Plan for a Covid-19 SME Advisory and Crisis Centre. The initiating point being a crisis support telephone point of contact.
Purpose, Structure.
- To provide practical advice, support and guidance to the SME community in the Northern district of Melbourne following the Covid-19 business shut down.
- The first point of contact through a telephone support service where a business owner who is in distress can communicate with another person who has business experience in these situations.
- Underpinned by an Interactive web site containing a structured format to assist in creating a plan for the business owner in distress.
- Supported by a financial and legal professional.
Background.
The shutdown has severely impacted at least 70% of our SMEs with a vastly reduced weekly sales, some as severe as 100% loss of revenue. Businesses that were profitable have suddenly become loss making entities.
Many of these businesses have:
- Long term leasing commitments to property owners and also to finance companies for equipment and machinery leases supported by director’s guarantees.
- Substantial debtors that will not be realised quickly if at all.
- Liabilities owing to employees.
- Non business personal commitments by the business owners such as home mortgages or rental and other private debts.
- Other financial commitments such as rates, insurance and utility expenses.
- Limited cash reserves.
- Restricted ability to obtain additional finance.
- Little ability to find their way to Government and other assistance which might assist them.
A large proportion of these businesses have come into being because the owners (Entrepreneurs) are good at what they do, but they do not have the skills: financial, legal, negotiating or planning required navigating through this storm.
Many of these operators are under extreme physiological stress created by their financial dilemma.
Their only options are to:
- Contact their accountant, which will cost them money they do not have, and is likely often not to provide practical help.
- Contact their lawyer which will cost them money they do not have and is likely often not to provide practical help.
- Do nothing, let the problem grow or simply throw their hands in the air and run away.
- Take more drastic steps!
What a SME advisory and crisis centre can achieve.
Many of these businesses can benefit from such a facility through:
- Having access to people who have experienced similar trauma and have gained the skill set to navigate through this maize.
- The realisation that by developing a business plan to minimise the damage, a path to survival can be found.
- Working with people who have had hands on experience in this situation will help/provide invaluable information to them as to how to negotiate their way through each of the financial and other dilemmas they currently face.
The benefits of a SME advisory and crisis phone/internet support center.
Business owners being supported by this facility can expect to:
- Reduce their exposure to long term financial liabilities.
- Have an increased opportunity to continue after trading conditions begin to recover.
- Have a free source of sound practical advice.
The reason this facility is an imperative.
Business people who have lost a large proportion of their sales need to be supported by a plan devised to recover what can be recovered, in order to be able to regrow when the chaos is over. Furthermore those who decide to close down need to be advised on the best pathways out of their dilemmas, so as not to have their lives and the lives of their families permanently damaged, as the ramifications of these types of experience often lead to mental collapse and substance abuse which can have fatal consequences.
It takes a great deal of resources to create an entrepreneur who can survive and there are all too few of them in our existing society. Small to Medium sized business is the backbone of our society.
Resources required for a Covid-19 SME Advisory and Crisis Center.
A Covid-19 SME Advisory and Crisis phone line support centre can operate within a virtual space provided the people requiring support can speak with an experienced person on a telephone.
To operate effectively A Covid-19 SME Advisory and Crisis Centre will require:
- About eight people who have had long term experience in running a business and have experienced financial stress during their business life to handle phone calls from the clients who are in distress.
- A full time experienced coordinator, to assist in the coordination of the inquiries and the activity of the facility who understands what it is like to work in a business under financial pressure.
- An online presence containing a structured format showing the steps required in developing a business plan for the business owner.
- The backup of professional advice from a Lawyer and a qualified Accountant.
The objective of the eight long term experienced people taking the phone calls will be to:
- Settle the distressed business owner down.
- Guide the evaluation process in conjunction with the structured format set out on the web site. Evaluate the financial position and identify the key stressors, is it debt, is it rent, is it lack of sales, and other factors.
