Blog

Reality hit us when our National Franchise client informed us they were shutting down their franchise network due to their sales falling by 90%. The lock-down provisions and social distancing requirements, meant it was not possible for them to continue trading. Their rental liability alone would put them out of business in 3 weeks.

In one foul swoop, 40% of our fee income vanished overnight and then came the phone calls from our other clients telling us of their similar dire financial situations. Before we knew it we had lost 70% of our fee base and we had just recruited to take on more clients.

The following is a simple summary of Stage 1 of our Business Survival Plan once we realised that the s##t had hit the fan:

1. Worked out a detailed cash flow projection for the next 3 months to see whether we had enough cash reserves to last for 3 months.
2. Took stock of available funding facilities like credit cards, lines of credit and superannuation.
3. Reviewed our debtors and immediately stopped providing services to ones that were not paying us and discussed collection protocols with the rest to shore up our cash flow projections.
4. Requested a temporary reduction of our office rent with our landlord in accordance with the National Code of Conduct.
5. Changed our fee collection process to upfront payments via automatic direct debit or credit card facilities.
6. Reviewed our suppliers to determine if any were in a position to give extended terms.
7. Discussed with staff openly on their job situation and went through the options available in order for the firm to survive.
8. Analysed and looked into the Stimulus packages being put in place by Federal and State governments to assist with cash flow boosts and keeping jobs.
9. Had a long hard look at whether it was worth carrying on or throwing in the towel and going on Jobseeker.

The Results:

1. Our cash flow analysis showed that we could last for at least the next 3 months.
2. We disengaged with our recalcitrant clients and the remaining ones are paying us up front.
3. Our landlord came to the party and we have a rent reduction for the next 3 months to be reviewed after 3 months.
4. All new jobs are being quoted where possible as fixed fees and paid up front.
5. Our cash flow projections show that we are able to keep all our staff for the time being.
6. Applications for eligible Stimulus packages were made and cash flow is being boosted by these Government initiatives.
7. If we “make it to the other side” it is going to be one hell of a story to be able to tell so the towel still has not been thrown in yet.

If anyone needs a hand with doing the above or just needs to have a chat on whether it is worth the effort to carry on, drop us an email at info@seeton.com.au or give us a call on 08 94745155.