“I thwink… 2010 will be a treeemendous year… I mean, it’s gotta, just Gotta (with a capital “G”) be better than this one… you know what I’m sayin’? Hey, honey, pass me another glass…” (Drunken Charlotte business owner bypassing the shot of hemlock for some more red wine)
“The MacArthur Foundation gave out its annual genius awards. This year’s awards went to a journalist, a mental health scientist, and a couple who sold their house three years ago.” (Conan O’Brien from The Tonight Show with Conan O’Brien)
“Have yourself a merry little Christmas. Let your heart be light.” (Ralph Blane)
In last “Charlotte Property Management Weekly’s” episode, I discussed the first two takeaways from businesses looking to survive this tough economic environment. This article will focus on the other top two business adjustments I’ve seen businesses take in 2009. Without further ado, they are:
1. Revenue hedging became important. By this, I mean that business models adapted. Let’s look at real estate. People need to live somewhere, right? If they are not buying and selling homes, they’ll be renting. Businesses made sure they were in position to benefit no matter what their potential customers chose to do.
2. Cash was promoted from “King” to “High and Mighty Emperor.” Before banks completely shut off the loan faucet, forward-looking businesses took the maximum out of their lines of credit and put the cash into interest-bearing accounts; their cost of accessing capital was the interest spread between the borrowed money and the short-term certificate of deposits. Smart move! Banks cut everyone else’s lines of credit to tighten their balance sheets. So what did businesses do so they would have sufficient working capital to pay people?
Small business became like big business. They played with their accounts payable (paid their vendors later) and accounts receivable (provided incentives to customers to get paid earlier). What does this mean? Here are examples:
· Accounts payable: You pay your vendors an average of $1K/day and wait 15 days to pay invoices. However, if you started paying invoices in 20 days, you would now have $5K more in your bank account (5 days X $1K/day = $5K).
· Accounts receivable: You take in $2K/day in revenue and your customers pay you in 30 days on average. If you can get them to pay you in 27 days, then you would add $6K to your bank account balance (3 days X $2K = $6K).
It has been said that 90% of all businesses fail for lack of cash flow. Take these steps to stay in the game. And be thankful that the tough economy, though presently painful, ultimately makes your business stronger (think of how tired the Karate Kid was washing all of Mr. Miyagi’s cars)! When economic times get better, you will be very thankful (think a beaten-down Daniel-Son taking down Johnny Lawrence with the “Crane Kick” to win the All Valley Karate Tournament!)!
Thank you for your readership and I look forward to dishing on more of our business issues in 2010. Have a wonderful holiday!
Brett Furniss is the President & Owner of BDF Realty, “Charlotte’s Most Innovative Property Management & Investment Company”specializing in rent-to-own (lease options) and rent-to-sell homes. You can follow his Twitter thoughts on the Charlotte real estate market by clicking on http://Twitter.com/BDFRealty. He is the author of the FREE E-Manual entitled “How to Rent-To-Sell Your Own Home” (http://www.RentToSell.com/RTS-Book.html) which details how to get the most potential buyers to your home in this challenging real estate market.
“The MacArthur Foundation gave out its annual genius awards. This year’s awards went to a journalist, a mental health scientist, and a couple who sold their house three years ago.” (Conan O’Brien from The Tonight Show with Conan O’Brien)
“Have yourself a merry little Christmas. Let your heart be light.” (Ralph Blane)
In last “Charlotte Property Management Weekly’s” episode, I discussed the first two takeaways from businesses looking to survive this tough economic environment. This article will focus on the other top two business adjustments I’ve seen businesses take in 2009. Without further ado, they are:
1. Revenue hedging became important. By this, I mean that business models adapted. Let’s look at real estate. People need to live somewhere, right? If they are not buying and selling homes, they’ll be renting. Businesses made sure they were in position to benefit no matter what their potential customers chose to do.
2. Cash was promoted from “King” to “High and Mighty Emperor.” Before banks completely shut off the loan faucet, forward-looking businesses took the maximum out of their lines of credit and put the cash into interest-bearing accounts; their cost of accessing capital was the interest spread between the borrowed money and the short-term certificate of deposits. Smart move! Banks cut everyone else’s lines of credit to tighten their balance sheets. So what did businesses do so they would have sufficient working capital to pay people?
Small business became like big business. They played with their accounts payable (paid their vendors later) and accounts receivable (provided incentives to customers to get paid earlier). What does this mean? Here are examples:
· Accounts payable: You pay your vendors an average of $1K/day and wait 15 days to pay invoices. However, if you started paying invoices in 20 days, you would now have $5K more in your bank account (5 days X $1K/day = $5K).
· Accounts receivable: You take in $2K/day in revenue and your customers pay you in 30 days on average. If you can get them to pay you in 27 days, then you would add $6K to your bank account balance (3 days X $2K = $6K).
It has been said that 90% of all businesses fail for lack of cash flow. Take these steps to stay in the game. And be thankful that the tough economy, though presently painful, ultimately makes your business stronger (think of how tired the Karate Kid was washing all of Mr. Miyagi’s cars)! When economic times get better, you will be very thankful (think a beaten-down Daniel-Son taking down Johnny Lawrence with the “Crane Kick” to win the All Valley Karate Tournament!)!
Thank you for your readership and I look forward to dishing on more of our business issues in 2010. Have a wonderful holiday!
Brett Furniss is the President & Owner of BDF Realty, “Charlotte’s Most Innovative Property Management & Investment Company”specializing in rent-to-own (lease options) and rent-to-sell homes. You can follow his Twitter thoughts on the Charlotte real estate market by clicking on http://Twitter.com/BDFRealty. He is the author of the FREE E-Manual entitled “How to Rent-To-Sell Your Own Home” (http://www.RentToSell.com/RTS-Book.html) which details how to get the most potential buyers to your home in this challenging real estate market.
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