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Flash Sale + Social Proof


Flash Sale + Social Proof


Flash Sale + Social Proof

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One of the lessons from COVID is for repair shops to have a strong cash reserve.  Shop owners need to budget their money each week, and allocate money to different bank accounts, such as payroll, operating expenses, taxes, etc.

Another account I would recommend is to have a Cash Reserve account, where money is allocating each week, and not touched unless their is a emergency, such as an economic downturn and or if an economic emergency occurs in your area or with your company. 

While no one could have predicted the affects from COVID 19, I think we can all agree that being cash strong is a viable strategy.

You should have anywhere from 3 to 6 months of covered expenses in a separate bank account.  I know, I know....it's a lot of money. Start slow and build each week. Anything set aside is better than nothing. 

Of course, to have a reserve means that you need to have the profit to put away. Right?  Well, another reason to know your numbers, revisit your pricing and make sure your labor rate is enough to support your payroll, operating expenses and have enough left over to set aside money for the unexpected.

Trust me, you'll be glad you did. 

 

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  • 3 months later...

Flash Sale + Social Proof


Flash Sale + Social Proof


Flash Sale + Social Proof

When I had my little business, for the first three years all we did was pay off loans, but at the end of those three years we were debt free. Then we started putting anywhere from 3 to 5% of the gross sales each month into that side account savings for what if expenses. It would grow and grow and if we needed some surprise un accounted for purchase, we had the money. No sweat, no more loans for us. When we decided to sell the business, that extra money was moved in to the bonus for the owners account!  Worked out well and have suggested that approach to a relative that has a small business and so far they are doing it too. They want to buy a bigger building and are planning on using that money for expansion. Also they do not want loans.

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3 hours ago, Charlie said:

3 to 6 months of operating expenses, set aside in a stagnant account is hard to fathom to a small business owner who is trying to grow.

I speak from experience, for the first 24 years, I leveraged everything to grow. I work well in stressful situations, and can find my way through the tough times. It seemed for years, the numbers in my checkbook balance were red. I accepted every risk in order to grow to three locations, purchasing the Real Estate along the way. The trick was always having good revenue, strong revenue can conceal a multitude of sins. For the first 24 years I operated with no cash in the bank (to speak of) while making payments on the prior years taxes. I was bold and lucky, some would say stupid.... I was very fortunate.

Then, in 2019 I read Profit First, and it changed my world. The economic stresses of running this company have nearly vanished. We just purchased our fifth location, taxes are all paid with next years in the bank. The numbers in our Operating Account are now all black. When my bankers ask for the performance report, they almost can't believe it. Shifting how that revenue is handled, and changing my mindset has given our company strength and predictability. 

For anyone looking to sell their business, or to transfer operations to the next generation (that's all of us), having strong, predictable financials will change the multiplier, in many cases it doubles it. I suppose you could say, having strong, predictable financials is the best investment you will make. 

Was it necessary to operate the way I did for the first 24 years, in order to get where I am? I can't say for sure, but what I will say, is if I was to do it all over again, I would begin with the Profit First philosophy. Many of us start from nothing, with nothing, and we only know what we know. The lucky ones survive, and along the way, become enlightened, stimulating positive change. I only hope that for the next operator, it doesn't take 24 years to figure it out. 

Charlie, amazing post my friend!  Words of Wisdom for sure. The book Profit First should be required reading for any business owner. In fact, for everyone. Thank you for sharing a little of your story. I am sure that many of the shop owners reading it can relate. Myself included!

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