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Entrepreneurs are known for their high-risk tolerance. Research supports this stereotype, and so can I: Of all my clients, small business owners are the boldest in managing financial assets.
This approach to risk is understandable. Entrepreneurs are usually innovators who are willing to leave a “fixed salary” to test the feasibility and profitability of their ideas. I also found that this personality type is often optimistic. Entrepreneurs’ strong belief in advantages hides any disadvantages.


Seasoned entrepreneurs also know what action they can take if things don’t go according to plan. Or at least they think they know. We all thought we knew. Even for those of us who live by calculated risks, 2020 is a curveball. But if you take the business approach, last year it provided a good laboratory to test your relationship to risk.

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I’m not saying I like the unprecedented disruption in 2020, but it provides opportunities to help clients try new ways of doing business. I’ve seen what succeeds and where more planning is needed. And, like any good lab technician, I made a graph of the results. Do you want to know the four variables that lead to success during a pandemic? keep reading.

Maintain a healthy cash reserve


The saying that “cash is king” was obvious last year, especially in certain industries. A restaurant owner who has enough cash to operate for 12 months has a better chance of surviving than a restaurant owner whose reservations can only last 3 months. Cash gives us the flexibility needed for adequate supply in 2020. An adequate cash base is also the starting point for our cooperation with clients.

The company’s cash reserve policy is similar to the personal cash reserve policy: the strength of your plan increases with your level of cash. At a minimum, you should have sufficient funds to deal with typical outages, such as replacing a machine. You also need reserves or a well-designed insurance policy to deal with rare but major emergencies, for example, if a hurricane damages your property and forces you to close it for several months.

Establish a solid banking relationship


If you do not have cash, obtaining cash through a bank loan or line of credit may be beneficial in situations that are unforeseen or even difficult to understand. The visit begins with a good relationship.
According to a study by the U.S. National Office of Economic Affairs, in the competition to obtain the first attractive SBA-backed loans (namely, Pay Protection Program (PPP) loans), the applications of borrowers who are more closely connected with the bank May be approved. the study.


If you are considering selling your business, it can also be helpful to know a banker in person. For example, bankers can help you consolidate your balance sheet before you buy a company for sale, or they can borrow money from you to fund an employee stock ownership (ESOP) plan.

Draw a dividing line (or even a veil) between your business and your risk stack


Small business owners are the face of their business. In many cases, they are also wallets. Especially at the beginning, your business and personal financial situation are closely connected, if not intertwined, or even gathered together. We understand this. However, while your business may require your personal investment, we recommend that you have two different financial plans and two very different levels of risk.


This was tested in the pandemic. Think of a gym owner who had to close for months. If there is no veil between assets, you can choose to use personal assets to float your gym during shutdown. This measure may have bought you time, but the pandemic has not set an end date, so it has been putting all its assets at risk. Having a personal and business plan can protect your personal investment, even if you eventually run out of cash and are forced to close your business.

Develop contingency plans for the worst-case scenario in reality


For companies, making financial plans involves imagining “hypothetical” and “worst-case” scenarios. Scene planning usually feels like a task that can be postponed for a day, but you never know how long you have to do it.


The document we call “glass shattering” describes what happens if a key leader dies or becomes disabled. This exercise can help you see the gaps in the plan. The administrative gap will alleviate some anxiety. As we said in the office, “The second day of the crisis should not be your own crisis.”
Even a less dramatic interruption is worth considering. This winter, when our team was shaking and struggling during a historic blackout in Texas, we held a brainstorming session to determine what measures we will implement to avoid disruptions during future storms. We decided to migrate more services to the cloud and install a generator.


When planning for emergencies, remember to focus on your real risks, not your deepest fears. Humans tend to underestimate unknown risks. Some people turn a blind eye. Others can only imagine the worst. But 2020 tells us that the best plan is in the middle. (Why do you really need a garage full of toilet paper?) By planning for the worst under normal circumstances, you can avoid unrealistic planning for the worst case. Look for expert data that can help you more effectively identify the risks and opportunities facing your business and how to best plan for them.

Also Read: Post-Pandemic Adaptations| Business


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