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Money

Money, Money, Money in your Small Business

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Virtually every small business owner worries about money. But in this Covid-19 environment, with such an uncertain future, managing money is even more critical now for your small business survival. So how should you spend your money now?

First: a couple of basic things to remember.

Cash is king. If the three most significant things in real estate are “location, location, location,” the three most important things in business are “cash, cash, cash.” In normal times, a smart business also looks at ‘profitability’—which product or service lines have the best return on investment. You don’t have time for that right now. Instead, concentrate on making sales and getting cash, even if you have small profit margins. Money in the bank is going to enable you to survive until times get better (and they will).

Credit is queen. Most small businesses rightfully hate being in debt. But having good credit—and using it wisely—is an important tool in your management toolbox, especially now. Here are three types of credit to use—just use them wisely:

  • Lines of credit (LOCs)– Having a flexible credit line to finance short-term purchases is always a good idea. In today’s environment, banks may be hesitant to give you a new LOC, but it doesn’t hurt to ask.
  • Credit cards – The dirty little secret is most small businesses use credit cards to finance business expenses. I do too. Just be careful. Credit cards have high interest rates (though not as high as ‘fintech’/alternative lenders, which should be avoided). Stay on top of your credit card payments!
  • Suppliers/vendors – Talk to companies you buy your inventory and materials from and discuss a plan for better payment terms. Explain how better terms are part of a well-considered business plan for your long-term survival. They’re probably more willing to negotiate than ever. If not, shop for other vendors hungry for new business.

Negotiate everything. I mean everything. Right now almost every business is worried they’re going to lose customers. They’re in the same boat as you and your business: needing cash more than profitability. Now’s the time to contact each and every source you pay and ask—politely—for lower costs. In some cases, you may need to reduce your level of service, but that’s probably okay. If they won’t lower your costs, ask for better payment terms—perhaps letting you pay monthly bills in payments over a number of months

Here’s a short list of what you should negotiate:
  • Rent
  • Telecom providers, cell and internet
  • Online subscription services
  • Other services, such as payroll, accounting, web hosting
  • Vendors
  • Insurance policies

Look for things you can do without. For instance, we got rid of our postage meter a few months ago, saving money every month.

Spend money.  While you need to watch your spending, don’t be so obsessed with lowering expenses that you cut things that bring you money or help you survive, such as:

  • Staying in front of your current customers. You should regularly be sending out email newsletters, posting and boosting on social media, making calls. Let your current and past customers know how they can buy from you now. Offer discounts, weekly specials, sell gift cards, provide delivery. Do what it takes to get them to open their wallets.
  • Marketing to prospects. Inevitably, you’re going to lose customers in this environment, so you need new ones too. History has shown that companies who increase their marketing in economic downturns actually increase market share.
  • Safety and cleanliness. If you have a place of business, whether a retail store, a restaurant, a factory, an office: cleanliness is job one. Customers and employees will not return if they feel they are not safe. If any kind of outbreak happens at your place of business, you’ll be set back even further than you are now. Spend money on having employees continually disinfect, providing hand sanitizer and face masks. Require masks on customers for in-person interactions. It is unfair to your employees to force them to interact with customers not wearing masks.
  • Pivoting. You are almost certainly going to have to make some changes in your business to meet the new realities of a Covid-19 world. Social distancing and some isolation will last for many months, if not years. Spend money necessary to change your business practices to meet the needs of this new world.

Copyright Rhonda Abrams, 2020

This article originally ran in USA Today on May 20, 2020