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The goal with this step by step process is to allow you to take back control over what you think about, what you focus on and how you manage your business during and after the Corona Virus Small Business Crisis.

Time to stop letting panic, fear and anxiety rob your energy, time and control.

You can make decisions that will benefit your business. In step one, we took stock of your expenses so you can better control your cash flow. Spend money on only those categories that are necessary to generate income, keep the doors open, keep employees armed with the tools they need to be productive. Anything that is not necessary; cut it, reduce it, pause it

Step 2: Look at your liabilities.

One thing it keep in mind is that your liabilities should be…in balance, for lack of a better phrase, with the assets they are leveraged against. That means that short term assets should be funded with short-term debt. An example would be that money borrowed to buy inventory, should be very short-term debt. Because inventory is assumed to be sold in an average of 30 – 90 days, the debt incurred to purchase it should not be any longer that 30 – 90 days. Debt to purchase vehicles with a 5 year life, should be financed with 5 year debt. If you use long-term debt to fund short-term assets, you will always be behind because you are servicing debt for which the asset or the income producing category is no longer generating revenue, but you are still paying the debt on it.

OK, so to the strategy:

Look at all of your debt and determine how you are going to service them. There are several things to consider:

  • Which vendors do I need the most to continue to be able to purchase and sell products?
  • Which vendors might be in a position to work with me on payment terms?
  • Which vendors are likely in my same position and I need to be cognisant of their situation as well.
  • Do I have credit card balances for which the bank might provide some form or forebearance so I can delay payments without penalty.
  • Do I have traditional debt from banks that I can work with to lower my payments, get a lower interest rate on?
  • Do I have private investors, loans from friends, family, others that I either must keep the payments going or can I ask for payment relief for a few months and add those months’ payments to the end of the note or increase payments over the life of the loan to make up for the payment vacation that you are requesting.

Remember….It is always better to talk to your vendors and banks about your plan than to just stop paying them or significantly reduce or delay your payments. It will serve you better to have the discussion with them first.

The stimulus package offers several different versions of relief or businesses and employers. There is some relief available for employers to delay the payment of payroll taxes. There is the Paycheck Protection Program for 2.5 times your average monthly payroll costs, the EIDL Loan Advance for up to $10,000. Consult with your accounting/tax advisor for the programs that would work or you and how to apply or implement them.

Time to be brutally honest with Yourself

How long can your business survive?

During the process you may discover a few things about your business that should have been identified before. Don’t let the Corona Virus Small Business Crisis blind you to decisions that should be made as if the crisis had not happened. These could include:

  • I have more employees than I really need to successfully operate this business. This particular position is not necessary and does not really facilitate our ability to generate revenue, create a great customer experience, efficiently run the administration or operation.
  • We have profit centers, products, services that we sell that do no generate enough profit to justify our maintenance of them. Some products or services take more time, trouble and effort than their profit margin justifies.
  • We need to specialize. We need to sell fewer products or services and instead concentrate of a few that we can sell more of for out best profit margins. Selling 1,000 products that yield $100 of profit margin each is much better that selling 10,000 things that generate only $10 of profit. Volume in and of instelf causes more effort at every level. Specialize in a few things unless you have products that you can sell tons of at no additional cost, where the sheer volume of it generates enough income to justify.

Some businesses were not going concerns before the crisis and they should not be kept alive just to fail after the crisis. Be honest with yourself. If your business was seriously struggling before the crisis, do not incur additional debt when you cannot see the path, cannot create the foundation for a profitable business.

It may be time to reinvent yourself. Not every business should be kept alive with life-support measures. Some will need to be closed. Others will need to be reinvented with a better model. Instead of taking this time of crisis expending your energy on a business that you know in your heart of hearts might not be built to survive, take this time to reinvent, adapt, create a better business. Plan, strategize, build a model that you can roll out when the crisis is over; A business plan that will benefit from the incubation period.

What we are trying to help you with in this series is to convince you that now is the time to remain calm, dedicate the time to seriously reviewing your balance sheet and determine how you can position yourself to not only better survive this crisis, but to have a better understanding of what you can do now and in the future to operate a more successful, profitably business because you have a plan. You are not letting the crisis control you, you are controlling your response and reaction to the crisis. Believe me, it will be much for you if you take the reigns and weather this with a proactive plan, not a reactionary, impulsive, poorly-thought-out-shoot-from-the-hips approach

We are a CPA firm that is ferociously committed to helping entrepreneurs realize their business dreams and potential with radical new thought processes and rock-solid strategies that work better than you ever imagined. Join us on LinkedIn and Facebook below oconnor-cpa-firm

Post Author: Tricia O'Connor CPA MBA