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s2smodern

Still reeling from the shock of having their businesses shut down, most small businesses in Montana are now venturing forth to reopen, in stages, and in step with the state’s mandates on how they must operate. But how do they resurrect their business from the brink of disaster?

Having had to go more than two months with little or no revenues, many business owners are facing an uphill struggle, especially those who have not experienced any sort of economic downturn before. While there’s lots of information about how to apply for a variety of funding assistance, many need more “nuts and bolts” advice.

The Big Sky Business Journal asked Wayne Nelson, President of Stockman Bank, to share what he has learned over the years.  As a banker for the past 38 years, Nelson has had much opportunity to assist businesses through the ups and downs of economic challenges. “I have been in the  trenches with most of my clients and others,” said Nelson, and it is from that perspective that he brings advice – but he has never seen anything quite like what is happening now – and he adds, “neither have the business people.”

“These are very unusual times,” said Nelson, “and we must adjust accordingly.” Nelson believes it’s a transformative time – “a lot of things are going to be different… It isn’t going to go back to normal.”

But despite the unusualness of the situation, Nelson goes back to fundamentals in making suggestions about what business owners should do during this economic crisis – much of it is the same advice “that our bankers council to clients on almost a daily basis.”

Basically, a business needs to strategically plan. “Use strategy and develop a plan that will work.” It’s a task that will take more than “five minutes of thought. It will be hard work,” said Nelson. 

A strategic plan should be short. It’s about how to get through the next 30 or 60 days” said Nelson. It’s a plan that is proactive. It’s like driving a car. As you navigate you adjust to a curve, or to wind or to ice. “You don’t wait until stuff hits you,” said Nelson.

And once made, the strategic plan must be an everyday part of the business. “It is not just a piece of paper,” said Nelson, “You don’t write a plan on paper and put it on a shelf. You put it on your desk. Tape it to your computer. You look at it every day and ask every day if it continues to make sense.”

“During the phased reopening of our economy, you have to figure out how you are going to operate at those various stages. It requires a thoughtful process.” It will require closely scrutinizing the budget.

When things are going along smoothly, “we kind of get complacent, but when we encounter headwinds, we have to scrutinize expenses.”

Nelson emphasized, “Cash is king.”

Maybe things will “snap back,” as some forecasters are predicting, “but you have to prepare for the worst.”

“Prepare and be realistic as a business owner. You have to be there for the long haul, so be realistic at revising and planning for expenses.” This can get emotional. “A lot of business owners have a difficult time looking at employee expense.”

Employees are one of the most costly expenses, a fact that is very hard for some employers to hear.

It may be necessary, though “for you to get lean,” said Nelson, “When you come out the other side, you can re-hire.”

Then, look at your business model.  Some people never challenge the way they do things. To gain new and different perspectives, Nelson advises that business owners consult with a board of advisors, or other experienced business owners, or employees.

Maybe the changes that need to be made are to close less profitable locations. Reduce the size of your fleet of vehicles. Or reduce some of the services offered.

“Don’t do things because you have always done that. You have to rethink everything,” said Nelson.

He related an example of a change recently made by one Billings business, Denny Menholt Chevrolet. With people becoming less willing to go out in public, the company realized that business had dramatically fallen off for their service department, so they revised how they do business. While in the past people dropped off their vehicles for servicing, Menholt now offers to pick up the vehicle, wherever it is located, do the service work, and then return it, fully cleaned and sanitized.

For some businesses, changing the way you do things might mean having to go out in the field where your consumer is. Change your hours. And, it might require making some capital expenditures to make the changes.

Or the opposite — maybe you don’t need a new truck, or to expand work space right now or buy that new ground, right now, because leasing is less expensive than purchasing. Remember, “cash is king.”

“Think about everything you are doing,” advised Nelson, “that’s what being a good manager requires. They have to really show their stuff right now.”

”And, he adds confidently, “Good managers will prevail.”

Good managers or owners may have to seek advice. “Just because you are a business owner doesn’t mean you’re a good manager,” noted Nelson. Get good help to manage better.

Take inventory of all your “stuff.” It’s easy to accumulate stuff in a business. “A lot of businesses have more stuff than they need. Stuff may mean equipment or supplies, machinery no longer used, inventory that doesn’t sell well.  All such “stuff” is non-earning assets, which could and should be turned into cash. Again, “cash is king.”

Inventory that doesn’t turn as quickly as it should, becomes non-earning assets. Said Nelson, “Inventory is money sitting on a shelf.. . it doesn’t matter what it is… it should be in the till not on the shelf…. there is an optimal level of inventory.”

In a world of “quick delivery” if the inventory or item needs to be replaced, it can be quickly obtained.

A business owner should be asking themselves, “What is making me money and what is not making me money?”

Dive into all areas. Question everything.

Some businesses are discovering that their best approach to surviving is simply to shut down completely until they can fully open, because it is too expensive to operate without the opportunity to generate full revenue.

“Talk to a banker or an accountant,” said Nelson, “They can help you make decisions. We have experience from working with hundreds of borrowers. We can provide advice drawing on the wealth of previous experience.” While some dilemmas may be new to you, “we have seen it 42 times before.”

This is when a banker or an accountant can bring significant value.

Planning ahead and making necessary changes doesn’t mean you borrow more money. “Maybe borrowing more money is going to bury you. Too much debt could reduce future options.” said Nelson. “There may be a place for a loan that is proper, or to restructure an existing debt, or no loan at all.”

“How to use debt and its proper use is a careful thought-out process.”

In dealing with current costs, and to help keep cash in your till, talk to landlords or vendors to see what they may be willing to do. “Your landlord doesn’t want an empty building. Most landlords are more than happy to work out payments, to defer payments or maybe even skip payments,” said Nelson.

The same goes for vendors. They know things are tough and a “supplier doesn’t want to lose a customer either.” They may be willing to set more lenient terms, instead of net 30 days they may give you net 90 days, or more.

“Everybody needs each other,” said Nelson, “It is a time for everyone to work together.”