Don’t let your business become a

Don’t let your business become a Zombie Company

Is your business at risk of becoming a ‘zombie company’? There is increasing concern by economists that a number of businesses will not recover after the government support package of JobKeeper comes to an end. Fortunately, the program has just been extended, however, for some companies, this may only delay the inevitable.

Some industries are clearly more vulnerable than others, so I thought I’d look into what’s going on in the construction industry. But first here are the major changes to the JobKeeper program recently announced. Changes to JobKeeper

On 21 July 2020. the government has announced proposed changes to the JobKeeper Payment program including:

an extension of the program to 28 March 2021 turnover tests to determine eligibility tiered payments for eligible staff • from 28 September to 3 January 2021 - payment rate of $1,200 per fortnight for all eligible employees who, in the four weeks before 1 March 2020, were working in the business or not-for-profit for 20 hours or more a week on average; and $750 per fortnight for employees who were working in the business or not-for-profit for less than 20 hours a week on average • from 4 January to 28 March 2021 - payment rate of $1,000 per fortnight for all eligible employees who in the four weeks before 1

March 2020, were working for 20 hours or more a week on average and for business participants who were actively engaged in the business for more than 20 hours per week, and $650 per fortnight for employees who were working for less than 20 hours a week on average.

These proposed changes will not impact JobKeeper Payments until after 28 September 2020. Visit the Treasury website for more details about JobKeeper extension. The outlook is bleak

Denita Wawn, CEO of Master Builders Australia said new modelling conducted by Master Builders Australia showed the devastating impact that lockdown was having on the building industry, the economy and the community.

Master Builders Australia previously forecast there would be around 159,000 new housing commencements in 2020/21.

“We now expect there to be only around 116,000, a drop of 27 per cent,” Ms Wawn said.

It is estimated that 90% of building and construction companies in Australia work in the residential building sector. Around 388,000 of these are SMEs. That’s clearly not good news for painters and tradies who have to compete for those projects that do go ahead. Zombie companies on the rise

So what kind of business is being called a ‘zombie company’? According to Investopedia, Zombies are companies that earn just enough money to continue operating and service debt but are unable to pay off their debt. This is an important aspect, when you think about the fact that the Federal Government has just extended their guarantees for companies who want to take out business loans to get back on track.

The Government wants businesses to survive and create more jobs, so they have been providing lots of different avenues for assistance, which you probably are familiar with. However, keeping a business on life support when it’s not really sustainable into the future would be a management failure. So what does it mean for the small

tradie business? The old saying “Don’t throw good money after bad” definitely holds true here. Critical

numbers to create a healthy business post Covid-19

The road to a financially healthy business, no matter what the economy, is based on 5 critical numbers. 1. Gross Profit in $ / Gross Margin % 2. Markup 3. Net Profit $ / Net Margin % 4. Budget 5. Breakeven

Aside from taking stock and doing a budget and expenditure audit, these are the 5 critical business numbers that will help you decide which measure to take and which way to turn. While it might seem like a good idea for some businesses, taking on an additional loan could well mean the breaking point in the not too distant future for others. That’s why it’s important to check your numbers first before jumping headlong into a potentially precarious situation.

Rather than taking on more financial commitments, your business could survive by making some changes in the way you operate, and rethinking what kind of services you provide. With every downturn in the economy, there are always opportunities arising for business owners who are nimble and quick to pivot and take advantage of them.

If you are stuck and need help with a complete review of your Covid-19 business recovery plan, call my office on 3399 8844. You can also visit our website at

www.straighttalkat.com.au