How to Thrive During an Economic Crisis: An SME Playbook for Navigating the Middle East Instability (part 1)

There is no long-term strategy without short-term survival. Period.

Right now, Australian business owners face a rapidly shifting and unpredictable operating environment. The conflict in the Middle East is sending shockwaves through global supply chains, energy markets, and creating challenging credit conditions.

Consequently, the decisions you make in the next few months will shape your business for years to come.

This is not a moment to wait and see. It is a moment to act.

Fuel and Freight Costs Are Climbing. Fast.

Surging oil prices are hitting transport-dependent businesses hardest. If your business relies on logistics, delivery, or regional operations, your cost base is already under pressure.

What you should do:

• Claim every fuel tax credit you are entitled to. Do not leave money on the table.
• Monitor government relief announcements closely. Short-term measures may already be available. The $1bn interest-free loan package for fuel-hit sectors announced in the beginning of April by the Federal Government is a good example.
• Apply for every ongoing grant and tax incentive available for your business. These programs are highly beneficial, particularly when it comes to boosting cash flow. If you’re not sure whether you’re eligible, reach out to BridgePoint Group. We have a team of experts who have recovered over $30 million for our clients.
• Meanwhile, ships rerouting around Africa are adding 10 to 14 days to import timelines, plus surcharges. If you rely on imported goods, your cash flow and profitability models need updating now.

Re-run your financial models. Then re-test your compliance with bank covenants. Additionally, if reduced activity creates idle labour time, act quickly. Encourage staff to take annual leave, freeze non-essential hiring, and pause overtime.

Learn how BridgePoint Group can help you build a financial model for your business’s unique circumstance.

Energy Bills Are Back. And They Bite.

Gas and electricity prices are climbing again. In fact, many SMEs are already absorbing hikes of 20 to 40 per cent, echoing the brutal conditions of 2022.

While long-term fixes like smart metres and energy-efficient equipment remain worthwhile investments, the immediate priority is the same: re-run your numbers and re-test your covenant compliance.

Do not assume your business is protected simply because costs have not hit invoices yet. Act before they do.

Supply Chains Are Disrupted. Re-Think Your Product Mix.

Shortages in petrochemicals are driving input cost jumps of 20 to 30 per cent for businesses in construction, agriculture, and manufacturing. As a result, you may find yourself unable to source materials at the same price – or at all.

Your action plan:

• Explore alternative suppliers or substitute materials where feasible. Yes, this is difficult. Really difficult. But before you dismiss it as obvious but useless advice, ask yourself, have you tried everything, or only some things? Have you tested every assumption that leads you to a “we can’t” statement? For the best chance, persist where others don’t.
• Prioritise production of your highest-margin products and favour your most important customer relationships.
• Above all, do not delay passing through price increases. You do not need a contractual right to request one. Contractual clauses can be varied by mutual agreement – and suppliers are more likely to agree when it benefits both parties. Empty shelves help no-one.

Inflation and Interest Rates: The Double Squeeze.

Energy shocks are pushing CPI toward 5 per cent. Furthermore, the RBA may respond with rate hikes, raising borrowing costs for businesses carrying debt. Together, these forces erode both your margins and your customers’ purchasing power.

Understanding how your debt behaves right now is critical. Specifically, consider:

• Negotiating short-term variations to your existing finance facilities.
• Taking your financing needs to market to secure better-priced or better-structured deals.
• Rethinking your debt-to-equity mix, including whether to reduce your dividend payout ratio to preserve cash.

These are not drastic steps. Nevertheless, they are the kind of proactive moves that separate businesses that thrive during economic crisis from those that simply react to it.

Consumer Spending Is Softening. Resize Before You Must.

Households are cutting discretionary spending. Therefore, demand for non-essential goods and hospitality is easing. Track your revenue trends weekly, not monthly. If the numbers tell you the business needs to be smaller for now, act quickly.

However, be surgical. Cut overhead and inefficiency – not the people, capabilities, or client relationships that will drive your recovery.

Credit Is Tighter. But Banks Still Lend to Good Businesses

Banks are applying greater scrutiny to businesses exposed to energy cost (and other forms of) volatility. Even so, banks are still in the business of lending. Their appetite for strong, well-managed businesses has not disappeared.

Your job is to make the case clearly. Present updated financials, demonstrate covenant awareness, and show that you are on the front foot. Banks back businesses (and the management teams) that understand their own numbers.

Case Study: How Smart Refinancing Helped a Manufacturer Scale From $60M to $100M

The Bottom Line

The businesses that will thrive during economic crisis are those that respond with clarity and speed – not panic. Re-run your models. Re-test your covenants. Have the conversations with your bank and your suppliers now, before the pressure becomes unavoidable.

Short-term decisiveness protects your long-term future.

Protect and Position Your Business.

If the challenges in this article feel close to home, you are not alone – and you do not have to navigate them without support. BridgePoint Group works with Australian business owners and leadership teams to cut through complexity and help them to take decisive action with confidence.

Whether you need to stress-test your financial models, renegotiate your finance facilities, manage covenant compliance, flag, characterise and represent an issue, or restructure your cost base, our consulting and corporate advisory teams bring the experience and the directness your business needs right now.

This is precisely the kind of environment where having the right advisers in your corner makes a measurable difference.

Get in touch with us and start building the plan that keeps your business not just surviving, but thriving.

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