This article was first published in the CFOMagzine on May 19 2020
For Grant Wilson’s clients, the impacts of COVID19 were felt overnight, but their experiences haven’t been as disastrous as you might imagine, and in many cases are incredibly positive.
As Director, Corporate Advisory at William Buck South Australia, Grant has a broad client base stretching from hospitality, through to manufacturing, food and aquaculture. Whilst his hospitality clients saw their sales drop overnight, those involved in food manufacturing and food retail have had to manage turnover levels doubling in the space of a week.
But regardless of what was happening to their revenue stream, Grant said he quickly came to realise that good businesses were surviving, regardless of their industry segment.
“We have businesses in very difficult markets who needed to close for some time and some still are closed. But those businesses were prepared for this; not COVID19 as such, but prepared for what might eventuate in a severe market downturn and the impact that brings” Grant said.
“They know exactly where they are financially, have very strong credibility and relationships with their financiers and we have been working with them closely on detailed monthly financial modelling regarding cash flow, profit loss and balance sheet for a number of years.”
It’s this comprehensive financial modelling capability that’s allowed Grant and the wider William Buck team to work very quickly with clients and project a range of scenarios to help them make rapid fact-based decisions.
In addition to being prepared, Grant found another key to surviving and thriving through the pandemic was having clear alignment on strategy. He said that while many businesses have been required to adapt their short-term business needs to tackle the COVID19 crisis, and be short term opportunists, having a thorough business plan and being aligned on its implementation to begin with better enabled them to do this.
“We work with our clients to develop detailed strategies and to review them regularly,” said Grant. I can’t stress highly enough the importance of not only having a strategy, but also being completely aligned when implementing it. When businesses have that discipline, they know exactly what happens when they pull different financial and market levers to obtain a required result. Those businesses that didn’t have that discipline and clarity of thought might as well have been pulling the lever to a trapdoor”.
“What I’d say to all CFO’s right now is ‘ensure you have a detailed financial model, that is completely up to date, so you can continue to undertake various scenario analysis, to ensure your business both survives but can also thrive on the short term opportunities that arise. However don’t lose sight of the strategies that made your business successful in the first place. Everything has an end point”.
After this, Grant said he’d tell businesses to improve and maintain relationships with their stakeholders as he’s observed that many businesses are suffering due to a lack of emphasis on their relationships – particularly with their financiers.
And whether its in their relationships, lack of capital, or poor management of resources, this is a good chance for business owners and CFOs to identify weaknesses in their business.
For some businesses, this hasn’t been a choice, with the pandemic exposing underlying deficiencies in business models almost overnight. But Grant said there’s been a silver lining to this in that it’s enabled CFOs to identify and address flaws in the business.
“It’s important that CFOs extend on this by asking pragmatic questions such as: how will I manage and protect the assets of the business so that it survives into the longer term and throughout a second wave or another disruption? How will I manage cash flow? How will I manage staff and what about capital assets?”
“Working on weaknesses and asking these questions will allow businesses to progress; an opportunity that may have been overlooked without the pandemic,” said Grant.
But COVID19 has also stripped businesses of opportunities, one being that of merger and acquisition.
“M&A has certainly hit a brick wall,” said Grant.
Many of those that were in the market prior to COVID19 simply don’t have the financial resources or access to capital to continue and make acquisitions. This will be exacerbated once the financial support from the Government stops.
And it doesn’t help that the banks have little appetite for risk at present.
The next three to six months will present some opportunity but with that, he urges, will come a lot of risk.
Grant believes the market will see many businesses up for sale, with owners having ‘had enough’ or having ‘had a tough time’. The risk here is that many businesses looking to get out will be those that had structural weaknesses in the first place and have been hit the hardest.
Grant’s advice? For those looking to sell, seek professional counsel, re-evaluate your business strategy, ensure you have a clear and current overview of your financials and be patient.
This goes for those on the flip side of the coin too. “If you’re looking to buy, be patient. If you don’t have the money, don’t push too hard as no one knows if there will be a second or third wave or how this situation will unfold.”
For businesses simply focused on thriving post-pandemic, this responsibility will be placed on the CFO.
“No one is better placed to navigate the new normal.”
“Keep reassessing, asking those pragmatic, operational questions, revisiting finance, finding new lines of credit and managing your receivables and suppliers,” said Grant.
“It’s the CFO’s time to shine, so use it.”