount. You may need to rationalise your leasing commitments, or cull favourite products and services that don’t make your business money.

Your business turnaround may also mean abandoning ambitious revenue growth targets in the short term in favour of focusing on costings, margins and profitability. “Get those elements right and you will position yourself with the best platform to grow,” Byrnes says. “It’s about being strategic and decisive, making the changes needed and being prepared to go one step back in order to go two steps forward later.”

If you put your house in order now, it will help you to determine if it makes sense to diversify or pivot to a new business model, as many enterprises did during the pandemic.

When recovering from a business set back, you must be rigorous with your financial planning. This is particularly important if you want to negotiate with third parties or secure funding from financial providers. Financial forecasts that emphasise short to medium-term cash flow give your suppliers and lenders confidence that you’ve considered key risks and makes them comfortable that you’re well placed to weather further storms.

“A small to medium business doesn’t necessarily need a complex, integrated, three-way financial model, but they do need to be able to produce sound financial information that makes sense and can inform management and their stakeholders about their forecast trading,” Byrnes explains.

“Those businesses can then go to a bank or the ATO, or a landlord or stakeholder, and present themselves in the best way, demonstrating that they’re examining different scenarios and preparing for a range of outcomes,” he said.

It’s always best to act early, whether you’re in distress, under stress or looking to ensure you don’t end up in either situation. “Think of a funnel – the earlier turnaround planning occurs, the more potential solutions there are,” Byrnes says. “Conversely, the longer time goes on, the fewer the options that are generally available. That’s where we see value destruction and businesses ending up in serious difficulty when perhaps it could have been avoided.”

Turn to the professionals

Professional advice can provide a balanced, objective perspective and become an investment that pays for itself. “If you’ve built a business and been there for a long time, there can be a tendency to think you can manage your way through everything,” Byrnes says.

“It’s difficult to step outside the business and take a helicopter view. An external advisor, who has no emotion or attachment to the organisation, can come in and give a view on how you’re performing, compared with the rest of the market or your competition, it can be really valuable.”

Build a base to win from

As the economy recovers, Australian businesses can expect uncertain demand and spending levels as well as fierce competition in the future. If you’ve improved your business resilience, you’ll be better placed to cope with challenging conditions and capitalise on opportunities as they arise.

“In the current climate, businesses have just got to get the fundamentals right,” Byrnes says. “Inevitably, there are going to be winners and losers and it’s about giving yourself every opportunity to make sure you’re in the former category.”