• Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • HOME
  • NEWS+OPINIONS
    • NEWS TO US
    • COLUMNS
      • APPARENT HORIZON
      • DEAR READER
      • Close
    • LONGFORM FEATURES
    • OPINIONS
    • EDITORIAL
    • Close
  • ARTS+ENTERTAINMENT
    • FILM
    • MUSIC
    • COMEDY
    • PERFORMING ARTS
    • VISUAL ARTS
    • Close
  • DINING+DRINKING
    • EATS
    • SIPS
    • Close
  • LIFESTYLE
    • CANNABIS
      • TALKING JOINTS MEMO
      • Close
    • WELLNESS
    • GTFO
    • Close
  • STUFF TO DO
  • TICKETS
  • ABOUT US
    • 5 DOUBLE-U’S
    • MASTHEAD
    • DISTRIBUTION
    • ADVERTISE
    • SUBMISSIONS
    • PRIVACY POLICY
    • Close
  • BECOME A MEMBER

Dig Bos

The Dig - Boston's Only Newspaper

READ CURRENT STREET ISSUE

DIG Year End 2020

HOW SMALL BIZ CAN SURVIVE THE CORONAVIRUS STORM AND THRIVE IN CRISIS

Written by DAVID RABINOVITZ Posted March 29, 2020 Filed Under: NEWS+OPINIONS

Boston Coronavirus
PHOTO OF AN EMPTY BOSTON BY DEREK KOUYOUMJIAN

Edited by George W. Hightower

I write about cannabis, generally, but today I am writing about business. Before jumping headlong into the cannabis sector several years ago, I was employed in the management consulting field providing financial advisory and strategic advice to C-level principals of privately-held firms, often in the engineering sector. In the spring of 2016, I met the love of my life judging a business plan competition at my (MBA) alma mater, Babson. As the judges went around the room introducing themselves, I quickly explained the boring financial stuff I do for engineering firms and then mentioned on the other side of the barbell, that I consult in the cannabis sector. Everyone is always intrigued about the cannabis projects; it’s a real conversation starter and that’s how I met Beth.

However, today’s column is on business: the nuts and bolts of navigating the sort of turbulent and uncharted territory we find ourselves staring into. The idea for this column was spurred by calls with clients over the past weeks who are concerned about whether they can afford to stay afloat, let alone how they might adapt to survive beyond the storm. One size never fits all, but the following overview might help many by simply pointing readers back to the basics of strategic planning.

A downturn like the one we face today creates risks, and for some, interesting opportunities. Managing those uncertainties and surviving takes planning, not waiting to see what happens and reacting. If you lack a high-level perspective, your instinctive reactions may make sense for the isolated problem confronting you today, but probably will not weave well with other decisions you’ll face. This could impact your ability to survive. Your decisions should drive to your vision and align with your plan. Anything else will simply contribute to generalized chaos.

The grease of commerce

Surviving the turbulence is fundamentally a matter of cash flow. Cash is the lifeblood of a business. It is the most essential ingredient of working capital, and working capital is the grease that keeps a business running. Without capital to pay bills, suppliers stop supplying, employees stop coming to work, and the economic engine grinds to a halt. Assuming you are a business-to-business, business-to-government, or business-to-third party payor, you sell on credit in some form and have accounts receivable. The following discussion is not as applicable to businesses that are cash and carry—like conventional retail, consumer services, food service, or hospitality.

Business might come to a grinding halt, deals may fall apart, or orders may be delayed, but you never pay your current expenses from current sales. Today’s expenses are paid from invoices issued 30, 60, or 90-plus days ago. You fund your operations by collecting old invoices, and replace those invoices with new sales. Those new sales will be collected in the future and will fund payment of future expenses.

Your first step is to forecast your cash flow and calculate how much time you have to assess and consider what to do. An air bubble in water will rise to the surface at a rate of about one foot per second. That means if you can hold your breath for 60-plus seconds, you can safely ascend from 60 feet underwater. The first rule of SCUBA training is you always have time to think. The same adage applies here—the trick is estimating how much time you have and how to stretch it out.

