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2020-04-14 09:13:24accountantsEnglishhttps://quickbooks.intuit.com/in/resources/in_qrc/uploads/2020/04/Build-an-action-plan-to-prepare-your-business-for-COVID-19.jpghttps://quickbooks.intuit.com/in/resources/accountants/build-an-action-plan-to-prepare-your-business-for-covid-19/Build an Action plan to Prepare your Business for COVID-19

Build an Action plan to Prepare your Business for COVID-19

3 min read

By Pavan Sharma, Partner at BCL India.

“One day, in retrospect, the years of struggle will strike you as the most beautiful” – Sigmund Freud

I, like many small business owners, am hoping against hope that Freud’s quote turns out to be prophetic. These are challenging times; one that many in our living memory haven’t witnessed.

The human race, enmeshed like never before battles a virus that originated in one province but has spread across the globe. Do we have the mettle of our fathers & forefathers who witnessed & overcame bigger challenges – struggle for freedom, the world wars, recessions, terrorism and much more? For we must overcome. We must win. And win we will. 

While enough and more has been spoken about how one could protect human health, little has been spoken about how one could protect the health of businesses. What can business owners do to sustain long enough to reap the benefits of a turnaround, which, from the Indian scenario looks at least two – three quarters away. 

Every business owner needs an action plan. Here are some ideas that might help

What is my most valuable asset?

This is an important question that every business owner must answer? The logical thing to do is to protect this asset with all the might there is. For some it may be their IP, for many their cash flows, and for many more, their employees. 

I’m in the service sector and for many like me, the best asset is Human Capital. This is especially so for small business owners. The employee pool your business owns represents a well-trained, oiled machine that’s survived the highs and lows of business with you, in whose DNA the vision of your business is engrained, and who will strive for the success of your business. To stand by them during this hour, is critical.

That’s easier said than done right? What does the business owner do, if cash flows deplete? If the ship sinks, does it matter that the crew were well fed? What can be done?

Here’s a plan that small business owners could use. In addition to a 12-month cash flow forecast, assess your cash flows at the end of the month & identify the gap to meet critical expenses – on top of the list, could be employee costs. This gap needs to be funded and the funding could come in the form of salary cuts, but in the order below,

  • Business owners, first, if they draw any salary. The biggest cut should be by this pool because the gains from the turnaround would accrue most to them.
  • CxOs & Senior Managers next. They could be compensated via bonuses post turnaround.
  • Mid-level and other employees, last
  • Employees whose family income is near or below the basic sustainable number, shouldn’t suffer any salary cut.

In the long run, it would benefit the business owner, if more money went into the hands of those in need of it the most. For they will in turn pump that money back into the financial system, a la Keynes.

What else can I do?

The lockdown has pushed everyone to use solutions on the cloud. This fantastic habit now needs to form part of every businesses’ standard operating policy.

This will have a domino effect where the business owner politely nudges his / her customer or vendor to start using solutions on the cloud, and in turn, they do the same to their stakeholders. The benefit of reduced fixed costs will be immense in the long run. 

I see a silver lining for funded start-ups. As much as Investors want their capital to be safe, they don’t want their capital to be lying idle. An investor would prefer to fund their existing portfolio (a known, tested model, provided of course, it is operating viably) than to divert capital to newer, risker pastures. It would be a good idea for funded start-ups, who were planning to raise money, to reach out to their existing investors first. Who knows, they might get lucky.

Finally, listen to your customers & clients. They are your best advisors. You might have to walk the extra mile to support them. But in turn you will win their gratitude & loyalty; something that money cannot measure.

Stay safe. Stay healthy. Stay indoors.

*The opinions expressed in this article are those of the author. They do not purport to reflect the opinions or views of Intuit QuickBooks.*

 

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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