If 2020 was the year that tested our limits, what does 2021 have in store for business?

9 February 2021

They say what doesn’t kill us makes us stronger and for business owners and accountants everywhere, 2020 tested this statement to its limits.

For many of my clients, 2020 was all about survival. The aim was to stay afloat, get through and come out with a healthy business that wasn’t in excessive debt.

I had one client who had sold a large franchise business in August 2019 and had signed a contract in December 2019 to purchase another franchise business. Guess when the agreed settlement date was? 31 March 2020.

I had been working with these guys for over ten years and generally they were cool, calm and collected, but around Mid-March, the anxiety had set in. They couldn’t get out of the purchase agreement or even change the settlement date. The husband was stuck overseas in Bali and was waiting for a flight back, and even when he did manage to get a flight home, he was required to quarantine for two weeks. Something as simple as signing bank documents to set up the EFTPOS machine turned into a nightmare.

This poor couple were in such a predicament and we spent a lot of time working through different options and scenarios. There was so much to navigate, not only for them but for their staff and what the purchase of the business would mean to their staff’s eligibility for JobKeeper.

In the end, settlement took place on 31 March and they closed the store. It was the safest solution. The store remained closed for one month and, in the beginning of May as restrictions eased, they decided to open. I’m happy to say they are now trading successfully and have taken on a second store.

JobKeeper was another challenge we had to adapt to. There were many who said JobKeeper was easy. $1500 per fortnight for employees - how hard could that be? Let me tell you it was extremely hard.

While JobKeeper provided much needed support for businesses and their employees, there were a lot of complexities that we had to navigate. People who were eligible one day and received payments, then changes meant they were excluded. Staff who were under 18 on 31 March but turned 18 the day changes were made. Staff who were uncertain if they were dependants as they lived at home but were still required to pay their own expenses. The list went on and on.

Times were tough for many businesses throughout March and April but, as the restrictions eased, the unexpected happened. Many businesses found May was extremely busy. Whether it was cancelled overseas holidays, less money spent during lockdown or JobKeeper and other stimulus measures, many people had more money to spend and the spending picked up in May right where it had left off in March. The fear was slowly lifting, and a cautious sense of optimism was emerging.

Since then, except for certain industries that are still significantly affected by COVID-19 and despite further outbreaks and lockdowns, business sentiment remains optimistic as we start 2021. The Government incentives and investment have reaped positive results. Business owners have taken the time to properly analyse their numbers and understand what they needed to do to “pivot their business”. As a result, many businesses are travelling well.

While I’d love to believe it’s all smooth sailing into 2021, the reality is there is still a lot to be worked through and much uncertainty remains. We are almost in a false sense of reality now because:

  • We can’t travel overseas so there is more cash to spend in Australia.
  • JobKeeper has provided additional cashflow for businesses and individuals – some are saving some are spending.
  • Banks are still being quite flexible with loan deferrals and a lot of people have taken advantage of that – whether they needed to or not.
  • The ATO is being flexible with repayments of debt.
  • Landlords have been forced to waive and defer rent.

But that will all be wound back throughout early 2021 and when it does, you need to be prepared. To help you get 2021 started on the right foot, here are some important considerations for your business:

  • Have you developed a business plan and strategy? Is it flexible and have you thought outside the square? Simply increasing marketing and reducing costs is unlikely to be enough.
  • Develop different financial or cashflow models, and stress test them. It’s important you prepare for a another wave of the virus. It’s happened overseas, and it can happen here. What happens if turnover is down 10%, 20% 50%, and this time there’s no JobKeeper?
  • What is your plan to manage and reward key staff in these scenarios? Will your business be successful without those staff and what options are available to you to keep them on board long term? Is an employee share scheme something that you want to consider?
  • Are you operating with the right business structure and is it allowing you to be as protected and as agile as you need to be?
  • Keep a healthy level of communication open with your bank.

Don’t let your business be reactive in 2021. There are so many variables at the moment, you need to have control over your business plan and strategy, so you can be prepared and remain agile. And don’t do it alone. The most successful businesses get help. The right help. Your business is one of your biggest investments so make sure you’re treating it that way. You wouldn’t go to a doctor to get a haircut. Don’t go to the wrong person for advice on your business.

With the deadline for the end of JobKeeper fast approaching, it’s important your business has a plan in place for 2021. Talk to your adviser or get in touch with the Findex Accounting and Business Advisory team today for assistance.