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The businesses that give themselves options, including plenty of cash to work with, will survive and thrive. 

Contributor: Andrew Amrhein, NCG Senior Coach

For many contractors and businesses we speak with, work right now is plentiful.   For the time being, enough restrictions have been lifted or loosened that it almost feels normal.   That said, there is still a lot of uncertainty.   The possibility remains that things could get worse before they get better.   Some areas are already re-starting restrictions to slow the spread of Covid-19.   Schools remain a major question for most of the country.   Now is the time to accumulate cash for an unclear future.  

Start by asking yourself:  How long can my business operate in another downturn?    For a meaningful answer, I would suggest knowing a couple numbers:

  1. Revenue per day: How much revenue is your team producing per day? Using Revenue per Day, you can calculate two of the most important Indicators (KPI’s) ever:
  2. Days Receivables = Receivables / Rev per Day
  3. Days Cash =  Cash / Rev per Day

Know these numbers cold. Post them for your team and get everyone involved in improving them, even if they’re just cheering others on.  Our recommended best practice would be to always have at least 30+days Cash on Hand, with 2 months of Overhead in reserves. Once you get there, never go below 30 days Cash on Hand without a plan.  Sacrifice spending to get there.

Here are some other suggestions that will help:
  • Start transferring a small amount to Business Savings today.  Something you won’t notice.  Even $100 a week adds up.  Push yourself.
  • Finish jobs well.  Avoid letting punch lists and walkthru’s linger.  Any novice can start a job. It takes a Pro to bring it home!
  • Focus on profit as well as revenue. Stick to jobs you know and do well. Now probably isn’t a great time to add a new service line.
  • Stay coordinated!  Don’t let your regular meetings fall to the wayside. Remember: a good 30 minute huddle to get clarity saves many hours!
  • Exploit your niche customers and referrals. Connect with the customers that love you, ask them for more work and referrals.
  • Consider repairing vehicles and equipment before purchasing.  If you must purchase, do you really need “brand new” or might lightly used suffice?
  • Meet with your accountant for tax planning

About meeting with your accountant, if you received PPP funding, there’s a major tax issue looming.  The IRS has clarified that any expenses forgiven cannot be deducted on your tax forms.  That could be a major tax hit at the worst possible time.   Take time now to plan with your accountant.   Also, consider writing your Representatives to change this.

Last, consider applying for the SBA’s Disaster Loan (EIDL) program.  You’ll submit the application, and the SBA will tell you what you qualify for.  

  • No payments for 12months
  • 3.75% interest — that’s low!
  • 30 year term — that’s cheap!
  • No pre-payment penalty. If you don’t use it, just pay it back.   

Now is not the time to try going it alone.  Use every resource!   For some, it has been a matter of pride to avoid needing/using loans.   Your employees would rather have a backup plan– apply for the EIDL! (Please, with a cherry on top.)  Put it into savings, and forget you have it.  

The businesses that give themselves options, including plenty of cash to work with, will survive and thrive.  Everyone will sleep better practicing cash management responsibility.  Take the opportunity now to build your Cash Fortress. You’ll be glad you did.

All the best,

Andrew Amrhein

Andrew Amrhein


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