Digging into the numbers

Review your accounts receivable and estimate, based on customer payment history, when each invoice might be paid. If your clients are restaurants and bars, you’ll need to consider their current predicament. Model the results and allow for payment elasticity—that as time goes on, payments might slow. Build your model to easily adjust these variables. You will now have a handle on expected cash inflows. I assisted a well-known consulting firm in the engineering sector to develop a webinar on this topic and we suggested that for planning purposes, as of April 15, add five days to the expected payment date for every additional 15 days that pass. The economy has not felt the full impact of this event and you should expect further slow-down in your collections cycle (let’s all hope I’m gladly proven wrong)

Now let’s move onto classifying costs. Skip anything you know about fixed and variable. Dump all the MBA-speak. Focus on practicality. I often teach young engineers that costs include costs you control, costs you influence, and costs you grin and bear. Align your thinking to the circumstance.Today, we’ll focus on costs (vendors) that absolutely must be paid, should be paid, and would be good to be paid.

Vendors that absolutely must be paid provide critical services that are automatically suspended for non-payment and will materially impact the business if they are not paid. These are things like health insurance, business insurance, and, as an example, software subscriptions that, if not paid, result in service interruption.

Employees must be paid, but you may be able to create some runway. Reduced workweeks (if demand drops) or temporary wage reductions (with larger cuts at the higher end exchanged for greater protection for the lower end) can help stretch payroll budgets. Asking staff to use vacation time might sound good, but it still represents a cash outflow and will not preserve short term liquidity. You need to adjust actual wages if demand drops and should not be afraid to survey the staff in order to understand what they believe is the most equitable solution. Maintain camaraderie: only one captain can steer the ship, but setting sails and stoking the boilers only happens by committee.

If you must make payroll adjustments, focus your staff on asking for relief from home lenders, landlords, auto lenders, and credit card companies. That bucket of expenses can make up 40% or more of a person’s fixed expenses. If they can secure some short-term relief, you may find your staff can survive without excessive stress on reduced wages (whether due to salary reduction or work-week reduction) for a period of time, until we have weathered this storm.

The next level of suppliers are critical items that will not be suspended automatically for non-payment but that cannot be easily replaced. These include rent and lease payments as well as primary suppliers. Payment terms can often be stretched (you’re not the only one thinking this way, that’s why you need to build payment elasticity into your collections planning). Contact these types of suppliers early and work on partial deferrals. If your rent is $20,000 per month, try to negotiate a cash payment of $10,000 with the other $10,000 deferred until business activity resumes. You’re looking for ways to extend the runway, never wait until cash is critical. You can always negotiate a deferral and decide not to take it.

Your last level of suppliers are purely “non-essential.” Think office and cleaning supplies, training and education, non-essential travel, etc. These expenses can be stretched the furthest. They are also likely the smallest items on your income statement, but in aggregate, they can help buy time. These are suppliers you use that are not critical to your customer. Think of it this way: if you make ice cream, the quality of the milk is important, but if you change carton or packing tape suppliers, the customer may not notice.

Once you have modeled this out, you will have a sense of the length of your runway—how far you can run with no new revenue. Burn that figure into your brain. Use it as a reference point for business decisions that impact cash flow. Ask yourself whether the current decision you face now will shrink or expand your runway tomorrow.

Finally, overlay a monthly break-even calculation. If your business needs $85,000 a month to pay its basic bills to keep afloat and you have enough capital to last 75 days, for each period you expect some revenue, you will be extending the runway. Follow that runway number and keep focusing on ways to extend it until we get past the worst of this outbreak. 

We will get past this. At the tender age of 27, I thought the world was over on Black Monday, October 19, 1987 when the stock market crashed, but we got past it. Then came the Savings and Loan crash in 1989 followed by the dot-com crash in 1999, while in and the Great Recession in 2008. In each instance, we got past it.

This is the worst health calamity seen in my 60-year lifetime, but it comes on the back of a strong economy and one thing is for certain—we will get past it. You’ve built a business over many years, let’s not let it crumble over the next few months.