- Each client will need to be guided on how to set up a plan that will either minimise the damage and exit the business or minimise the damage with a view to follow a plan to recovery.
For the plans to work effectively there will have to be a great deal of collaboration.
- A Local Government Instrumentality is essential to providing an underpinning structure as a Covid-19 SME Advisory and Crisis Centre will need to can operate within a formal legal framework.
- The Council/Local Governments have access to a data base of businesses that operate within their region and can quickly identify which areas of business could require assistance. For example nearly every food processing factory depending on the food service sector of the economy will be in damage control. Every restaurant, coffee lounge, take away will be a disaster. Other businesses such as hairdressers, clothing boutiques, businesses relying on foot traffic will all have severely reduced weekly sales. The people I have spoken with have seen sales reductions of between 50% to 100% which means a business that was sustainable has immediately gone into loss mode, some of the operators may not yet be aware of the size of their weekly losses yet alone be able to analyse the cumulative losses and the impact that will have on their debt to equity position, particularly if they have commercial leases with guarantees that impact upon their family home and a list of debtors who may never pay with another list of angry and aggressive creditors who are demanding payment.
- The creation of a plan is essential to reducing the damage and to finding a way out of the mess. If there is zero support and guidance to the business operator apart from an expensive and overloaded accountant, the only result will be long term disastrous litigation, resulting in all of its negative consequences.
The costs benefit analysis:
- The support center will have to work in conjunction with a local honest accountant and a non-adversarial lawyer so as to provide the required professional expertise when required.
- There will be downstream benefits as the creation of the support center can lead to a shop local initiative supported by local council and will bring together groups including business, education and traders groups combined with the local community so as to keep our rivers of commerce healthy, that is our local shopping strips.
- To run such a project will when it gets up and running require about ten full time participants at a cost of $2,000 a week each or about $50 per hr for a period of six months. IE $2,000 X 26 X 10 = $520,000.
- With further funding based upon performance for at least another six months. A trifling sum when stacked up against the potential losses to real estate values and to the costs of social collapse of the region and to the buckets of money that are being allocated without any sort of sustainable objective.
- Every business that is placed on a path to recovery will save/generate at least $100,000 per annum for the government in taxes and reduced center link payments. If the support center puts 50 businesses back on track the return to government is a minimum of $5 Million in one year. Hence funding is not an issue.
In Summary:
- The Consequences of doing nothing are chaos, crime, despair.
- The immediate need for support, the current crisis, small business people with nowhere to go and no solutions, the longer you leave it untreated the worse the debt problem and the greater the chance for a disaster.
- The financial benefit of proactive damage mitigation. Keeping the entrepreneurs we have alive, looking at the money they will generate in the future for government, will more than likely save at least 100 businesses at a tax generation capability of at least $50 million over five years.
- Every business that is placed on a path to recovery will save/generate at least $100,000 per annum for the government in taxes and reduced Center Link payments. So if the support center puts 50 businesses back on track the return to government is a minimum of $5 million in one year. Hence funding should not be an issue.
- There will be downstream benefits as the creation of the support center can lead to a shop local initiative supported by local council and will bring together groups including business, education and traders groups combined with the local community so as to keep our rivers of commerce healthy, that is our local shopping strips.
- The cost of implementation of a support center. Estimate $1 million for one year. This is a far higher return on investment than the $170 million being wasted on destroying 500 year old sacred trees on the western highway which is negative and will never return the money invested back to the community.
Prepared by: Diarmuid Hannigan The Community Collaborators Pty. Ltd. Tel 0401416305
Additional Information.
There are two state government departments who have responsibility.
One is Jobs Precincts and Regions. The other is Economic Development.
Within Jobs Precincts and Regions sits Martin Foley Minister for Creative Industries, Jaala Pulford Minister for Small Business and Martin Pakula Minister for the Coordination of Jobs, Precincts and Regions: The Minister responsible for Economic Development is the treasurer Tim Pallas. “Treasurer and Minister for Economic Development – Tim Pallas MP”
