As the economy re-opens in some states, use this restructuring expert’s advice to prepare your business for the opportunities and challenges to come.

Thousands of Australia’s small and medium-sized business owners have been dealt repeated blows by the COVID-19 pandemic.

Perhaps you’re one of them, watching your hopes of profit and growth fade. Ceasing trade is an option… but it’s not your only one. It’s possible to recover to fight another day; in fact, there are ‘turnaround’ specialists out there to help you do exactly that.

Matt Byrnes, National Head of Restructuring Advisory at Grant Thornton, is one such expert. With economic activity accelerating in some states and regions, even as more challenges lie ahead, he believes now is an opportune time to turn your business around and improve its chances of surviving the next 12 months.

Here is his advice to help you stabilise and strengthen your operations.

Prepare to make difficult decisions

Has a business downturn left you overstaffed? However hard, it may mean reducing your headcount. Or maybe you need to rationalise your leasing commitments, or cull products and services that are ‘company favourites’ but don’t make money.

Your turnaround may also mean abandoning ambitious revenue growth targets in the short term in favour of focusing on costings, margins and profitability.

“Get those elements right and you will position yourself with the best platform to grow,” Byrnes says. “It’s about being strategic and decisive – making the changes needed and being prepared to go one step back in order to go two steps forward later.”

Putting your house in order now can help you to determine whether it makes sense to diversify or pivot to a new business model, as many enterprises have done on the fly during the pandemic.

Nail your financial fundamentals

Rigorous financial planning is also essential, particularly for businesses looking to negotiate with third parties or secure funding from financial providers.

Robust financial forecasts, with an emphasis on short- to medium-term cash flow, can provide suppliers and lenders comfort and certainty –that you’ve considered key risks and are well placed to weather whatever storms lie ahead.

“A small to medium business doesn’t necessarily need a complex, integrated, three-way financial model, but they do need to be able to produce sound financial information that makes sense and can inform management and their stakeholders about their forecast trading,” Byrnes explains.

“Those businesses can then go to a bank or the ATO, or a landlord or stakeholder, and present themselves in the best way, demonstrating that they’re examining different scenarios and preparing for a range of outcomes.

“We see a lot of businesses that have a popular brand and a decent core business but have those other functions wrong. When investors or banks look at those businesses, they see uncertainty, and uncertainty represents risk.”

Don’t delay

When it comes to making changes to put a business on stronger footing, timing matters – it’s always best to act early, whether you’re in distress, under stress or looking to ensure you don’t end up in either situation.

“Think of a funnel – the earlier turnaround planning occurs, the more potential solutions there are,” Byrnes says.

“Conversely, the longer time goes on, the fewer the options that are generally available. That’s where we see value destruction and businesses ending up in serious difficulty when perhaps it could have been avoided.”

Turn to the professionals

Change is challenging, particularly for leaders heavily involved in day-to-day operations. Professional advice can provide a balanced, objective perspective and be an investment that pays for itself.

“If you’ve built a business and been there for a long time, there can be a tendency to think you can manage your way through everything,” Byrnes says. “It’s difficult to step outside the business and take a helicopter view.

“That’s why having an external advisor, who has no emotion or attachment to the organisation, come in and give a view on how you’re performing, compared with the rest of the market or your competition, can be really valuable.”

Build the base to win from

Depressed demand, reduced spending and ongoing uncertainty are likely to make the months and years to come fiercely competitive ones, for Australian businesses of all stripes and sizes. If you’ve acted to improve your resilience, you’ll be better placed to cope with challenging conditions and capitalise on opportunities as they arise.

“In the current climate, businesses have just got to get the fundamentals right,” Byrnes says. “Inevitably, there are going to be winners and losers and it’s about giving yourself every opportunity to make sure you’re in the former category.”