HELP DIGBOSTON WEATHER THIS STORM AND CONTINUE PROVIDING ARTICLES LIKE THIS ONE

David Rabinovitz
DAVID RABINOVITZ

David is a business consultant and aspiring Massachusetts marijuana entrepreneur. He is the treasurer of the Mass Cannabis Reform Coalition and CEO of NewCann Group / www.CannaVentureLabs.com. David is a trainer for the Mass Cannabis Control Commission Social Equity training program and mentors numerous Social Equity Program participants. On Fridays at 4:00 PM he co-hosts the Green Rush cannabis business talk Jimmy Young at twitch.tv/procannabismedia. He speaks at various industry events and his industry insights and analysis have been featured in several media outlets. Despite a phobia for needles, in his spare time he is a regular platelet donor for the American Red Cross. Contact David at [email protected] or connect on LinkedIn at linkedin.com/in/davidrabinovitz/

More from author
  • DAVID RABINOVITZ
    https://digboston.com/author/david-rabinovitz/
    THE ROAD TO HOME DELIVERY PT. 5: DOGS IN THE FIGHT—IDENTIFYING THE PLAYERS
  • DAVID RABINOVITZ
    https://digboston.com/author/david-rabinovitz/
    THE ROAD TO HOME DELIVERY PT. 4: STEP-BY-STEP—RULES FOR OPERATORS, EXPLAINED FOR CONSUMERS
  • DAVID RABINOVITZ
    https://digboston.com/author/david-rabinovitz/
    THE ROAD TO HOME DELIVERY PT. 3: FEAR FACTOR—HOW THE DELIVERY OPERATOR MODEL WORKS
  • DAVID RABINOVITZ
    https://digboston.com/author/david-rabinovitz/
    THE ROAD TO HOME DELIVERY PT. 2: THE CANNABIS COMMUNITY ORGANIZES

Filed Under: NEWS+OPINIONS Tagged With: coronavirus, COVID, news, news to us, slider

WHAT’S NEW

VIDEO: MASS VACCINES ADMINISTERED TO MOST VULNERABLE AROUND GREATER BOSTON

VIDEO: MASS VACCINES ADMINISTERED TO MOST VULNERABLE AROUND GREATER BOSTON

2021 Biden inauguration Boston

PHOTOS & RECAP: “NO HONEYMOON FOR BIDEN” RALLY IN BOSTON

2020 Indian farmers' protest - On a truck. Photo CC0 1.0 Universal Public Domain by Randeep Maddoke, randeepphotoartist@gmail.com.

OPINION: IS DISSENT ANTI-NATIONALISM OR PATRIOTISM?

WU ASSERTS THE IMPORTANCE OF THE ARTS IN HER CAMPAIGN

WU ASSERTS THE IMPORTANCE OF THE ARTS IN HER CAMPAIGN

STREET MEDICS BOLSTER PROTESTS IN MORE WAYS THAN YOU MAY REALIZE

STREET MEDICS BOLSTER PROTESTS IN MORE WAYS THAN YOU MAY REALIZE

HOW ONE MASS TOWN TOOK EXTRAORDINARY MEASURES TO APPEASE A CONTROVERSIAL COP

HOW ONE MASS TOWN TOOK EXTRAORDINARY MEASURES TO APPEASE A CONTROVERSIAL COP

Primary Sidebar

HEMPIRE FREEDOM PACK 25% OFF

FEATURED EVENT

Most Popular

  • APPOINTED SOMERVILLE OFFICIAL SPURS OUTRAGE WITH TWEETS FROM DC MOB SCENE by MARC LEVY
  • Aerial View Parkman Bandstand at Boston Common. CC BY-SA 4.0 2017 by AbhiSuryawanshi. NO HONEYMOON FOR BIDEN: 1/20 PROTEST ON BOSTON COMMON, 4 PM by MATTHEW ANDREWS
  • VIDEO: COP WHO BRAGGED THAT HE HIT PROTESTERS SHOWS HOW BAD APPLES THRIVE IN BOSTON by CHRIS FARAONE
  • PRISON HORRORS BY THE NUMBERS by SARAH BETANCOURT
  • IT’S HARDER THAN EVER TO FIND A BATHROOM IN BOSTON. WHAT’S THE CITY DOING ABOUT IT? by ZACK HUFFMAN

