This is a scary time for small businesses. That’s why we wanted to talk to someone with practical advice.
So our guest for this episode of the podcast is Matthew Roling, the Executive Director at the Office of Business Innovation at Wayne State University and a certified public accountant. He spent a combined seven years at Rock Ventures and has also worked as a turnaround consultant in the aftermath of the Great Recession at Alex Partners.
Below is the audio of the conversation and a lightly edited transcript.
Sven Gustafson: So the Coronavirus, as we know is, on one hand, it’s a health crisis, but it’s also an economic crisis for all kinds of businesses, obviously, big and small. But of all categories of businesses are small businesses sort of the most threatened by Coronavirus and what’s happening? I mean, what are we looking at here?
Matthew Roling: Oh, absolutely. You know, the $2 trillion bailout package that was passed by the Senate a couple days ago is is aimed squarely at blue chip companies. You know, there is a lot of money in that bill that will be used probably at the SBA, Small Business Administration, so there is some money that will be allocated there. But, it remains to be seen how it’ll be meted out, and and what types of businesses will qualify, and small businesses generally don’t have the cash reserves that larger companies have, or the access to capital markets. So there’s a lot of uncertainty for small businesses and small nonprofits right now. It’s really difficult.
Gustafson: What are you hearing from small business owners? You know, in your capacity at Wayne State, I’m sure a lot of them are coming to you in a panic right now.
Roling: It’s really interesting because as I started to put myself out there to try and help people, I assumed that a lot of the questions would relate to okay, how do I how do I communicate and negotiate with my lender?
How do I communicate negotiate with my landlord? But the questions that I’ve been getting most frequently are about human resources. You know, what’s the difference between a furlough and a layoff?
How do I need to communicate with my employees? What’s the best way to make sure that their opportunities for unemployment benefits are preserved, which, which is really heartening, because, you know, at least for the people that I’ve been talking to, it means that a lot of people are doing their best to put their employees first.
Gustafson: We’re seeing a lot of small businesses that we know and that will be featured on this show start to get creative, right, like so, for example, we’ve talked to some businesses that have pivoted over to essentially manufacturing hand sanitizers. You’re seeing that at some local distilleries as a matter of fact.
Some companies are pivoting to doing things like making face masks with no guarantee that they will even be compensated for it and you know, we’ve spoken to a brewery that is spinning out all these new businesses. Doing things like selling frozen foods and trying to deliver some of their products. Are these sort of good ideas in your opinion or is there further risk involved in doing these kinds of things?
Roling: Well, I mean, there’s, of course, there’s always risk. But you know, if you this is this is such a strange circumstance, right? If you had a typical recession or even if the United States was at war with a foreign state, it’s horrible, right? But it’s also familiar. And it’s easy to kind of point at the problem and say, well, this is the existential threats.
But we have this circumstance where it’s invisible, right, and we’re being told to turn off or repurpose live swathes of the economy without being able to see the problem, right. But what I think it’s really important because the actions and behaviors that companies take right now, I think will be judged, you know, for years to come.
And the first thing that you really need to do if you’re a small business or nonprofit is take stock of your people and your assets. And ask yourself, hey, how can I be part of the solution because if it’s four weeks for four months, sooner or later, we’re going to, we’re going to see the end of this tunnel.
And the more creative you can get in being part of the solution, the more that we’re gonna be able to compress that period of time. And then you know, we’re going to be out on the other side of this, and there’s going to be an ocean of pent up demand, you know, people are going to want to celebrate, people are going to want to travel, people want to buy cars, and clothes and food, and so on and so forth.
And I think you’re going to see a huge amount of brand equity and brand loyalty for organizations that go out of their way to think creatively about how to address this problem.
Gustafson: What sort of tips do you have for small business owners for things they can do to try to weather this, you know, downtime and survive essentially,
Roling: Cash, cash is life and for small organizations, and every single week that you can stay alive, where when we closer to the end of the tunnel. We’re one week closer to a vaccine. We’re one week closer to more comprehensive testing. And so the very first thing you have to do is manage your cash extremely tight. When I was a turnaround consultant, you know, the tool of the trade is a 13 week cash forecast.
And every single week you roll, you roll that analysis forward. Because you know, you don’t run out of money in a month or a year, you run out of money in a day. You know, there comes one day where you can’t make payroll, you can’t pay your mortgage, you can’t pay your landlord.
And so the tighter you can manage that, right and so if you if you get really accurate at modeling out your weekly cash flows, you can look into the future and you can see, oh my gosh, in seven weeks, I’m not gonna be able to make payroll.
And that gives you seven weeks to come up with creative solutions for pushing out your payables, so you know working with your vendors or your landlord or your lenders or coming up with ways to generate more cash.
But the more time you have, the more the more creative, the less risk you have in executing on ideas to put more cash in the business. And so if you’re flying blind, that moment in time where you might not be able to make payroll might surprise you. And if it comes at you, quickly, you might not be able to react. And that’s when you go out of business.
Gustafson: I’d imagine there’s great demand for, you know, people who can consult with small business owners at this time, but a lot of them of course, are are in business themselves. And you know, so for a small business owner there, that’s an additional outlay of cash, any free resources out there that business owners can sort of take advantage of.
Roling: Yeah, absolutely. You know, through Wayne State is one of our sister organizations is TechTown. And TechTown is working furiously to both rollout a working capital grant program for small businesses. And we’re also working on setting up or I guess, repurposing there, they have a program called “Ask an Expert,” where businesses can kind of come in and talk to somebody with skills and acumen to help them, you know, figure this out.
