Despite Australia having comparatively escaped relatively unscathed from the COVID-19 pandemic, its economy has been rocked by the most severe global economic crisis since the Great Depression, and Australians are still feeling the pinch of their first recession in almost 30 years.
A year on from the initial outbreak, social restrictions have been scaled back, vaccines are slowly being deployed to the general public and everyday life is starting to resemble a pre-COVID “normal”. So, you might be wondering, what does that mean for your small business, and the Australian economy overall?
COVID-19 and the Australian economy
The Australian Government took swift and decisive action to counteract the economic wave of destruction, pouring $251 billion in direct economic support into our economy – and it seems to have worked. In December 2020, the Australian Federal Government released its Mid-Year Economic and Fiscal Outlook (MYEFO) for the 2020-21 financial year and it indicates that the Australian economy is bouncing back strongly.
What is Australia’s updated economic outlook for 2020-21?
The financial outlook was a little grim at the end of the 2019-20 financial year, with a lot of uncertainty in both the domestic and global economies. However, Australia’s success in containing the physical effects of COVID-19, along with the Government’s ongoing economic support measures, has helped our domestic economic to start to recover. In fact, the figures released in the December report suggested that Australia was set to outperform all other advanced economies in 2020.
The labour market has strengthened in line with economic recovery (the unemployment rate has improved a little) and the forecast is for continued growth in real GDP in 2021, on top of demonstrated gross domestic product (GDP) growth in the September and December quarters of 2020-21.
Economic support measures of the Government’s Economic Recovery Plan
The Mid-Year Economic and Fiscal Outlook (MYEFO) for 2020-21 flagged an additional $6.3 billion in new policy measures to support those already provided by the Government’s Economic Recovery Plan. For tradies, the important ones included:
- Changes to eligibility criteria and income thresholds to make financial support payments available to more people for a longer period;
- Extending the HomeBuilder program to support employment and assist the residential construction sector;
- Additional funding towards the JobMaker Plan; and
- Substantial investments in transport infrastructure and essential services.
With record government spending (including significant investment in infrastructure, extended support for the housing and construction industry and continuing employment support measures such as the Jobmaker Plan and its Boosting Apprenticeship Commencements scheme), many small and medium tradie businesses may find themselves looking cautiously positive for the new financial year and performing well in the post-COVID business market.
Re-building your business after COVID-19
While many tradie businesses managed to weather the hardest parts of the pandemic (and its restrictions), navigating the COVID-19 minefield fairly easily, for most it certainly hasn’t been smooth sailing. If you’re in this boat and your business has taken a hit, there are a few steps you can take to get back on track.
Evaluate the damage
Update your profit and loss and/or cash flow statements and compare the figures to last year, so you know exactly where you stand, and consider other ways your business has been affected – e.g., has JobKeeper support helped you keep staff? Will you be able to keep them now that JobKeeper has finished?
Re-assess your budget
Consider taking a leaf out of the Government’s book and spending money to make money. Work out the things you absolutely need, and where you can cut back, to make the most of your incoming revenue. If your business situation is dire, but your personal financial obligations are manageable and you have the benefit of a spouse’s wage, you could consider taking a personal pay cut or, as a last resort, stop paying yourself a wage to help your business recover more quickly.
Work out whether you need additional financial resources
If your working capital is low and the Government’s economic support has been helpful but not quite helpful enough, there may be other options. Lines of credit, business credit cards and small business loans for cash advances, supplies, or equipment, may help fund your business’s recovery short term.
Prioritise your recovery actions
Set a recovery timeline that prioritises your actions and review it regularly. For example, short-term you may need to secure funding so that you can re-hire employees, re-stock your supplies or buy new tools or equipment. Your goals need to be realistic, and your progress needs to be measurable – especially if you have secured finance to fund your business.
Re-assess your business plan
Analyse your industry and your competitors, look at the trends, identify your strengths and weaknesses, re-assess your business goals and try to find opportunities. Are there ways to tweak your business model to meet your customers’ changing needs and priorities and remain competitive?
Reach out to your customers
Reach out to your existing or previous customers, tell them you are still operating or let them know your plans; you will likely find many of them are keen to support your business’s recovery. Also, stay connected via social media and consumer-focused communications to offer incentives and consider email marketing to keep advertising costs down.
Develop a contingency plan
Take what you have learned from COVID-19 and put a plan for future crises or disruptions to your business, e.g., think about increasing your liquid cash savings, reducing debts, and building efficiencies into your business to help your employees work smarter and faster and cut operating costs. Having a contingency plan (or plans) will help improve your business’s chances of surviving.
What if Your Business Cannot Recover From COVID-19?
While the economic support provided to date has been designed to reduce the number of business failures through COVID-19, the number of business failures has actually reduced to below what would have been considered average for normal trading conditions. However, because most of the Government’s financial support stopped at the end of March 2021, we’re likely to see an increased number of small businesses facing financial hardship and potential insolvency.
Perhaps one of the most important parts of the Economic Recovery Plan are the reforms to small business insolvency laws, designed to simplify the insolvency process and help small businesses to either restructure their debts or liquidate their businesses.
Recovery or insolvency? – LeVeon can help
At LeVeon, we want your business to succeed. Our experienced business and tax advisory and coaching services can provide small and medium business owners with the skills and advice you need to take control of your business. LeVeon is here to help you make the hard decisions, capitalise on the resources you have, identify your strengths and weaknesses and smash your business goals.
To learn more about how LeVeon can help you rebuild your business post-COVID-19, or help make your insolvency process easier, call us on 0488 008 259, send an email to firstname.lastname@example.org or fill in our Contact form to have a LeVeon representative contact you.