August 10, 2020
A short time ago, many of us would not have thought that our lives would essentially come to a screeching halt due to a global pandemic. This massive change in the economic climate has left some businesses paralyzed. Many owners are now grappling with the reality of trying to survive. Here at Grimbleby Coleman, the past few months have been filled with countless conversations with concerned business owners. Based on those conversations, we’ve put together three questions you can ask yourself to help manage your business through the current crisis.
How long can my business sustain itself in the current economy?
We all know “cash is king,” but how long do you actually have until your reserves run dry? It’s a scary thought, but it’s not as unnerving as not knowing. Invest some time into developing a cash projection so you can see if and when you could face a problem. Once you have your baseline projection, consider how it might impact your business if cash inflow or outflow were to increase by 10%.
This exercise is a bit like stepping on the bathroom scale. Although it isn’t fun, you’ll gain an accurate picture of the current situation. Knowing the number doesn’t change anything, but it does allow you to decide if you need to course correct or if you are on track with your goals. Moving forward, use your cash projection as a baseline to measure against the actual numbers.
How will I know when my business is recovering and I can return my operations to normal?
While normal may never feel the same, having a financial measure of when your business has recovered can be both helpful and hopeful. A breakeven analysis will tell you at what level your sales can cover your business expenses. This analysis will also predict your monthly fixed costs and variable costs, and allow you to carefully review your expenses. Knowing your break-even point for sales can give you a target to strive for.
You can take this information a step further by using it to come up with targets for daily sales, or sales by employee, and possibly also recognize when it might be time to hire more employees. Sharing this information with your team can help them feel committed and invested in helping your business recover.
Have I taken advantage of all resources and opportunities available to my business?
Many business owners are aware of the Paycheck Protection Program loans and Employee Retention credits available. You should, however, think beyond those programs and consider other opportunities:
- Revise terms and prices with vendors, including lease agreements.
- Stay on top of your receivables, and enforce late payment fees and finance charges, when appropriate.
- Analyze revenue streams and consider discontinuing or temporarily pausing those with the lowest margins. Invest your resources into those with the highest margins.
- Evaluate what has changed in your market, and shift to accommodate consumer needs and capitalize on opportunities. Consider a new service line or product or increasing your online sales presence.
- Streamline operations and maximize resources. This might mean removing a process to reduce downtime or cross-training employees to increase capacity.
We understand these uncertain times can feel overwhelming or even crippling. Not sure what your next step should be? We’d be happy to talk to you about options for your best plan of action. Call your accountant or email email@example.com today.