The nation keeps roiling, and life for many of your Greater Sacramento customers might take longer than anticipated to get back to “normal”.
For some, they might not actually want to get back to whatever that “normal” was before all of this. Some of this change might be healthy.
But for many, these days are hard. And that includes many of our Greater Sacramento business owner clients. The PPP has helped (as well as the EIDL in some cases), but seeing these federal aid packages as anything more than a band-aid might be a problem.
Use these funds to help your business GROW through this season, as much as possible.
In fact, there was a recent article I saw that I considered re-hashing and translating into non-accountant speak for you, but the level of detail was so good, that I think you should just take a look at the original: https://www.accountingtoday.com/opinion/is-maximizing-ppp-loan-forgiveness-the-real-endgame
Essentially, there are some very good arguments to be made for some businesses that “full forgiveness” of PPP isn’t always the best LONG term play.
If you want to take a look with us at these kinds of scenarios for your business, shoot me an email through the link at the top of the page or give us a call: (916) 481-1025
We can help you run the numbers, and figure out a good plan.
But even this is still a short-term picture.
What’s the optimal long-term strategy for your business?
Well, this might be a good place to start …
Customer Value Represents True Value For A Business In Greater Sacramento
“Everything you’ve ever wanted is on the other side of fear.” – George Addair
I have often helped my business owner clients peg a dollar amount on their business. This is called “business valuation” — and it isn’t always as simple as “year-over-year profit”.
Payroll, overhead, sustainability, sales systems, business category, leadership stability — all of these factors and more go into creating the dollar amount that brokers tend to use.
But in this environment, we’re not (just) looking at this from an exit strategy standpoint, but also — especially — from the standpoint of viability.
And so when we look at your business’ viability in 2020, we should consider not only your immediate (short term) P/L, but also your long term hopes. And in that process, (this is the clincher) very carefully consider customer value.
After all, every business, every product line, every service organization, even if it is distanced from the ultimate consumer by a chain of distribution, is still dependent on an actual consumer or end user for its lasting success.
That’s why the greatest asset a business can ever possess is a known list of satisfied, loyal customers.
Emphasis on “known”.
This is the foundation for long-term viability.
Recently, I observed a local business that was for sale. My observations revealed that the store’s inventory mix was poorly selected for its primary clientele, which were business people and office workers. Considerable floor space in the store was being wasted and the store did have excellent traffic during the day.
The asking price for the store was a little high (as asking prices usually are), but it looked to me like the numbers could be made to work. But here is a common circumstance in these scenarios, and the million-dollar question (literally):
“How many people with their home addresses or valid email address are on your mailing list?”
Many business owners, even years into operating a business, have never bothered to collect their customers’ names and addresses onto a distribution list. They have no way to directly reach out to past and present customers.
Business owners like this mistakenly believe that the value of a business is its lease, its furniture and fixtures, its inventory, its financial statements.
They don’t understand that none of those things are worth very much without customers.
Now let’s take a big brand. When you buy a new car or a new stereo or a new appliance, you are separated from that product’s manufacturer by a chain of distribution that includes manufacturer’s representatives, wholesalers, warehouse operators, and the store or the dealer.
Yet you probably filled out a warranty registration card and mailed it to the manufacturer or registered it online. Why is that done? One BIG reason (honestly, the primary reason) is so that the manufacturer can find out who its customer actually is. Some manufacturers then use these lists to market. Others just accumulate the data unsure of what to do with it, but at least they *have* a customer list.
As you establish marketing objectives, strategies, and the VALUE for your business if you ever want to sell it, I urge you to carefully consider customer value FIRST.
Believe me, buyers of businesses care about this data … and so should you, as someone who would want to actually grow.
Knowing who your customers are — and possessing the ability to reach to them regularly — is a power position for a business owner.
Existing customers are the engine for your business.
So what have you done to build up that engine? In 2020, it’s a critical question, and one to which it’s worth taking the necessary time to find a good answer.
Ornelas & Ornelas
I’m grateful for our chance to serve you and your business — and we are dedicated to its success, in every season.
Feel free to forward this article to a business associate or client you know who could benefit from our assistance. While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for families and business owners.