Thriving through quarantine
Three ways your firm can gain strength during and after the lockdown
With global recession on the horizon, decisive action now could give your firm more chance of success
Businesses around the globe face a battle to survive in the coming months and years as the economic impact of Covid-19 becomes more apparent. The forecast isn’t great. The IMF in April predicted the global economy will fall sharply by -3 percent in 2020 and IMF Managing Director Kristalina Georgieva warned in a BBC interview this may actually be too optimistic. Dr Rita Choueiri, a scientist at Praxity member firm William Buck in Australia, says uncertainty resulting from Covid-19 “makes implementing business strategies a long-term challenge” with many businesses potentially “experiencing a decline in sales and future concerns on cashflow”. So, what can you do to make your business stronger and more resilient? Dr Choueiri, who heads up William Buck’s Victoria R&D Incentives division, and Catherine Abbott, William Bucks Senior R&D Adviser in Victoria, have identified three ways to ensure your company thrives and not just survives, in the following months and beyond:
1. Re-purpose products and services
First, businesses can repurpose their products and services to meet the changing market. We’re sure you’ve already seen some examples over the past few weeks as distilleries started to manufacture sanitiser, cafes and restaurants provided meal prep services, and rideshare services delivered goods instead of people. Re-purposing focuses on assessing and re-aligning your business’ purpose with the customer’s altered needs, although this may not be a viable option for everyone (and tax implications need to be considered). Questions you should ask yourself include:
- Who was your original target market?
- How has this pandemic changed their needs?
- How can you alter your products and services to match this change or how can you provide a new product or service offering?
2. Invest and innovate
For businesses that cannot re-purpose and are experiencing a decline in customers, decreasing cash burn and cutting operational costs is a logical next step; decrease your overhead costs and wait out the crisis. However, research into the Great Recession suggests that heavily cutting operational costs and making staff redundant can lead to a decrease in product quality and staff morale. Where possible, companies could instead be evaluating their productivity and supply chains to drive permanent efficiencies into their processes, ones that will last beyond this crisis, and looking to invest in land, equipment and innovation while prices are low. Understandably companies may be concerned about future cash flow issues, so it is not surprising that many would halt investments and research and development (R&D) programs. However, history has taught us that continuing to invest in innovation during the Great Recession may have allowed companies to outperform competitors and prosper as the economy recovered.
3. Consider R&D tax incentives and financing
This will of course vary from country to country but your company may be eligible for tax incentives or similar funding. In Australia, for example, an R&D Tax Incentive exists to fund eligible activities to innovate, reduce costs, improve efficiencies and/or repurpose as a result of the pandemic. This can provide a funding lifeline in the form of a cash rebate of up to 43.5 cents for every dollar spent on R&D under certain circumstances. Even companies outside of Australia may also access the Australian R&D tax incentive by funding R&D activities that take place in Australia through an Australian subsidiary or permanent establishment. However, for companies that don’t have the accessible funds or cash flow to invest over the next few months, there may be other funding options available, including R&D financing, and other government incentives.
To be eligible for R&D tax incentive finance, a company must first be eligible to receive the R&D tax incentive (which is to be assessed by a reputable R&D advisor). While it’s hard to be certain at this point, it’s unlikely that the COVID-19 pandemic will reach the length and severity of the Great Recession. The next six months are uncertain, but you don’t have to face that uncertainty alone.”
Further information For more comprehensive analysis on the Australian government schemes, visit William Buck’s COVID-19 Resource Centre. For information on support throughout the world, visit the Praxity Covid-19 Support resource. This article was amended from an original article published by William Buck on April 22. https://www.williambuck.com/thriving-through-quarantine-bow-grw/