With Gov. Sisolak's recent executive decree that all Nevadans must wear a mask in public, many business owners I have talked to are growing increasingly disenfranchised.
After months of closures, then riots and now masks, there seems to be no end in sight. I thought a few words of wisdom might be in order. I have found that these “truths” have withstood the test of time, meaning they are as true now as they have ever been.
Truth #1: Operate from knowledge, not fear. Operating from fear causes several emotions that will result in the “fight, flight or freeze” response. These survival instincts are designed to ensure you don't die. In business, cooler heads prevail. Well-thought-out, intentional reactions to outside forces are what make entrepreneurs tick. We are merely solving a puzzle; how to come out better on the other side of the “crisis.”
Truth #2: Fortunes are made in a bad economy. It is very difficult to scale in a robust economy. Simply stated, labor is scarce and equipment is expensive. A “soft” economy allows savvy buyers to make strategic purchases that advance their agenda.
Truth #3: You make your money when you buy, not when you sell. Buying well goes a long way to create wealth. The key here is that you have cash/liquidity to buy well. If equipment is a part of your business, keep an eye on Facebook MarketPlace, craigslist, etc., to look for deals.
Truth #4: Cash is king: If you don't have any cash right now, don't lose heart. You have more latitude now to secure favorable vendor terms, bank terms, customer deposits, etc. All of these increase cash. Your vendors and customers have a vested interest in you making it. Leverage these relationships to increase cash to make smart strategic investments. It might be the perfect time to buy a competitor, start a new product line, etc. In the end, having cash will allow you to quickly move to capitalize on an opportunity.
Truth #5: Diversification is your friend. Don't fall into the trap of taking your retirement account to keep the busines afloat. Granted, the CARES Act gave you some flexibility to tap into your retirement account without the penalty and tax pain. It's a trap! Even with personal guarantees, etc., retirement accounts are off limits to creditors. Don't put capital that is not at risk at risk.
Truth #6: A crisis is a terrible thing to waste. From rightsizing compensation to customer payment terms, a good crisis will help business owners see the need to make hard decisions and live with the consequences. In times of plenty, there is simply no motivation to make hard decisions. Our current season aligns stakeholders and values. Now is the time to make hard decisions that will benefit you for years to come.
Truth #7: The only constant is change. If you got into the entrepreneurial game thinking that constant change would not be part of the equation, you didn't do your homework. I get it — the current crisis has put us all in “decision fatigue.” It seems like every decision we make has life or death consequences, either for our customers or the team. The truth is, we are creatures of habit. We like when things are plodding along as expected. Our resiliency as entrepreneurs is directly correlated to our ability to pivot quickly as our environment changes.
Truth #8: If you don't have an exit strategy for your business when you start your business, it's like jumping out of an airplane without a parachute. Many business owners get very excited when they have an “idea” that is the genesis for their business. They nurture and grow it like a mama bear cares for her cub. Every cub will eventually leave the mama bear and venture out on their own. Unfortunately, many business owners “birth” their business and are completely shocked and appalled when the business tries to have a life beyond the founder. Work with an experienced professional to create an exit strategy sooner rather than later. It is not fun trying to extricate a business from the founder halfway into due diligence in a sale transaction.
This information is general in nature. Consult with a qualified CPA to discuss your particular situation.
Michael Bosma, CPA, is Principal-in-Charge of the Reno office of CliftonLarsonAllen LLP. His NNBW column, “Covering Your Assets,” focuses on effective planning strategies for every business owner. Reach him for comment at firstname.lastname@example.org.