Business survival plan for COVID-19
April 5, 2020
Some considerations for placing your business on a war footing to steer through choppy waters over the next 6 to 12 months.
- Your business needs to prepare for significant interruption to your business.
- You should prepare 3, 6, 9, 12 month forecasting scenarios, stress testing revenues at various rates of decline. Be ready for reduced revenue over several quarters.
- Be prepared for potential breaks with suppliers. Unfortunately not every business will be able to survive this period.
- Where revenue is to be disrupted prepare for medium term mitigation actions.
Increase any available cash
- Collect all receivable debts, and consider reducing amounts owed to increase cash in the bank.
- Apply for government grants.
- Consider new bank loans.
- Look at business interruption insurance.
Whatever the deal is, close it – now
- Where there is a deal on the table on less than ideal but acceptable terms: take it. Now is the time to close on commercial transactions that may keep your doors open and bring in capital.
- Reduce payroll (consider leave without pay, part time work, options instead of wages).
- Defer payment wherever possible.
- Negotiate for a rent reduction or deferral.
- Restructure debt repayments on existing loans.
- Adopt a zero-based budget approach: start your budget from scratch to reconsider processes and identify new efficiencies.
Review contracts with suppliers
- Look at all contracts the business has with suppliers. See what can be renegotiated, updated in light of COV-19 implications.
- See if any contracts can be broken or renegotiated on force majeure clauses. Manage risk by including epidemic wording into new contracts.
- Where COVID-19 has interfered with performing the obligations of a contract, there may be common law remedies available (eg frustration).
- See what can be renegotiated informally.
- Where you have insurance in place, review your policies. You may be able to claim for a COVID-19 related loss.
Look after your customers and team
- You will need them both once this period has ended, and dealing with them with empathy, trust, and transparency will go a long way.
Draft a recovery plan
- Prepare how your business will be placed to bounce-back into recovery
- Work out how employees can be brought back into the workplace
- To the extent possible, have funds available for marketing when the time is right.