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Cash Is King

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If you’re reading this, you’re one of the lucky shop owners that was able to stay open throughout an extremely difficult few months. And, beyond that, if you applied for government loans and got assistance during this time, I believe you can use that to take your business to the next level. 

 Let me explain. It’s important to keep a cash flow—even if it was just breaking even—it’s important to cover your expenses. So, if you applied for assistance, don’t feel bad. The most important thing was staying afloat. And, now that you’ve done that, you are in a really good position. The PPP loan, it’s forgivable if you spend it on the right expenses. What that means now is that 60 percent of the money must be spent on payroll and it must be spent within 24 weeks, which has been updated from 75 percent on payroll and 8 weeks to spend. This gives business owners more time with the money and more flexibility with it. There’s also the Economic Injury Disaster Loans. Many of our clients got this. That’s a lot of assistance available—when else are you going to get this?  

Now, the impact of all of this varies from business to business, region to region. Some lost a lot of business and dropped as much as 50 percent. But some actually did more revenue. Either way, if you were able to cover all of your existing expenses by what you were bringing in, the money that you got from the government is a bonus. It’s bonus money. How? Well, if you need to spend 60 percent of that money on your payroll, that means that the money coming in from your customers doesn’t need to be used for that expense. And, as I mentioned in another column, I believe that this summer is going to be the best yet, meaning there will be a lot of money coming in from customers. 

We’re encouraging our clients that get any type of assistance to put this in a separate banking account that’s dedicated for PPP expenditures. That way, you can make sure you’re using the money for what it’s supposed to be used for. And the rest of the money that’s coming in—that’s extra revenue that you don’t have to spend on payroll. 

Extra money—that’s great! Now, what are you planning on spending it on? A shiny new piece of equipment? An renovation? Hang on, now. What I’m encouraging everyone to do is save it. I know, I know... that’s not the most exciting piece of advice, but it’s practical and it’s certainly what is needed. We don’t know what’s going to happen in the Fall. It’s an upcoming election and the coronavirus hasn’t gone away, so I encourage all of you to stash this money in case something happens. Not saying it’s going to, but it’s definitely better to be safe than to be sorry. So, as tempting as it might be to go out and spend it, this is my advice: Don’t pay off debt. Don’t refinance. Don’t buy crazy amounts of equipment. Don’t do anything with your cash. It’s nuts out there.  

If you don’t take this opportunity, you are putting yourself at a disadvantage and giving your competition a very easy advantage. Next spring, your competitors may have 10 times the cash you have. They can start offering signing bonuses to the top candidates and buying new equipment. They can go to training or give their shop the facelift that it needs to catch your loyal customers’ eyes. Don’t let this happen. Take advantage of the situation. 

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