Four signs your business model is not coronavirus-proof

Businesses falling by the wayside was already on the rise, according to ABS figures from June 2019. Then, the start of 2020 brought bushfires and the spread of COVID-19, sending many small businesses and startups alike into a downward spiral.

If businesses want to survive, they must go back to basics and make sure their business models are still relevant.

Most business owners look at their business model at some point in the journey, but everyday business pressures make it difficult to stick to the plan. Even for those businesses not feeling extreme cashflow pressure right now, cracks in the business model become evident in these unprecedented times.

These are the four warning signs you need to look for.

1. Too hands-on

Any business relying heavily on one person to turn up every day is fraught with danger. Illness, incidents or accidents involving that one person will always put your business at risk. As is often the case, that one person in a small business is likely to be you, the owner.

How to deal with this today

Consider the top three non-negotiables that absolutely must happen in your business if you cannot be there. Is it invoicing, a certain sales process, paying the bills or the wages, ordering stock?

Prepare a simple step-by-step ‘how-to’ guide for each of your non-negotiables and assign a trusted individual to take care of these important activities in the event that you’re not there.

As for who that trusted individual should be, consider a staff member, a spouse, a trusted business friend, or even your accountant.

2. Leaky profits

If you’re in an industry with low margins or you find yourself discounting more often than you’d like to mention, your business is in trouble.

Often the solution can be found in simply monitoring margins. A lot of business owners don’t track margins regularly and tracking margins monthly could highlight some unknown weaknesses which can be easily corrected before it’s too late.

How to deal with this today

Go to your bookkeeping system and look up your gross profits percentages for each of the past 12 months. Get a hand from your accountant if needed, but with those 12 numbers in front of you, you’ll quickly determine if your margins are slipping and by how much. A 4% drop in gross profit on a business with turnover of $500,000 is a $20,000 hit to your back pocket.  

3. Quality not quantity

It’s hard to stand out from the competition when your business is trying to be everything to everyone.

Offering too many products or services in too many different markets can make it difficult to boost efficiency and reduce costs. It also reduces quality when we can’t dedicate the time we want.

How to deal with this today

List every category of products and services that you sell. For example, high-quality lounge suites, bedding furniture and manchester. Review the profits you are taking from each category and seriously consider slicing off what isn’t profitable. 

I recently took this exact approach with a business owner who had five income categories. We discovered she was clearly able to reach her financial goals by focusing on just three of the five and halting the rest.

Streamlining her offer not only saved her hours of delivery time but also allowed her to focus on what she knew was most profitable.

4. Are you future-proof?

Are there only a few others doing what you do? Is your business being pushed out by corporates or technology?

Many business owners bury their heads in the sand when it comes to the long-term viability of their industries.

No one wants to hear this sort of news, but it is a real issue.

How to deal with this today

Can you move any aspect of your business online?

If you have been thinking about this but are yet to put it into action, now might be the perfect time to fast-track it.

Are there complementary products or services you can add to your offering?

Are there non-competing but complementary businesses that you can collaborate with and potentially strengthen both of your financial futures?

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