Over the past 14 months, we’ve seen many small businesses shift their operations and adapt to our ‘new normal’ way of life. Transitioning from traditional brick and mortar retail to online shopping, in-person dining to curbside pickup, the pandemic has ushered in a new wave of ‘normal’ business practices.
While only time will tell which of these new ways of work and life will stick around, some business practices endure and maintain their importance regardless of shifting economies and lifestyles. In fact, they have become even more pertinent during a pandemic!
The #1 thing that every small business owner should learn from this pandemic is that Cash Is King.
While perhaps considered by some to be an antiquated business adage, this pandemic has proved yet again just how important it is to have enough cash on hand at all times. Having enough cash on hand not only helps small business owners weather the storm better, but also puts them in a better position to recover from the storm.
While many small businesses benefited from receiving a PPP (Paycheck Protection Program) loan, for some businesses this simply wasn't enough to keep the doors open. As unpredictable and catastrophic as this pandemic has been to so many business owners, it has also highlighted just how important having cash is.
The number one reason most small businesses fail is because of poor cash flow management. There simply isn’t enough cash to cover the business expenses. Even during normal times, proper cash flow planning can be difficult for some business owners. Add economic turmoil and uncertainty to the mix, and many business owners can find themselves out of business for good. No matter what industry you’re in, proper cash flow planning is a must. Simple planning today makes tomorrow’s storm more manageable.
Business owners should have a minimum of 2 months worth of expenses saved up in cash. However, having 6 months worth of expenses saved up in cash is ideal. It’s not a matter of if the next storm comes, it's a matter of when the next storm comes. And the more cash you have saved up in your business is the difference of whether that next storm is a hurricane or just a quick downpour.