Small Business Financial Triage
BY MICHAEL SICURANZA
First and foremost, I hope everyone is continuing to be safe and maintaining social distancing. I received a lot of great feedback about my article last week on Financial Triage. So this week, all of us at Affinity Wealth put together a triage plan for small businesses. Remember, these are tips and strategies to use if you don’t have a business plan or strategy. Like MASH the tv show, we are doing “meatball surgery”, i.e. keeping your business afloat.
SO, without further ado, here are some ideas.:
CASH IS KING – Just like the previous article, preserving cash during time of disruption is key. The more you have the better. Owners, try to live off of your salary and keep the money in the business.
TAKE ON DEBT – Completely counter intuitive but if you have credit lines – max them out and sit on the cash. Yes, it will cost you some interest; here’s the reason why: banks, if things get crazy, could shut down unused lines of credit because of their own financial issues. This happened to a lot of people in 2007-09 when credit was frozen, and companies that needed access to capital couldn’t tap their credit lines when they needed it the most. This way, you have the money and it adds to your cash pile. We’ve already seen two banks who loan to financial advisors for M&A stop doing loans for now. If it’s happening there, why wouldn’t it hit your local bank?
DEFER RETIREMENT CONTRIBUTIONS – I know with the stock market down 30% from its highs, it’s tempting to put in retirement plan contributions earlier than normal. Don’t, if you are cash strapped or could be cash strapped in the near future.
STRESS TEST YOUR FINANCIALS – Focus on FREE CASH FLOW. Do you have it? How much? Are your over/under leveraged? What happens if revenues drop another 20%?
WHO’S NEXT IN LINE – While healthy, make it clear who is next in line in case the leader of your company gets sick. Spelling it out now is important.
KEEP ROUTINE – This includes proper sleep, fitness and health. As a leader, you have a lot on your shoulders, you need to take care of yourself in order to help others.
GOAL IS TO PRESERVE YOUR CULTURE – A culture is what makes a company survive and thrive. Making sure the key aspects of who you are as a company needs to be maintained despite people working from home. Do a daily video check-in so everyone can see each other. Encourage them to tell stories. Keep it as light as possible under the circumstances.
The financial damage to the Corona Virus will not be weeks or even months, it most likely will be 12 -18 months down the line. Companies that focus on these ideas give themselves the best chance to see that timeline.