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Facing the reality of Covid-19

Calling the Covid-19 crisis a game-changer for most businesses in New Zealand would be an understatement. However, there are ways for landscaping businesses to adapt to the situation; this article focuses on scenario planning and how to look after yourself during stressful times


Facing the reality of business financials and having support networks will play a large role in getting through the Covid-19 crisis.


Below are some tips on how to do this effectively.


Face reality


Looking at the facts of the situation and having a good handle on the numbers are important steps to take in planning the next move.


This involves some simple scenario planning and considers three possible scenarios: ‘great’, ‘probable’, and ‘shit’.

The process of scenario planning can be broken into four simple steps:


1) Revenue

Look at the company’s main income types: eg, hard landscaping, planting, residential, spec home developers, civic clients, etc.


Calculate what the average monthly revenue would have been over the next six months in a regular year.


Using that average figure, scale it back for each income type and work out what would constitute a ‘great’, ‘probable’ or ‘shit’ scenario.


Add all the ‘greats’ together to give a total income, and repeat for ‘probable’ and ‘shit’. These make up the three revenue scenarios.


2) Cost of sales

Calculate what the typical costs of sales would be for each of the three revenue scenarios. This includes the cost of materials, hireage, etc.


The easiest way to calculate sales costs is to look at previous years and use those numbers to work out the percentage of revenue. Apply this to each of the three scenarios discussed above.

3) Overheads

Look at the average monthly overheads (use the profit/loss report for this) and scale down any of the costs that have been reduced.


Remember that the Government’s wage subsidy was only for a limited time, and other temporary reductions (such as rent) might not last much longer. Staff wages will likely be included in this step given it is probably one of the biggest costs, and it’s an area that may need to be adjusted based on the next step.


4) Profit analysis

Calculate what’s left (in each of the three scenarios) and subtract the cost of sales and overheads from total revenue – this will show the total profit amount.


If any of the scenarios show a loss, then some options need to be considered.

Weighing up the options


If a company has cash reserves, and is willing, one option is to accept the losses until things improve. Another is to reduce some costs until each scenario can make a profit. The biggest area where cost can likely be reduced is in wages – for both employees and the employer. If an employer is able to reduce their own needs for the next six months, then they may consider reducing their own wage. If the employer is not willing to consider that option, or that doesn’t suffice, then reducing your staff numbers and/or wage levels until the scenarios show viability is the last alternative.


These options are uncomfortable to think about and unpleasant to go through, but facing the reality of how many staff the company can actually afford is a critical step. Ignoring these inevitable decisions now will only delay the impact on the company and worsen the effect when it does.


Look after yourself

It’s important to accept that the crisis is capable of affecting people in ways they don’t like to admit, such as experiencing restless nights, fatigue, or anxiety. These are all normal and reasonable responses to a crisis, so one shouldn’t be too hard on themselves if these signs are present.


An increasing number of business owners are recognising that it’s okay to reach out and get assistance for their business and for themselves. There’s an old saying that goes: “The wise seek help, while the foolish suffer in silence”.


Help can be sought from a friend, accountant, chamber of commerce, or a professional business advisor. The key thing is to find someone who is trustworthy, an effective listener, and has the right kind of experience to provide useful advice.


This article was written by Mark Skelly, a director of Red Hot Business Coaching and President of Hutt Valley Chamber of Commerce.



Keen to get in touch? Contact him via www.redhot.co.nz

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