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How to navigate your business through hibernation

4-minute read

Wondering if your business can survive an economic downturn? We outline 5 tips to help you and your business get to ‘the other side’ of the COVID-19 crisis.

Key take-outs
  • There are measures available to help small businesses impacted by the COVID-19 pandemic ‘hibernate’ for the next six months
  • Your business may be eligible for fortnightly payments of $1,500 per employee to help retain your staff
  • A new code of conduct for commercial tenancies includes the option of rent relief proportionate to your loss in revenue

In nature, hibernation describes the process of animals lowering their physical activity, body temperature, and metabolism to the bare minimum during winter months, only to resume their lives come springtime. In light of the COVID-19 crisis, many businesses are now asked to do to the same to increase their chances of re-emerging on the other side of the pandemic. 

 

So what can you do to navigate your business through 'economic hibernation'? Here are five relief measures that could help.

1. Tackle your outgoings

In response to the pandemic, many small businesses are already locked down or operating at reduced capacity. The government’s strategy of economic hibernation is designed to help them resume their operations post-pandemic and minimise its impact.

 

To date, this has involved an ambitious series of relief measures with a minimum six-month lifespan targeting the three primary costs facing small business: wages, rent and loan or credit repayments. 

 

According to the JPMorgan Chase Institute, more than half of small businesses have a cash buffer of only 27 days. Temporarily suppressing their outgoings, therefore, can help businesses stay afloat and allow the economy to rebound when the worst is over.

2. Keep workers in jobs

Wages are usually a business’ biggest expense. With this in mind, the government’s $130 billion JobKeeper package aims to help eligible businesses retain employees and pay them a wage as they deal with the current landscape.

 

Businesses can apply from the 20 April and, assuming yours is approved, you will receive fortnightly payments of $1,500 for each eligible employee from the first week of May. Payments will flow from the Australian Tax Office (ATO) directly into your nominated bank account, backdated to 30 March. 

 

It’s then your responsibility to pass those payments on to your employees in full.

3. Keep tenancies in place

Those eligible for the JobKeeper program may also take advantage of a new set of measures designed to safeguard commercial tenancies. Under a mandatory code of conduct to be legislated by each state and territory, tenants and landlords will be bound to a set of principles when negotiating lease terms in response to the pandemic. 

 

As well as a moratorium on the termination of leases, landlords are required to offer their tenants a rent reduction in the form of a waiver or deferral proportionate to the tenant’s loss of revenue. 

 

Further to this, NSW and Queensland have announced a temporary discount on land tax for commercial properties, which may be passed on to eligible tenants. Both states are also offering a three-month land-tax deferral for the coming tax year.

4. Keep cash and credit flowing

Complementing the above, there have been a number of measures to help free up cash for SMBs. In addition to government payments of up to $100,000 for eligible operators, your bank may be offering a pause on loan repayments. 

 

This allows you to defer payments on your business borrowing, including business auto and equipment finance loans. The relief is estimated to return as much as $8 billion back into the hands of small businesses. As part of a scheme underwritten by taxpayers, banks are also rolling out business loans at reduced interest rates

 

Since announcing their support packages, many businesses, like MESO Solutions, have already successfully applied for a loan and a repayment deferral. It has done so across 13 of its commercial loans, according to CFO Paul De Araugo. “[Westpac] placed a moratorium on my loans … It’s allowed us to keep paying suppliers while we’re waiting for approvals to start working.”

5. Seek alternative revenue streams

It can also be a good idea to think about other potential revenue streams. Dean Salakas of party supply business, The Party People sought this approach. After a staggering 85% loss in sales, he looked to pivot his business and is now selling hand sanitisers and face masks. 

 

Combined with relief measures he accessed through Westpac, the income from these products can help keep his business alive until the crisis is over and people are ready to celebrate.

 

This winter may be harder than usual for most Australian businesses, but with some planning, preparation and persistence, your business may be more likely to come out healthy on the other side.


Read more

Continuity planning in response to COVID-19

Find out how to take action to respond to the Coronavirus (COVID-19) pandemic and protect your business.

Is my business eligible for the JobKeeper payment?

Under the government’s JobKeeper program, you could be able to claim a fortnightly payment of $1,500 per eligible employee.

Managing business cash flow during the COVID-19 crisis

Find out what financial relief and support options are available to keep your cash flow alive during COVID-19.

Things you should know

The JobKeeper program is a Federal Government initiative and we provide a link to the external site for your convenience. This information is provided for general information only. Please read the Government’s fact sheet to see if you are eligible and for terms and conditions that apply. You should consider seeking independent legal, financial, taxation or other advice on how the Federal Government initiatives relate to your circumstances.

 

This information does not take into account your personal circumstances and is general. It is an overview only and should not be considered a comprehensive statement on any matter or relied upon. Consider obtaining personalised advice from a professional financial adviser and your accountant before making any financial decisions in relation to the matters discussed in this article, including when considering tax and finance options for your business.