ISSUE 25 JUNE 2020
THE VOICE OF THE NEW ZEALAND AUTOMOTIVE INDUSTRY
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On the ropes? How to fight back BUSINESSES SHUT DURING LOCKDOWN ARE UNDER A STRAIN THEY WERE NEVER DESIGNED TO WITHSTAND. AUTO CHANNEL CONTACTED BUSINESS CONSULTANT ARO ADVISERS TO HELP POINT BUSINESSES IN THE RIGHT DIRECTION dviser Dave Saunders answers our questions from the point of view of a workshop or smallto-medium automotive business:
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Our income has taken a hammering and so has our bank balance, what can we do? Most business owners worry about making a profit — and you should. If you can’t make a profit over the medium term, your business isn’t viable, and that’s a very bad thing. However, it isn’t lack of profit that kills a business; it’s lack of cash. Cash is king. It’s the equivalent of oxygen for business — you can’t last for too long without it. If you don’t have a buffer squirrelled away for a rainy day, look at raising some finance such as a bank loan or taking a more handson approach to cash-flow management. If you’re wondering what the hands-on approach is, it is negotiating better payment terms with
suppliers, haggling for a rent reduction, examining all of your costs very closely — which you probably should be doing anyway — and making sure you get paid quickly. I think we need to cut costs. Where do we start? I often suggest using a process of elimination; rather than thinking about where you can cut costs, think about where you really shouldn’t cut costs first, then attack everything else. There are two things that really grind my gears when people look to cut costs to get a business back into the black. The first is when they reduce the value of what they are selling. For example, if you were offering tyres and you substitute good quality tyres for cheaper quality ones but continue to charge the same prices, there is a good chance you will piss off your customer base. That’s not a winning strategy, long term.
Aro Advisers’ Dave Saunders The second thing that I often see is businesses cutting back on their advertising budget — even when it is working. Unless you’ve got more work than you can handle or it is clear that your advertising isn’t working, cutting your advertising spend is about as effective as putting less petrol in your car to achieve better mileage — it’s not going to work. However, I often see businesses over time build up lots of bad spending habits and these rarely get looked at. Money leaks out of all sorts of places. So, the first thing I would do is go through a cash flow statement or a profit or loss statement in your accounting software and see where all of your hard-earned money is going out, line by line.
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