Part 4: Building a better world for yourself during a recession/depression and pandemic

This is part 4 of 5 in a series of posts of opportunities available to you and building a better world for yourself by surviving (or thriving) during a recession and a pandemic.

Talk with your employment specialist

As an employer, you can’t just close your doors and not pay your staff because your doors are closed.  An employment arrangement is a contract and you have obligations, as do your employees.  Whether you’re laying off staff, renegotiating with staff for lesser hours, moving staff to work from home, doing nothing … there’s a right way and a wrong way to do this. 

Instead of laying off staff, ‘share the load’ and involve your team in the final decision – e.g. instead of laying off a couple of employees, you might be able to keep everyone on your payroll if everyone takes a 20% reduction in pay.  Just make sure you as the owner are wearing some of the load like everyone else.  No one’s going to thank you if you take a 5% pay cut on $100K per annum if you’re asking your employees to take a 30% cut on $60K each per annum.

And whatever you decide, you must run it past your employment specialist (I can refer you to one if you don’t have one) before you do anything.  They will help you make sure you don’t do anything that puts you in a worse position than you may already be facing.

Planning opportunity: balancing being able to restart your business when the dust settles AND keeping the staff you’ll need to restart when that happens.

Talk with your insurance broker

It’s likely that most policies aren’t going to cover you for Covid19.  At best, income protection will likely cover you if you’re unable to work (check with your broker/insurer to be sure). 

Rather than stop paying your premiums (and/or cancelling premiums), you should discuss with your broker/insurer the option of a premium holiday.  Just make sure you’re clear about what that means because there are a couple of different approaches to this:

(i) don’t have to pay your premiums but still have cover = okay
(ii) don’t have to pay premiums and DON’T have cover = bad

Consider reviewing your insurance policies – depending on when last reviewed, and your risk profile today, there may be options to wear more risk and reduce premiums.

And much like banks, your broker/insurer may have other options to help you get through this.  Find out what options they do have and take advantage of them if they’re going to help.  The goal should be balancing out the premiums you are prepared to pay versus the risks you want cover for.

Planning opportunity: find ways to reduce your insurance burden temporarily while maintaining an acceptable level of risk

Talk with your landlord

If you rent a commercial space that your business normally operates from, and if you’re not considered essential services, then you’re probably looking at having to continue paying rent for a space you can’t access. 

You need to go back to your rent agreement and see if there is anything in it that deals with not being able to access the property.  ‘Newer’ agreements since the Christchurch earthquakes provided some relief for the landlord and tenant where tenants cannot access the premises.

Whether you have any clauses that deal with no access, remember that your rent agreement is just that … an agreement … made between two people.  As such, it can be renegotiated as long as both people are willing.  Also, people are humans and while it can be stressful thinking about having to pay rent for a business premises you can’t use (while you’re making little or no income being locked down), your landlord is stressing just as much about what happens if your business shuts down completely and can’t or won’t pay the rent.

Talk with your landlord about your situation and see what they may be willing to do.  Maybe they will drop the rent while in lockdown and in return you agree to extend the lease?  Maybe they’re able to give you a rent holiday for a week, a month, or two?  Maybe you can give the landlord an extra term that’s important to them?

Whatever the case, don’t agree to anything in writing without first checking with your lawyer and making sure your landlord isn’t taking advantage of your stressed state without you realising it.

And if the worst happens and your landlord isn’t prepared to meet you even part way … discuss your options with your lawyer.  They will be able to guide you through your options based on your specific agreement.  

And whatever you do, don’t make a rash decision (even if your business wont make it through the lockdown) and  cancel the lease to spite the landlord.  It may feel great breaking your lease and leaving the landlord to find another tenant – but that will be short lived because you’ll quickly find out your business has to honor the lease unless another tenant is found, and if your business cant honor the lease, the owner (you) probably guaranteed the lease personally. Again talk with your lawyer and your accountant.

Planning opportunity: find ways to reduce your rent payments while being unable to use your business premises (non essential services only)

Talk with your accountant

Since this thing unfolded in late March, I’ve seen a wave of emails from various business professionals talking about this being an opportunity to reposition yourself to come out the other end running.  In theory no argument.  What I do have an argument with though is two things:

(i) there is no point thinking about how to come out the other end running WHEN you’re worrying about how to pay the rent next week; and
(ii) most of the emails I’m still getting are talking about four weeks from now … which I believe is delusional.

Anyone can help you grow your business when times are good.  Not so much when times aren’t so good.  So I’m expecting this thing to sort ‘the men’ from the mice.  With any luck, as this thing drags out the mice will be chewed up and spat out by life, and ‘the men’ will step up helping as many business owners as they can.

If you have an accountant, now is the time to put them on the spot for help getting through this thing.  This is not
the time for platitudes and cliché advice. If they’re not helping you then find someone who will.  Just remember you can’t expect your accountant to do everything for you – they should be able to show you a door but it’s up to you to go through it (it may be a reference from the Matrix, but it’s just as true in real life too).

Your accountant should be giving you advice like which Government subsidies will help, how to plan for tax, how to build cash reserves … pretty much everything in this rant of mine.  AND they should be
able to help you work out:

(i) WHAT you should be doing first; and
(ii) HOW you can do what you need to do.

Every business and its owner are unique.  What works for one may not work for another.  Therefore the ‘skill’ in giving great advice is being able to understand the differences and knowing what will work best in any given situation.

Even if you think you have this under control, it won’t hurt running your ideas past your accountant to make sure you’re not missing anything you don’t know about (so much has changed and some of it we’re all learning on the spot).  Take advantage of any offers your accountant may be making – free meetings?  Book one!  Free phone calls/emails?  Phone/email!  Check in with the plans you’re making.  Get a second objective opinion on what you’re planning.  Ask for help.

Planning opportunities: make sure your accountant is up to scratch and can help you now when you most likely need it.  They should be adding to your situation … not worsening it.

In Part 5 discover what opportunities you may have open to you via Government assistance.

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