MALCOLM Peak is Director of Peak Corporate Solutions.
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In A recent survey undertaken by travel agents in Australia commissioned by TD, I was not surprised that almost 97% would need to make significant changes to the way their business operated if the JobKeeper wage subsidy program ended without some other type of govt support.
The JobKeeper program is being extended, although at a slightly reduced rate and on a tiered basis. There will be renewed eligibility criteria, different payments for those working more or less than 20 hours per week, and the rates will decline into Mar 2021, with the idea being that businesses will begin to stand on their own two feet.
Does this mean businesses have a little more breathing space? Not necessarily.
JobKeeper is only impacting one part of a company’s expenses – wages – and in some cases the wage subsidy received by employees stood down under JobKeeper directions are significantly less than their regular paycheck.
Companies still have other expenses – rent, utilities, insurance – and if you are in an industry like travel, you will also have to process refunds/credits for travel that can’t be taken with restrictions in place.
Companies in some industries also have no revenue, and need to plan for no revenue for some time – in the case of no int’l travel until potentially mid 2021.
Adding to this, the hopes that some had that they could engage with domestic travel have been dealt a blow by the lockdowns in Vic, and the reluctance of some travel destinations to deal with agents, preferring to deal directly with consumers. This means there is a limited ability to earn revenue even domestically.
Some are trying to take a more positive mindset, confident in the ability of industries such as travel to survive and make it through stronger to the other side. This approach can be beneficial to mental health, so long as it doesn’t stretch into the realm of delusion. That’s when an overtly positive mindset can become an issue. The other issue with this approach is that it assumes all players in a market operate in the same way, with the same types of customers. This is far from reality.
A cafe in a central business district (potentially located on the ground floor of an office building) has to adopt COVID-safe practices, while coping with a lack of customers, given less people are working from the office at the present time. A cafe in a local suburban shopping centre may be experiencing a significant increase in takeaway orders (coffee and food) which more than offsets the loss experienced by seated patrons. Travel agents are also different. Some specialise in int’l travel of a specific type, and others focus only on the domestic market. The impact of travel restrictions on both may be different, as the domestically-focused travel agent could still earn money from local travel.
So, is it all a bit pointless?
Again, not necessarily.
Every business has had to undertake some form of business continuity planning since Mar, whether they have been impacted or not.
Unfortunately, the reality is that smaller businesses don’t tend to have the type of rigorous planning in place that larger corporates do, however there are a number of simple things every business should be looking to do to ensure their best chance of weathering the storm.
The first is ensure that you have a budget, this might need a few different iterations to allow for some different scenarios, but at least a business should be able to look at the cash outflows vs the inflows and know what the gap is. You can then look at how long you can operate and use that as a benchmark for some of the other planning you need to do. The second is to look at your business and when and how you can start to earn revenue. Here is where you as a business owner need to really understand the options available to you, how you can pivot and diversify, and what the real-world scenarios are likely to be for your business. The JobKeeper payments, while recorded as revenue, aren’t really revenue. As the PM noted – they are social security payments made via private payrolls.
The bottom line is that if you can’t see a way to earn revenue and use the extended JobKeeper to help you do that, then you seriously need to consider whether you have a business.
The third is to engage with your people, necessity is the mother of all invention, and sometimes tapping into the ideas of your people might give you some ideas to keep your business afloat. Proactively engaging with your people is also an opportunity to keep them connected with your business and this knowledge can be used by employees to make decisions about whether they should continue in your industry, or consider potentially re-skilling. Some businesses are very worried about retaining their good people throughout the COVID-induced recession, however they need to take a hard look at how they could achieve this, especially if the revenue is not there to pay them outside JobKeeper.
It is important to remember that there are a suite of support measures in place from banks deferring loan repayments, to landlords not being able to terminate leases for non-payment which go hand-in-glove with the government subsidies. Not all these additional support measures will continue in-step with the government initiatives, so it is important to realise that you simply may not be able to retain all the people you want to throughout this period.
What you need to think about is how to ensure you retain your company’s brand strength so that you will be able to either re-attract those people or others of equal capability when the time comes and you need to.
The final consideration is your customers, they are either looking to make bookings for domestic travel, or are looking to have refunds/credits processed.
Businesses are about networks, and even if you need to close yours, you need to take care of these relationships (including potentially handing them off to another party to manage) because you never know when you might need to engage with those people again in the future.
Be real. The key point in all of the above is to remain realistic. That doesn’t mean overly optimistic or overly pessimistic. Ensure you are informed about the support available to your business if it is impacted by the COVID-19 pandemic induced recession, and that you are able to react to changing situations in the economy as this is something no-one has experienced before.
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