This is the first of a small series of blogs discussing what I believe will be the 4 key phases of this coronavirus business cycle. I will discuss what we’ve seen so far, what we can expect to see in the coming months and tips to successfully navigate your business through these phases.
The coronavirus pandemic has affected businesses in many ways. When the seriousness of the situation first became apparent, we assessed our entire client base to identify those whom we believed may need assistance immediately vs those whom we thought would be more affected by the ripple effects and may need assistance in the coming months.
As all businesses are different, it’s understandable that they will progress through the phases of this coronavirus business cycle at different rates and whilst it’s not a race, there are certainly benefits to be recognised by both being able to identify the different phases and in understanding what is required to navigate and progress your business through them.
Potential benefits of progressing through the phases sooner can include; capitalising on new revenue streams, first mover advantages, more efficient use of resources by not sitting idle, and being seen as a clear leader in your field. Importantly, we’re not suggesting businesses act in contrast to Government restrictions, instead we’re discussing ways of adapting your business to successfully navigate these tumultuous conditions.
Phase 1 – Shock / Survival / Assessment
When the seriousness of the coronavirus economic situation was first coming to light, many businesses jumped straight into survival mode. “What do we need to do immediately to get through this?” At Advivo Accountants and Business Advisors, we were working with our clients on cash flow forecasts, business continuity plans and risk mitigation strategies. This was to ensure businesses were in the best position, armed with the right tools and advice to help them through this initial phase.
Once businesses had assessed and come to terms with their immediate position, many took their foot off the accelerator and assumed an idle pause. Reasons for this included:
- No choice – Government restrictions imposed;
- Shock – some have simply been frozen like a deer in headlights; and for the most part
- Exercising caution – to assess the current and potential future operating environment.
Exercising caution is certainly understandable and recommended. With so much media focused predominantly on the negatives (because that’s what sells) it was difficult to not get caught up in expecting the worst. This combined with so many Government stimulus measures being announced was re-affirming the seriousness of the situation and justifying a ‘wait and see’ approach. We all know cash is king and during adversity and uncertainty it makes sense to retain cash where possible, which of course slows spending and adds to the ‘idle pause’ and associated ripple effects for businesses.
During the last few weeks, we have invested a lot of time and energy to ensure our clients have been correctly advised and have had the opportunity to access the Government’s stimulus measures appropriate to their circumstances. We found there was a lot of confusion within the community surrounding certain stimulus measures and eligibility.
As we’re entering a phase where most of the complexities of the stimulus measures have been clarified and Government support is starting to flow, business owners are becoming more comfortable with their current position and can again focus on their service or product offerings to determine their path through the second phase.
Whilst some are transitioning sooner than others, we’re now seeing most businesses coming out of this first phase and looking for more ways to pivot/adapt their business models.
Phase 2 – Pivot / Adapt and Overcome
Many businesses have been doing this already, whether it be from necessity or the strong business acumen of those involved, but we’re seeing most businesses now operating within this second phase.
This is the period where the initial dust has settled, Government stimulus is now flowing, and people are becoming familiar with their new ‘normal’. It’s important to remember this phase won’t last forever and nor will the Government stimulus measures which are currently in place.
This is the phase where businesses really need to assess their business model and whether their products or services are filling a gap and delivering value for their customers in the current environment. We believe this phase is likely to last 2 to 6 months and the idea of adapting is not a single event where a silver bullet is identified. As restrictions are lifted there will likely be several iterations of ‘pivots’ or adaptations which when combined, will chart the best path forward for a particular business. We urge business owners to keep revisiting and challenging their existing plans and actions to ensure the best possible iteration is that which is currently being implemented, remembering this iteration could be different again in a couple of weeks if not days.
Here at Advivo Accountants and Business Advisors, we have many tools which can help chart paths through uncertainty, one of which is the Product Surround Model. This is an extremely effective tool which can be used to refine or develop a business’ product or service offerings.
At a high level, this tool helps to clarify the core and the secondary products or services for a business, which then allows a focus on how to really improve the value around those secondary or ‘surround’ products or services. You can do this by asking questions like:
- What are the problems and needs of my customers for the next 6-12 months?
- What strategies/adaptions will stick and align to our vision post coronavirus?
- What can we learn from our best competitors, other industries, innovation?
Importantly for the current environment, improving the ‘product surround’ doesn’t have to come at a great cost. Typically, 80% of a business’ costs relate to the core product or service, whereas it’s surrounding products or services only bear 20% of the costs but can really drive and deliver that additional value for your customers and clients. This is just one method which can be used to help define your path through these uncharted waters and will also help set you apart from your competitors.
In the coming weeks I’ll provide an update on the current phase and address the next phases of:
- Phase 3 – Thrive
- Phase 4 – Our new normal
Written by Chris Morris
Partner, Advivo Accountants and Business Advisors