- Understanding your fixed and variable cash obligations is critical to future business success.
- Cash flow projections are essential when telling the bank or your vendors that you can’t pay them right now.
- Make the hard business decisions that need to be made, and then get rolling on your future business plan.
COVID-19 has spun the business world on its head. Every day, there are new decisions to make. Many news outlets keep focusing on the hospitality, airline, food beverage and entertainment industries, but what about all of the industries that serve these industries? What about printing companies that print invitations for events such as weddings and trades hows? Moving away from these industries, what about brick & mortar shops such as salons, and the companies who distribute products to them? This pandemic is reaching the business community far and wide, and cash flow during COVID-19 is a key factor in assessing a business’ ability to come out on top.
We understand it is hard to be a business owner right now, but right now is when business owners need to start planning. Take a few minutes, make the hard decisions that have to be made, and start leaning on your advisors and your management team to plan for how you are going to be a business that survives. We are here to help, and we are here to tell you that time is of the essence. Start planning for 3 months, 6 months, 12 months from now, and do it right now.
One of the best ways to get started is understanding your cash flow.
Essentially, business owners need to stop the bleeding and do it fast. This will put you in a better place to get your business up and running when this crisis is a thing of the past.
Cash flow projections are essential when telling the bank or your vendors that you can’t pay them right now. Due to the pandemic we are dealing with, our prediction is that many banks and vendors will be understanding in the short-term, but they still want to understand how they will eventually be paid.
The main focus should be on which costs are fixed, and which costs are variable. In a time like this, many business owners will lead with the mindset of only paying for what is necessary to keep operations up and running. This may be the answer. It may not be. It depends on your business and its open obligations.
Some questions to consider:
- Do you own or rent your building? Can you defer payment either way?
- What government programs can your business access? See our latest post on SBA Disaster Assistance Loans. This is one of many government programs being proposed.
- What vendors can you defer payments to?
- What opportunities are there for your business to pivot in the short-term, and possibly long-term?
- Are their strategic partners willing to invest in your business?
- What is your personnel cost? Is there room for restructuring compensation?
- Is your pricing model still accurate during COVID-19 and post-COVID-19?
We are living in uncertain times, so this is just a guideline to get business owners thinking in the right direction. Many businesses are struggling and will continue to struggle until the country, and possibly the world, gets a handle on COVID-19. While other business owners are sulking, you have an extreme advantage to take a hold of the situation, set a plan in action, and be one of the businesses who is thriving post-COVID-19. Again, we are here to help, so please reach out to me at firstname.lastname@example.org, or our firm at email@example.com with any questions or concerns you have.