Big numbers of companies will die in 70 days if debtors don’t pay.
Kiwi companies particularly SME’s are facing unprecedented changes in supply and demand of their products and services. This throws their unit economics out the window and pushes them immediately into restructures, downsizing and market segmentation focus changes.
We all know Air New Zealand is at the worst end of the scale. As stoic Kiwi’s we ultimately want them to survive this recession as efficiently as possible. Our focus right now is SME’s and how they efficiently survive this powerful recession and stand to live and employ more people in the future.
On the front line
Down on the coal face in Lambton Quay there are big brands and small boutique retailers who are part of the wider business ecosystem. These retailers are an indicator for where the entire business ecosystem in Wellington CBD is headed. Wellington is an indicator for NZ. Retail foot traffic in Lambton Quay is down 30% 10 days into May and we are now in level 1 according to Bellwether NZ retail dataset.
If retail takes a hit, then it is a no brainer that New Zealand SME business ecosystem is taking the hit also. This hit immediately takes an effect on retail cash flow and flows through the ecosystem of suppliers, landlords and the support companies of each of these. It is probably just as infectious as Covid-19 and will begin to infect (affect) more and more businesses.
Aside from massive restructures or cost cutting, my opinion is that most companies won’t survive 70 days with more than either a 50% drop in sales revenue or a 50% of their debtors not paying. It is the government’s job to fix the first point and borrow to get the stimulus working like a vaccine and not an IV drip. It is a businesses job to get and keep the cash flow going and not become the dam in the river. Too many dams and the ecosystem is far too greatly affected and businesses will die.