If you’re counting on the government bailing out your small business, you may be waiting a long time. If you’re lucky, you may get a small loan that may or may not be turned into a grant.
The Paycheck Protection Plan (PPP) started out as a good idea. Somewhere it went wrong.
If it’s to be, it’s up to me!
If it’s one thing that entrepreneurs and small business owners know, it’s how to take responsibility. The buck stops here. And that spot is right where you sit. You are responsible for making sure customers come in the door (figuratively these days), that they pay and that they leave happy, so they tell their friends and come back again.
If any part of that isn’t working, it’s up to you to fix it. Here are some tools you can use to get started
#1: Take the Government Cheese.
The government has some loans, grants and programs to help small businesses. They’ve been rolled out poorly and the rules keep changing, but that doesn’t mean they are to be avoided at all costs. Just be aware of what works and what doesn’t.
The two most common loans for small businesses are the Paycheck Protection Plan (PPP) and the Economic Injury Disaster Loan (EIDL). The EIDL has been the quiet one. You apply directly with the SBA. Theoretically, you’ll get $1,000 per employee as a forgivable advance. And then at a future date, you’ll be contacted by an SBA loan officer. Sometimes they reject your application out of hand.
If you receive an EIDL rejection, apply again. Almost always the reason for the rejection is that your financial statement numbers didn’t show a profit or much of one. Use accurate 2019 numbers for your appeal. You might get it this time! The loan will be up to $150,000, 3.5% with 30 year fixed and fully amortized. It’s a good loan.
The second loan is the PPP loan/grant. It’s been the most public loan because of all the problems and changes. Wade through the information and make an application if you haven’t already. There is still money waiting for you. Whatever you spend in accordance with their rules in the first 8 weeks will be forgiven. After that, you have 2 years to pay it back. The interest rate is 1%. That’s another good loan.
The SBA has other loans available as well such as the 7 (a) loan, the 504 loan and microloans. See your SBA lender, usually your banker, if a loan will help you get through the tough times.
#2: Protect Your Cash Flow
Don’t pay off low interest loans. If you have an opportunity to get good long term, low interest financing, take it.
Keep money flowing in. Increase it as much as possible.
Watch the money that flows out. Decrease it, wherever you can without hurting your business.
#3: Make Your Expenses Pay!
An expense is something that hurts your bottom line. It’s cash out of your pocket. An investment is something that brings in a return. It’s also cash out of your pocket, but there is a resulting current or future stream of cash that is going to come back to you.
As an example, my full service tax service US Tax Aid focuses on all three aspects of successful tax planning: strategy, implementation and compliance.
We don’t just prepare your tax return. We do that, of course, as well as provide representation for you if there is ever a challenge from the IRS or a state. But those things are the things we do LAST. It all starts with tax strategy.
And we have an average savings of over $14,000 per year from the process.
If you pay someone to just prepare your return with no changes moving forward, you have an expense. If you pay someone to build a strategy, implement it and then make sure you stay in compliance, you have an investment.
One takes money out of your pocket. The other puts money in your pocket.
#4: Look at ALL Your Assets.
An asset should provide a return of investment. It should put money in your pocket, either directly or indirectly.
Do you have lazy assets? Is your inventory old and obsolete? Do you have equipment you no longer use? Do you have money tied up in failing projects that it’s time to let go of?
And what about developing the potential profit centers that can mean more money in your pocket in the next 30 days? Shorten your time to bring money into your business.
More than ever, cash is king. And all of your assets need to be working.
#5: Negotiate Ongoing Expenses.
If you don’t ask, the answer is always no. What expenses could you re-negotiate? You’ll never know unless you ask. Here are some things to consider.
Reduce your monthly rent.
Get a discount on utilities.
Cut discretionary spending.
Lease, rather than buy.
#6: Speed Up Cash In and Slow Down Cash Out.
Don’t extend credit to your customers. Get payment up front. Give discounts for payments in advance (especially if you are planning for a recession). Make sure you take credit cards.
Don’t pay your bills early, or if you do, only do it if you get a discount.
#7: Own Your Niche.
Don’t just “focus on your core competencies.” Dominate them. Be the absolute best in your niche. If someone thinks of your niche, be sure they know you are the one to go to. Sometimes that means focusing even more directly on what you do and who your customers actually are.
The more global your market becomes, the narrower your niche should be.
Own it.
#8: Keep Your Current Clients.
Get in touch with your current customers and clients. What are their biggest concerns right now? How can you help them?
Don’t rely on over-used phrases, but speak from the heart. (If I hear one more “in these uncertain times” or “in these unprecedented times”, I swear I’m going to snap.)
Now is the time for genuine human compassion with a positive message. Even if a customer or client needs to leave you for a while, it’s likely to be just temporary. And they will send their friends to you.
#9: Increase Marketing.
Marketing doesn’t have to cost a lot. It can be simply putting yourself and your business out there. Increase your social media presence. All that takes is time. Increase articles on your blog. Get interviewed on podcasting. One strategy I use is to have some kind of media exposure outside my own network at least once a day. And for my own network, at least 10 times a day.
#10: Watch your Credit Scores.
Banks are already starting to tighten up on lending. Watch your credit scores. You may need the capacity for borrowing later.
Keeping your business alive is one thing. Actually thriving and growing is another. Look for the advantage in the changing market. How can your business adapt and grow? Is it time to find new products and services for your niche? Or, would it be better to start in another niche?
Most people hang on to losing propositions way too long, whether they may be a bad employee or partner, industry, vendor or customer. You don’t have the luxury of time right now. Act fast, but act smart.
