You Ask, I Answer: Small Business Recovery Advice?

In today's episode, Michelle asks: if you could give one piece of advice to small businesses as they prepare for recovery, what would it be? This is more of a uh economics and finance question than a marketing one. The major lesson that I think everyone, certainly everyone who survived the Great Recession learned was that the single most important thing for any business during any kind of downturn is cash flow. Positive cash flow, net positive cash flow. Net positive cash flow means you stayed in business because you're bringing in more money than you were spending.

Negative cash flow meant you're going out of business. It's a question of when, but if you're spending more than you're earning, you will eventually go out of business. Now it could be a very long time if you you know, if you're Amazon or Apple or whatever, and you're sitting on a million, you know, a million billion dollars or whatever. Um but fundamentally it comes down to cash flow. And this is true of both uh businesses and individuals, people, you know, ordinary people like you and me.

If our cash flow is positive, we're okay. Like, you know, you make your rent, uh, whatever, and you're you're good. Your negative cash flow, it's a question of time before you run into serious trouble. Cash flow is really simple and straightforward. Every small business's accounting program should have cash flow statements built into it.

Uh, if yours doesn't, for some reason, you've got a really terrible accounting package and you need to change immediately. The easiest way to think about cash flow is take a sheet of paper, right? And draw a line down the middle. On one side, you put all of your income, on the other side, you put all your expenses. You tally both of them up for whatever period of time, you know, monthly, weekly, whatever it is that you run your business on, and then you subtract uh expenses from income.

If the number is greater than zero, great, you've got positive cash flow. If the number's less than zero, you're in trouble. At that point, you now have to start making decisions. What can you do to either increase the income side or decrease the expense side? A lot of businesses, for good or ill, um, have had to lay off people, right?

Because generally speaking, human beings are the most costly thing on your books. Salary, healthcare, all that stuff. Um, and the sooner that you cut down those expenses, the sooner you can reduce the expense side and and presumably keep whatever income side is going. For a lot of small businesses, um, you know, that's literally the only lever they have to pull on the expense side is is people. On the income side, this is where you will be tested as uh as a small business owner, as an entrepreneur.

We have had, you know, for about 10 years, really, um, solid economic growth. Yeah, nine years. So the Great Recession really didn't end until about 2011. And then it took up a good four years after that for there to be real growth. Um so for a lot of working professionals today who are under the age of 30, entrepreneurs, whatever, uh, they didn't live through the Great Recession as a business owner.

They they lived through it, obviously they were alive at the time, but they didn't live through it as a business owner, having to make those business decisions about how do you balance those two fundamental levers to increase your income and decrease your expenses. Some of the things you can do on the income side, depending on the kind of business you are, you may be able to repurpose some of what you do in other markets or repurpose and repackage in other ways. So, for example, uh, there are a lot of folks I know who are in who are public speakers, that's their job. And obviously, there's not a whole lot of public speaking going on right now, and what there is does not pay well because everyone's kind of doing these free virtual events. But there's plenty of room for people putting together courses and classes and master classes, mastermind groups, all these things that they can use to supplement their income and find alternate streams of of revenue.

There was a book, oh gosh, uh twenty years ago. Um I wonder if I still have it. It's up there somewhere. Um, called Multiple Streams of Internet Income. And it was kind of a cheesy book in spots and things, uh very sort of uh used car salesman tone, but the point was valid.

Using digital marketing, this is in the days before digital marketing was a thing, uh, you can build multiple streams of income. And this is something that as a both a person as and as a small business, you need to do. You need to have those additional uh types of income available so that you're bringing in dollars wherever you can find them. Affiliate advertising, um, email marketing, social media marketing. Ultimately, you're you're trying to get to a point of arbitrage where you are spending less money to bring in more money.

There's a sort of an operational cash flow. If you spend a dollar, but you get two dollars back, you're in great shape, right? You can put a dollar into that, whatever machine that's doing that all day long. Where it gets into tricky ground for a lot of businesses is understanding their margins. Because if you put a dollar in the machine and a dollar one comes back, yes, it is net positive in that transaction, but then you have all the overhead expenses.

So one of the things that's important to do on the cash flow worksheet is figure out what is your margin, right? Um if you are bringing in a thousand dollars and you're spending 999, you have no buffer, you have no wiggle room if something changes drastically. If you are spending if you're bringing in a thousand dollars and you're spending two hundred, you got eight hundred dollars of wiggle room. So if an unexpected expense comes up, you can you you have some flexibility, you have some some uh buffer for system shocks, and they're going to be plenty, unfortunately. So figuring out what your net positive cash flow is or what your net cash flow is is important.

Figure out your margin is what's important, and then reduce your expenses on the one side, and then pull push the lever for income to as many places as you possibly can. Um if you've got any kind of audience whatsoever, figure out how to monetize that audience, figure out how to get that audience to do something, anything uh that brings in revenue. If you don't have an audience, spend some time building it. It would have been better to have been doing this for the last few years while uh that was easy, but here we are. Um spend some time where you can providing value to people using the digital technologies because they do still cost the least, generally speaking, for acquisition, and get to a point where you have an audience that will be valuable to somebody else to market to, right?

If you have a an email newsletter, uh popular YouTube channel, whatever the case is, as long as you understand your audience, uh, you can use that to build those additional streams of income. There's a lot of people who have done a lot of work, some of it good, some of it not, on things like passive income. Can you create something like you know, a book you published that sells, whether you or need to be constantly doing it or not? The difference between that, uh, you know, you can spend all your time marketing your book as opposed to writing a book. Um for white papers, custom research, you name it, whatever the thing is, do you have the ability to create stuff that will operate without you necessarily need to be pushing the boulder uphill for it every single day?

So that's the advice I would give on the small business side. Understand where your net cash flow is, understand where your margin is, do your best to reduce your expenses, do your best to increase your income streams by as much as possible wherever you can find it within the law, the bounds of boundaries of law and ethics. Um find ways to pivot your operations to accommodate the current landscape. There was a really interesting piece recently that talked about this may be the resurgence of drive-in movie theaters. Makes total sense.

If you're trying to keep away from other people and sharing the same airspace, it's uh certainly a possibility. But what are the uh things that in your business you can do to get people to change their behavior and work with you? From you know, c contactless delivery of foods to uh coaching to whatever the thing is, how do you make the situation work for you? It will require a lot of creativity, a lot of brainstorming, uh a lot of paying attention and looking at what other businesses in your industry are doing and seeing if you can do the similar things. It's a good question, it's an important question.

So if you have follow up questions, please leave them in the comments box below. Subscribe to the YouTube channel and the newsletter. I'll talk to you soon. Want help solving your company's data analytics and digital marketing problems? Visit trustinsights.ai today and let us know how we can help you.