READ CURRENT MEMBER EDITION

DIG Member 1.9 – 11/26/20

READ CURRENT STREET ISSUE

DIG Year End 2020

Footer

digbos

“Trump was voted out. However, this is not a man “Trump was voted out. However, this is not a mandate for #Biden and #Harris.” https://digboston.com/photos-recap-no-honeymoon-for-biden-rally-in-boston/ #photo #rally #march #left #protest #inauguration #Boston #Massachusetts
OPINION: IS DISSENT ANTI-NATIONALISM OR PATRIOTISM OPINION: IS DISSENT ANTI-NATIONALISM OR PATRIOTISM? #Boston #protest for Indian farmers, Saturday 1/23/21, 12-1 pm at the #Massachusetts State House https://digboston.com/opinion-is-dissent-anti-nationalism-or-patriotism/ #India #politics #food #farmer #protest #justice #solidarity @monica_gill1
HOW ONE MASS TOWN TOOK EXTRAORDINARY MEASURES TO A HOW ONE MASS TOWN TOOK EXTRAORDINARY MEASURES TO APPEASE A CONTROVERSIAL COP https://digboston.com/no-justice-how-officials-in-one-mass-town-took-extraordinary-measures-to-appease-a-controversial-cop/ #ArlingtonMA #police #reform #cop #racism #controversy #BlackLivesMatter #Massachusetts
Ghost kitchens simply don’t have a need for host Ghost kitchens simply don’t have a need for hosts, servers, bartenders, bussers … What happens to those #jobs if virtual kitchens continue to flourish? https://digboston.com/ghost-story-virtual-kitchens-appear-to-be-the-next-big-thing-but-at-what-cost/ #restaurant #labor #work #Boston #Massachusetts #coronavirus #COVID19
“I don’t think we’re going to wake up on Jan “I don’t think we’re going to wake up on Jan. 7 in the same country we went to bed in on the 6th.” https://digboston.com/former-mass-gubernatorial-candidate-predicted-violence-before-assault-on-capitol/ #politics #Massachusetts #national #Capitol #WashingtonDC #MAGA
RADICAL AND RELEVANT: THE LIFE OF HARRY BRILL http RADICAL AND RELEVANT: THE LIFE OF HARRY BRILL https://digboston.com/radical-and-relevant-the-life-of-harry-brill/ #obituary #organizer #radical #sociologist #democracy #politics @UMassBoston @BklynCollege411 @UCBerkeley #Boston #Massachusetts #NewYorkCity #Berkeley #California
NO HONEYMOON FOR BIDEN: 1/20 #PROTEST ON BOSTON CO NO HONEYMOON FOR BIDEN: 1/20 #PROTEST ON BOSTON COMMON, 4 PM https://digboston.com/no-honeymoon-for-biden-1-20-protest-on-boston-common-4-pm/ #opinion #progressive #left #action #inauguration #Boston #Massachusetts
Light and sweet and hoppy, we’re loving this lat Light and sweet and hoppy, we’re loving this latest incarnation of a #beer that’s been in the making for months. https://digboston.com/video-jacks-abby-x-boston-celtics-pride-and-parquet-hoppy-lager-unboxing-tasting/ #fun #video #review #Boston #Massachusetts
Jostling for position and influence are the disadv Jostling for position and influence are the disadvantaged candidates, existing industry participants, and municipalities … https://digboston.com/the-road-to-home-delivery-pt-5-dogs-in-the-fight-identifying-the-players/ #cannabis #politics #analysis #Massachusetts
The candidates will be interviewed about the upcom The candidates will be interviewed about the upcoming race. https://digboston.com/wu-and-campbell-to-speak-at-mayoral-candidate-webinar/ #politics #mayor #campaign #Boston #Massachusetts
Load More... Follow on Instagram
Social Buttons

DigBoston facebook DigBoston Twitter DigBoston Instagram

Masthead

About

Submissions

Advertise

Privacy Policy

Customer Service

Distribution

About Us

DigBoston is a one-stop nexus for everything worth doing or knowing in the Boston area. It's an alt-weekly, it's a website, it's an e-mail blast, it's a twitter account, it's that cool party that you were at last night ... hey, you're reading it, so it's gotta be good. For advertising inquiries: [email protected] To reach Editorial: [email protected] For internship opportunities: [email protected]