And so we’re working there to bring in people like myself, who can sit down and talk to nonprofit and for-profit business leaders to help them figure this stuff out.
The first thing you should do is if you do have an accountant or some type of financial professional in your life, you should talk to them. But through Tech Town, we are working on offering those services and capital to small businesses.
Gustafson: And Tech Town also has launched a like a loan program for small businesses, have they not as part of this?
Roling: Yeah, that’s actually the program I was referencing, it’s focused on brick and mortar businesses in the city of Detroit that have owners that have average median incomes that I believe are at or below the poverty line.
So, if you’re a small business in Detroit, and you haven’t been raking it in, it’s something you should take a look at. And I actually think it’s a grant program, not alone program. So I think it’s strings-free cash. And, you know, kind of to that point, the other the second piece of advice I would give any small business or nonprofit right now is, there’s no such thing as having too much cash on your balance sheet right now.
So, if you have existing loan or line or credit agreements out there, if you have accounts receivable that you think you can collect, or other invoices outstanding, you’ve got to do everything in your power to tap those lines or to get that money in your bank accounts as fast as possible, because again, that just helps you increase your cushion more so that you can kind of get through to the other side of this lockdown.
Gustafson: You mentioned earlier this the Senate passed stimulus package $2 trillion. I was reading up on this and it it does have some things specifically tailored to small businesses, forgivable loans, payroll, tax credits, a delay in paying social security taxes. You mentioned the Small Business Administration loan program. how helpful is all of this? And what would you like to see the government do more to help small businesses in particular,
Roling: It’s really fluid, right. And these tools are being negotiated and developed at warp speed, as far as you know, the federal and state governments concerned right.
So it’s super important that if you are a small business or small nonprofit, that you’re keeping tabs on these in real-time, as much as possible. You know, there there are some things that are under the control of the federal government and there are some things that aren’t right?
So, you know, the federal government can’t tell landlords, “hey, you know, you have to not collect rent.” Or they can’t tell lenders, “hey, you can’t foreclose on mortgages or loans.” Right? And when I say foreclosure, I mean that more in the commercial sense than the residential sense, right. But, you know, so having said that, what kind of levers can they pull to help, you know, obviously giving a 90 day payroll tax holiday is huge.
Giving people individuals an extra 90 days to pay taxes is huge.
Creating pots of money and funds and money that are either easily forgivable or low interest is huge. My only concern is that the levers that the government does pull that they create windows that are long enough, that are light enough and open enough to accommodate experts best guess as to how long this is going to last.
And you have people at the Trump administration talking about you know, the lockdown kind of subsiding and in April. And that, at least to my knowledge from what I’ve read from experts is not probably feasible.
And so you want to give, again, small businesses and nonprofits as much runway as possible to get to the point where state and local officials feel comfortable opening the economy back up.
And, you know, 90 days three months feels right. I’m not, you know, I’m not a public health expert. So I can’t, I can’t opine on whether or not that’s the right window. I just, I just think it’s really important that when the federal government does create these tools, that they are consulting with health officials to make sure that the windows of time that they create are wide enough.
Gustafson: And then finally, you know, it’s always difficult to look into the future and make predictions but thinking about when this is over and we return to some semblance of normal. Will there be new opportunities or new needs to kind of adapt to a new normal do you think for a small business?
Roling: Oh my gosh, I mean, the world won’t be the same. You know, it’s really hard to see silver linings right now and especially if you’re furiously trying to, you know, inject capital into your business or worrying of your you know, if you’re like most normal human beings trying to kind of protect the welfare of your employees or your customers or your lenders or your other stakeholders. But the world will never be the same.
And, if you’re if you are running a nonprofit or small business, this is really a moment in time for reflection. If you’ve been kind of going sideways for a while, right, and you’ve just been kind of feeling the drag and the fatigue of running a small business. You might want to tap out you might want to want to close up shop.
Because I ran a tech startup for a year and a half. It’s really, really hard. It’s emotionally a lot of work and effort. And so you know, this is a judgment free time, right? If you feel like, you know, well, this might be a good time to, to close the shop.
Alternatively, the phrase that I kind of keep sharing with people is hey look when times are good you prepare for when times are bad, and when times are bad, you prepare for when times are good.
And so if you want to keep growing your business in its current state, now’s the time to, you know, prepare for that moment. Because you know, a lot of your competitors might not make it through, there’s going to be a lot of pent up demand.
And so thinking strategically about how you can really kind of take your organization to the next level is there’s another option.
And then the kind of the third, the third path is a pivot, right. And, you know, I think for the last two or three decades we have had the trends have been increasingly focused on the digital world and e-commerce. Telecommuting, social media, etc.
But having said that, you know, by and large, most purchases, the average American made were in a brick and mortar retail environment. And this crisis just dumped gasoline on all of the digital fires in our world.
And a lot of people that might have never dreamt of buying a dress online, or, you know, buying pet food online or working from home, are all being forced to do that. And they’re all probably going to get used to it. So what does that mean for our commercial world? You know, a couple of months from now. And so, thinking long and hard about where your company fits into the new world order when this is all said and done is extremely important.
Gustafson: So this could be really a transformational moment in our economy?
Roling: There’s no question about it. You know, if you’re in technology or public health, or the built world, right, you need to be thinking long and hard about what this crisis means for your industry going forward.
If you’re in public health or research epidemiology, you know, you just got huge tailwinds for your work, right?
If you’re in commercial real estate, or you’re you have a brick and mortar retail presence, you are facing some incredible headwinds.
And so you know, those questions really need to be asked because it’s not going to be back to business as usual for a lot of people when we’re at the other end of this tunnel.