- It’s essential to have clarity around the drivers of your business performance, to help you make more informed decisions
- Start by determining your break-even point and current cash reserves, so you can calculate how long your funding runway is
- Then look for opportunities to reduce costs or increase working capital
Business intelligence for positive decision-making
With revenue lines under increased pressure as a result of coronavirus (COVID-19), it’s more important than ever to understand your business’ financial structure. By gaining a deeper understanding of the drivers of revenue, costs and profitability, you can pull the right levers to sustain your business through this period of uncertainty. According to our 2020 Real Estate Pulse Check, margins and profits were already declining before the pandemic, so businesses need to take swift action. Even those performing relatively well can benefit from removing inefficiencies and waste, at a time when both sales and property management revenues are likely to be impacted.
In this guide, we’ve listed some of the key questions you need to ask to gain a greater understanding of your business position and the way forward.
1. Calculate your costs and your breakeven point
- What is your breakeven point? This is the point at which the business can meet its fixed costs, such as rent and premises, technology, and salaries
- How much revenue is required from property management and sales income to meet your breakeven point?
- What are your variable costs? How could they change in the current environment? What impact will lower sales volumes have on marketing, administration, and growth-focused activities?
- What are your fixed costs? Should you reduce them in the current environment? Can technology assist? Do you have an appropriate staffing structure/mix? Is there waste or inefficiency in the business that can be removed or improved?
2. Analyse and forecast income
- What is your recurring income from property management and leasing fees? How could a rise in unemployment impact rents across your property management portfolio?
- How reliant is your business on sales income? What impact do you expect coronavirus containment policies to have on listings and sales?
- Try modelling different scenarios of how sales and property management fees may be impacted under best, worst and mid-range scenarios. What would your breakeven point be?
3. Review working capital
- How much cash can you access, both in and outside the business?
- Do you have an overdraft, line of credit or other cash flow buffer?
- Have you conducted a six and 12 month cash flow forecast for your business, adjusting for softer trading conditions. How does this forecast reflect any savings measures you can implement? Does it show liquidity through this period?
- How much support will you receive from federal and state assistance packages? Make it a priority to talk to your accountant and your financial institution, so you can quantify the impact of possible support measures, including:
- Boosting cash flow for employers: a tax-free cash boost of $20,000–$100,000, delivered as a credit against future BAS payments
- JobKeeper: a six-month wage subsidy of $1,500 a fortnight for eligible employees
- The Coronavirus SME Guarantee Scheme: a federal government guarantee for 50% of unsecured loans up to $250,000.
Read more in Access to support
4. Consider owners’ drawings
- How much do you and the other business owners currently draw from the business?
- Can you review your personal budgets and reduce costs?
- Is it feasible to temporarily lower your drawings, to reduce pressure on the business?
How Macquarie can help
The Macquarie Real Estate team is here to support you throughout the COVID-19 crisis, with personalised support. To find out more, contact your Macquarie Relationship Manager, call 1800 442 370, or visit macquarie.com.au/business-banking/real-estate-industry.html