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CEO and founder of software-as-a-service company, Sked Social, it is fair to say that entrepreneur Hugh Stephens has a stake in how small businesses and startups have been impacted by the COVID-19 recession.
He is also a partner of Galileo Ventures – a venture fund and accelerator program aiming to systematically enable and support promising young emerging founders from university programs.
Dynamic Business sat down with Mr Stephens to discuss how the government should currently be assisting small businesses, as well as how his industry has been impacted by the coronacession.
What should the government be doing to help businesses restructure and restart?
A lot of the cash flow impact small businesses are experiencing is essentially around tax payments. So, big papers.
Certainly, there’s an opportunity there in terms of being able to boost cash flow and obviously we have existing programs to do this, but the question is how long they should run for. Given that something that often a lot of business owners struggle with is ensuring that they make their cash flow payments, or their BAS payments and things like that. There’s an option there for the government to support that.
But I think on a broader scale, there’s really a question here of how do we avoid the wave of bankruptcies or liquidations. That’s probably going to be endemic coming out the other side of the pandemic, particularly once things like JobKeeper starts rolling back, which has no doubt propped up many businesses that would have otherwise been well and truly dead.
One of the things that I think that not a lot of people have necessarily spoken about a lot is that with what feels like a mass extinction event may come a lot of business segments that might drive a lot of new interest and a lot of new views into those sectors.
For example, it will be interesting to see what happens to the hospitality sector, and how will no doubt see people jumping into that once things have settled. There’s a really big question as to how the government can support people in that.
I’m not a fan of grant programs. That’s the government’s typical mechanism to support any particular industry. There’s definitely been some interesting alternative models. The UK has shown some interesting models in terms of being able to provide effectively through a loan scheme. Almost like a HECS loan type model for business owners, whether they’re new or existing, where there is a sort of very low level of recourse. Loans, I think, are a very typical way that you can support the business sector as a whole, because that suits both venture-funded type companies, as well as regular SMEs.
So I think that’s definitely a space that should be explored as to how the government can provide policy levers in that space to encourage more cash to essentially be given out to the end-user. As we all know, banks hate lending to small businesses and small business owners are certainly very nervous to borrow from banks. No one’s particularly interested in putting their property down as collateral at this point.
Historically the government has been a terrible customer for small businesses. I really heavily encourage the government to actually procure goods and services from small businesses, rather than from all of the large enterprises that often end up actually giving it to the same small business, but taking a cut along the way.
What can business founders be doing to help themselves?
I think everyone has gone into survival mode.
From my observation, everyone is either sharing that it’s been a really bad year for them, while others are feeling guilty when sharing that the pandemic has actually really helped their business.
The first thing I’d say, is that this shouldn’t be looked upon as a bad thing. But those who are struggling should be willing to say: “Hey, it’s been an awful year” and then reach out for help.
I’ve spoken to many startup founders, a lot of which have seen upmost of 90 per cent of revenue just walk out the door. And for people in that position, they need to be leaning on the community around them in order to be supported. Don’t put on a brave face, don’t be afraid to admit it’s been terrible.
As for how you actually survive, that’s quite business and industry specific. But I think there’s definitely a big question here for the wider community around start-up and small business owners, regarding how we’re going to support those who are struggling.
As a business owner or founder, your business is like a baby. At the moment, there are a lot of business founders who feel like their baby is on life support. When you’re that close to your business, it can be incredibly difficult when something that you have no semblance of control over, comes in and hurts your business. It can be very taxing on your mental health.
I think there’s a big piece, just in saying, bring your families together, network with other founders and business owners, and share that mental burden with one another. We can band together and float our way along until hopefully things start to look more normal again.
How has COVID-19 impacted your industry?
We have a customer base that is fairly diversified across different industries, as well as different sizes. We cover everything from itty-bitty small businesses through to enterprises.
We do have some exposure to hospitality, which is obviously one of those sectors, along with the entertainment sector, that has been heavily hit. Similarly, we also have exposure to tourism as a market, which again, same story.
We had to put a program in place and as a team internally look at how we supported those customers, knowing that in the short term, they were unlikely to pay us as they weren’t getting andy revenue themselves.
They still needed to keep the lights on though in regards to things like marketing and all that sort of stuff. So we put together a COVID-19 program of adjusting plan limits, discounts, pausing accounts or whatever it may be based on the customer’s particular use case.
While we certainly lost revenue in those segments, luckily that was them offset by the growth in e-commerce, which benefited us as a marketing tool provider as people moved to sell their stuff online.
The the period from February to May we saw a lot of customers who were very uncertain about selecting new tools, or expanding marketing initiatives now matter how their business was performing, just because there was a lack of general self confidence. It’s been really good to see that confidence come back in the past couple of months, and with that some benefits for us.
We’ve seen an interesting impact where customers have been given the opportunity to go back to the market, look at their vendors and ask ‘are we really getting what we need out of this particular tool or platform?’
Luckily for us, we’re not the sort of software company that tries to hide recurring payments. But I have no doubt that there’s certainly a lot of software companies that have seen a massive amount of churn walk out the door, because it was the kind of little payments that consumers or businesses have to keep reconciling on their card statements. Through COVID, I suspect a lot of people will have gone through those statements line by line and gone ‘Oh wait, what’s that? Yea, get rid of that’ to things that aren’t necessities.
How has this period impacted you personally?
I’ve run a remote team for almost seven year now, so in the sense of having people suddenly shit to working from home, that wasn’t really an issue.
I think the big difference to me personally has been that a lot of my support networks that I would see on a social basis outside of work have dissipated. It’s a bit challenging having to get used to not being able to see people, regularly and face-to-face.
I was very big on going out to bars and restaurants with friends, and obviously that’s just not happening in Victoria. That’s certainly been very tricky to adjust to, and I guess that’s the unfortunate nature of being in the naughty state.