Think Nicholsons

Jul 12

The road ahead?

Sixteen weeks ago, I wrote an article about how to make smart legal decisions in these uncertain times, taking inspiration from Cormac McCarthy's stunning post-apocalyptic novel 'The Road'.  

The changes in our world across those 16 weeks have been incredible:  

- Australia's third largest trading partner (and most significant defence partner), the USA has celebrated their 4th July 'birthday' in the face of over 130,000 COVID-related deaths. Ripple effects from COVID-19 continue to spread through their population and their economy.

- Queensland has avoided widespread virus deaths - at significant economic cost; but 

- Victoria has just returned to lockdown - despite the significant social and economic costs which they've already incurred.

The last 16 weeks have seen a bewildering array of government and health announcements, changes to our social fabric, major economic adjustments and job losses, and significant changes in the law and in consumer and business attitudes. I know that I have never worked harder, nor had to adjust faster than in the last 16 weeks - and I expect that most other small and medium business owners feel the same.  At this stage, the road ahead for Australian business owners looks open, but also winding.

"You need to go on ....You need to keep going. You don't know what might be down the road."
- Cormac McCarthy, The Road

So, what can business owners expect from the winding road ahead, and what should they look out for?

My experience from ~25 years of commercial legal practice, lessons from previous recessions and downturns, and the last 16 weeks suggest the following:

Unpredictable Demand

Business owners can expect wild swings in demand for their goods and services.  Some businesses will experience extreme demand in new areas - should you 'pivot'to meet them?  Possibly, but doing this involves significant risks including the risk of investing capital, energy and precious time without receiving any worthwhile return.  For example, some Australian distillers who invested serious capital in switching to hand sanitiser production during its peak demand period have been left with significant unsold product, and no return on investment.

Other businesses will experience significant falls in demand - but the overall theme is likely to be unpredictable demand which does not fit normal patterns of customer behaviour, and which continues to vary.  Customer and client needs have changed and will keep changing - managing these changing needs with intelligence and flexibility is a huge challenge, which most business owners must face.  Adopting a system of business planning which allows for rapid adjustment to these demand changes is one step which may help small and medium business owners to cope better with this - see my further comments below.  

If this lack of certainty means that you are struggling to pay wages, rent or other expenses, then there are important short term steps which you can take - but please act quickly.  See our previous article "Struggling to pay rent?" here.

Unreliable Sources of Supply

Businesses need lots of important inputs to function well - they depend on reliable supplies of finance, goods, skilled labour, sources of work and other factors.  In these strained times, some businesses are also depending on the (time-limited) supply of government financial programs such as JobKeeper, Cash Flow Boost and other temporary financial and legal relief mechanisms.

Unfortunately, small and medium businesses must expect these key supplies to also be volatile, and to perform and react in unexpected ways.  Finance has been reasonably liquid and available in Australia to date, partially due to Government support for bank lending, but around the world, very large companies are drawing on very large finance facilities - because they're not confident that the facilities will otherwise be there when they need them.  Disruption to worldwide supply chains has been noticed by every consumer.  Employees will respond in amazing ways to the stresses which COVID-19 has introduced - our own team members at Nicholsons have demonstrated the gamut of reactions already, and their courage, flexibility, loyalty, diligence and team spirit (and at times their terror, rigidity and fragility - they are human, after all) have been remarkable to observe across the last 16 weeks. The financial and legal relief offered by Government has been crucial, but is also causing some significant adverse consequences in the medium term for small and medium businesses. 

So, what can business owners do in the face of unreliable supply?  When people have limited supplies of time, energy, money and opportunities, will they direct it to your business, or to someone else?

For business owners, your response ought to be more of the same: plan; think ahead; think laterally.  Communicate with people, see what they need and figure out how to effectively and efficiently offer that.  Tell people what you will do, then do it reliably, and when and how you said you would.  Build on the foundation of your expertise, and offer things which people genuinely want and need - you have already built a business by standing out from your competition, so keep building on that to keep standing out.

Reckless Competition

Speaking of competition - you can expect some of your competitors to do some crazy and desperate things in these uncertain times.  Business and industry norms (and some laws) will be broken.

Business owners are likely to find that some of their competitors will adapt short term tactics which cause long term damage or which are even illegal.  You are likely to see 'loss leading' behaviour to win market share - for example, we have recently seen law firms offering to provide letters of demand for free.  Stressed businesses are likely to take capital-intensive and sometimes unprofitable steps just to keep their people and systems busy - though not necessarily productive (this has, for example, been occurring extensively in the construction industry and some other industries across the last few years, as those industries have faced increasing challenges).  Business owners can expect to see unethical, dysfunctional market behaviour in their industries including illegal competition through stolen branding, stolen designs and concepts, improperly poached staff and clients and so on.  

This sort of behaviour is often bad for the business and the short-term focused competitor, and of course, it's often awful for the poor client or customer, who rarely receive what they were (over)promised in those scenarios.  Short-term thinking can be self-destructive for the competitor in question, and may merely postpone their inevitable failure - but can be incredibly bad for the business which you own, along the way.

On this front - there are actually many things which you can and should do.  Talk to experienced people (like us) who can help with proactive and protective steps like trademark registration, confidentiality and intellectual property protection, appropriate supply contracts and so on.  Don't wait to do these things - proactive steps are most useful when done early. If you - regrettably - have existing problems with a competitor, then we can help you there also - we've seen and solved a lot of challenging cases for clients.  Don't sit and worry about what might happen, or stew on what has happened - reach out and get some advice which is grounded in extensive, relevant experience helping business owners like you.


"We were always lucky.  You'll be lucky again. You'll see. Just go."
- Cormac McCarthy, The Road

Business planning

In uncertain times, it's important to have a plan but also to be able to review and adjust it quickly.  You might find it useful to check out the Plan - Do - Check - Adjust cycle drawn from lean-agile principles, or for a more classic planning system, consider this classic series (1976) of Harvard Business Review articles on 'How to Design a Strategic Planning System' for business.

Key areas where we can help business owners

For TM, intellectual property and business contract issues - contact me or Simon Thompson

For property issues - contact Paul Morris, Nick Prove or Matt Russell

For difficult situations and disputes - contact Troy Hawthorn

For strata and body corporate issues - contact Andrew Suttie

If you'd like to talk about any of these impacts on you as a business owner, or your response to them, then please call or email one of our highly experienced, commercially focused lawyers.

Stephen Robertson

Partner
Stephen is a commercial lawyer with extensive experience in advising businesses in areas of acquisitions and divestments, commercial agreements, structuring, legal risk and revenue issues. He also advises on property law, with a focus on commercial and industrial property.


† At the date of publication, Queensland is almost COVID-free but Victoria has returned to serious lockdowns. The USA has suffered over 130,000 COVID-related deaths in four months.

‡ I really hate the terms 'pivot', 'new normal', 'unprecedented' and the like, because I consider them lazy, but I had to use that one :)