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Will business survive COVID-19

We are living through unprecedented times. Events and shocks to the health, business and financial systems are unfolding by the hour. We have never seen anything like this in our lifetime, so naturally, our fear of the unknown runs riot and our imagination can take over from the reality of the circumstances we find ourselves in. There is no more explicit evidence of this than Australians hoarding and fighting over toilet paper.

Unless you have been asleep for the last month, it is self-evident that Australia, and the whole world for that matter, is going into recession and possibly a depression. The effects of this are already starting to be seen and include employees losing their jobs, businesses failing, investors going broke, falling equity and property prices, etc. The government stimulus packages and low-interest rates will help to lessen the recession’s length, impact and pain, but will not prevent it.

A lot of businesses will not survive the coronavirus and subsequent recession. The top of the list are airlines, retailers with discretionary products, tourism operators, restaurants, low profit/loss-making businesses, undercapitalised businesses, highly geared businesses, highly geared investors, etc.

In contract, many businesses will benefit from the coronavirus and be more profitable and more robust. These include health-related businesses, food retailers (think Coles, Woolworths, Aldi, etc.), fast food delivery companies (think Uber Eats, Dominos, etc.), internet companies, telephone companies and accountants.