Now that we are likely nearing the stage when many direct covid related government business support measures will be reduced or completely stopped, it is good to ask what businesses should have or need to do to stop them from dieing and perishing.
Let us rewind the tape a bit first. When the pandemic hit Malta in March 2020, I categorised most businesses in the following broad categories:-
- Businesses with a strong balance sheet that where already undergoing a level of business transformation that ended up accelerating the implementation of the planned or adapted version of the transformation plan due to the pandemic.
- Businesses with a decent balance sheet, that had been suffering from a reduction in business momentum well before the pandemic and once the pandemic and its effect hit them, soon realised that they needed to pivot and change their business model and business strategy at an accelerated speed.
- Businesses with a weak balance sheet, due to the years whereby the business was allowed to suffer from the lack of strategic focus and the perpetuation of outdated business models, which suddenly meant that change was being forced on these businesses, whilst they had little or no capital to finance the needed business transformation.
However, even the pandemic has its silver lining. I sense that never as now, do business owners, even family business owners, realise and embrace the need for the change and transformation within their businesses. Many business leaders and owners are realising, that resisting change would only mean the end of their respective business organisations. Thus the need to be extremely agile and pivoting successfully has risen on the agenda of virtually all businesses. In many businesses, it was and still is very much a case of all hands-on deck to deal with the challenges presented by COVID. Today, many business owners have finally realised that the agility and ability to reinvent and transform their business will remain to be critically important as the economic and business landscape will remain evolving at a fast pace.
Many points I raised in various articles during the pandemic remain evermore important now, as we are likely at the stage where various direct support measures from government will be heavily reduced or stopped. These points are:-
- Keep a very watchful eye on your cashflow and financial performance and key KPIs. As things change from one day to the next, you cannot operate with months old data.
- Accelerate the implementation of strategies to win new business or reach your clients in different ways or using new channels – key to this is the digital strategy.
- Whilst keeping a watchful eye on costs, try your very best to keep your best human capital with you. It is cheaper to do this than going through the costly exercise of re-employment.
- Maintain a healthy and cooperative relationship with your suppliers. All supply chains are under massive stress and so you need to make sure that suppliers support you in these difficult times.
- Plan, plan and plan again. Do your budgets and apply various scenarios to your budgets and run your sensitivity analysis. Make sure that you have all your basis (financing mainly) covered even in the worst case scenario.
- Know your risks well. Mitigate them in the best way possible, but make sure that you can survive if any of the risks you listed become a reality.
At the end of the day every business has been challenged in way or another by the fallout from the pandemic. While the direct government support has not only been very welcome but played a key role in the survival of many businesses, the fact remains that a great number of businesses will emerge from the pandemic with very high levels of debt and a much weaker balance sheet than what they had prior to the pandemic.
One fully understands that government cannot keep running a huge deficit in public finances and hence the direct pandemic related support payments from government (like the wage supplement) must end at some point in the coming weeks or months.
However, in my opinion, what is needed now are tax policy measures that reward risk and encourage people to grow their businesses. One idea is that a one-off measure is implemented that allows businesses and self employed to get cash refunds equivalent to the tax credits accumulated from the losses run in 2020 and 2021. These tax cash refunds could be linked in refunding proven expenses related to innovation, investments, job growth or environmental sustainability.
After all the sacrifices various business owners have done to change their business models and transform their businesses and after all the public funds pumped in propping up the economy in the darkest hours of the pandemic, it would be stupid to throw all this away and allow businesses to die rather than give them the space needed to invest, to keep transforming and to grow. This is truly the time, where there should be “No time to die!”