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I’m a huge advocate of
monitoring and managing your cash. If you run out of cash, depending on your
supplier relationships, you could be forced to shutter in as little as four to
six weeks. Unfortunately, running out of cash is a serious, serious issue,
which is why I mention it so often.
I speak from personal experience. Once, I owned a real estate investment company. I was a millionaire on
paper, but I had little cash and suffered when several problems hit multiple
properties at once. To put it bluntly, I got slammed.
Now, with businesses
having to shutter or drastically reduce operations due to the coronavirus, cash
is an absolutely critical issue for way too many. To help, the government has enacted
measures to help, including providing SBA loans with relaxed underwriting
standards and a forgivable component. However, if you take advantage of these,
you will need to understand what your cash needs are to ensure you can repay
the regular portion of the loan.
I STRONGLY
recommend using a 12-week
cash flow projection.
I use this with all my consulting clients and it is simply eye-opening. You
can see what is happening to your cash now, over the 12-week period, as well as
forecast the future to determine what you need to address now to be prepared.
A tool like this is
invaluable for managing your cash and spotting issues before they punch you in
the gut. If you’ve already been sucker punched by the situation we’re in, it’s
a useful tool for charting a path forward.
A recession is coming.
No, it’s here.
Several companies were
born and thrived during a downturn. In 2009, a partner and I almost bought a masonry
construction firm. The original bank financing the deal had to pull the plug
because too many masonry firms in their portfolio were failing. But our target
was thriving.
Why? He had systems in place and constantly tracked his metrics
and made the necessary operational and financial adjustments. He competed on
value.
Let's review:
- Do
you review your financial statements at least monthly?
- Do
you have KPIs (key performance indicators) for key areas of your business and
review them at least weekly?
- What’s
happening with those KPIs and financial metrics? What’s the trend? Are there
shocks?
Just looking at the numbers is a
complete waste of time!
You need to compare and
contrast, identify trends, and find out the why behind the trends. This
is what it means to work on
your business.
If you want to
survive and thrive during this downturn, your business operations must
be on point.
You might need to re-build /
re-structure your operations and organization to eliminate waste and ratchet up
employee productivity. In a recession where cash is tight and financing may be
restricted, every dollar counts. Not just for you, but also for your customers. You thrive by building a company that is both valuable to you and to the customers you serve.
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