The Federal Government’s JobKeeper scheme has played a significant role in Australia’s economy for the past few months. So as government stimulus nears its end date of 28 March 2021, small business owners are about to face a very different economic climate. With this new challenge however comes opportunity for business owners to create a stronger and more efficient business. Now is the time to review areas of your business that you may not have ever thought to review and determine if there are efficiencies to be introduced.
Here are some tips to help get your business in the best possible shape to operate in the new economic environment.
Gross Profit - The Simplest Formula
We spoke to Karen Lindsay from Aegis Business Services about how some of their clients have maintained their profit margins during the economically challenging times. According to Karen, when looking at increasing your gross profit, the principles are no different any other time – simply look at where you can increase revenue, and where you can reduce costs:
- Negotiate with suppliers for a higher discount or lower prices; or change supplier(s) altogether.
- Change your mix of offerings – increase your concentration of sales of the higher margin value products or consider removing lower margin products.
- Review systems and processes, particularly in regards to employees’ roles, to create a more streamlined business.
Expanding Products & Services
Unsurprisingly, businesses who have been able to successfully adapt to the new environment are likely to be best placed to operate after the government payments end. As Karen notes below:
“Some of our clients have managed to introduce a new service or product that has complimented their offering pre COVID-19… Once JobKeeper payments end, the business will be in a position to support itself fully as [they] have achieved the required cashflow to maintain their current workforce.”
Furthermore, Australian Small Business and Family Enterprise Ombudsman Kate Carnell, in a recent podcast, highlighted how she believes many businesses have progressed as much as 10 years in terms of digitisation in the space of 6 months. In her opinion, these businesses are also in a much better place for growth in a different market.
Reviewing your workforce
It’s inevitable that the end of JobKeeper will mean you may need to review your staffing levels. Whether you need to reduce your headcount, or your staffing needs have changed, it’s worth considering whether your existing staff can be trained and/or upskilled to support your changing needs. Hiring new employees into what may end up being a short term environment may present challenges of its own down the track. If you do need to let staff go once JobKeeper ends, be sure to seek the advice of an employment lawyer to make sure you’re following all the correct procedures and legalities.
JobKeeper wasn’t the silver bullet for all businesses…
JobKeeper may have certainly helped businesses keep their staff employed, but for businesses such as Canberra Martial Arts & Fitness, the scheme did not work out too positively:
“Ironically the hardest part for us was a couple of our part-time staff with the least hours and their lack of commitment to the business. They worked significantly less hours than the rest of the team, but were getting the same full JobKeeper amount as everyone else... One would take sick days every other week, not show-up unless it suited them because they knew they'd get paid either way.”
Tom expresses relief to have come off JobKeeper: “Luckily we weren't eligible after the end of September as I worked hard to restore the business, one of the difficult staff members resigned, and the other one has become a great employee.”
It’s survival of the fittest from here…
While it’s still early days, it’s clear that come March this year, some businesses will perform better than others. Businesses who have used the last 10 months wisely to prepare themselves and get their financials into the best possible shape will certainly find their journey easier than those who’ve chosen to hibernate.
As Karen notes “I believe the businesses that are likely to do well once the JobKeeper ends are those businesses who have not qualified for the final round of JobKeeper payments altogether. Out of our clients who initially received JobKeeper payments, less than 10% are still receiving the assistance. Many of them have been agile enough to adapt, or had their customers return – this shows the strength in their business and the importance of customer loyalty as well.”
If you have not yet started to prepare your business for the end of government payments, it’s not too late. Even starting with the basics of reducing costs in some areas can bring about immediate results. The good news is that numbers have shown that JobKeeper ending may not be as dangerous as initially thought. However, this is also not a green light for business owners to sit back and wait until the stimulus ends expecting the economy to automatically bounce back. By now, most businesses would have an idea whether they need to restructure or review their business or not, so now is the time to act.
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