Reopening and recovery is on top of every business owner’s mind, and there is no better time than now to think about the financial health of your business. Afterall, strong financial health leads to an increased likelihood of long-term sustainability.
Strong financial health starts with understanding your short- and long-term cash flow. It also means gaging the health of your clients, vendors and employees. At Piermont, we recommend you consider a holistic approach to measuring your business wellness.
Assess the impact of COVID-19 on your business
Now that the initial shock of the pandemic has warned it’s important to assess your cash flow, liquidity, and holdings. Once you understand your situation, stress test it. A “stress test” is a way to put your business under the microscope to diagnose whether it can survive a worst-case scenario. In assessing your cash flow, liquidity, and holdings, evaluate what would happen if you have no new customers, if there was a supplier breakdown, if you lose a key contract…. Use a sensitivity analysis to understand how long you can sustain your existing operations and what changes you need to make. For example, look at what would happen if you had only 10% of your usual customers in June or July. Then do that same exercise with 50% of your customers. Ask yourself the hard questions and model the outcomes. This will help inform any immediate steps you need to take to shore up your business.
Understand the impact on your constituents
Once you have projected different scenarios for your business, bring it back to reality. To do that, you will need to gage how your customers, vendors, and employees are coping with the “new COVID normal.” Ask your constituents key questions: How have their needs shifted? How have they been impacted by stay-at-home orders? What will reopening mean for them? Envision yourself in their shoes. By understanding your key constituents and how they have been impacted, you will have a more detailed picture of your financial outlook over the coming months.
Communicate with your bank and key advisors
In these uncertain times, communication is more important than ever. In addition to communicating with your customers, vendors and employees, you will want to ensure your banker and/ or financial advisors are aware of your situation. For example, talk with your bank about the outcomes of your stress tests, discuss options and work with them on solutions for the future. If you have an existing loan, ask your banker if it’s a good time to restructure the loan to reflect your current situation. And, if you need additional capital to compensate for delayed payments or to help you pivot your business, discuss whether now is the right time to apply for a loan.
Find a banking partner that’s right-sized for your needs
As we’ve seen throughout this pandemic, it’s important to find a banking partner that can be responsive to your needs. Understand whether your bank has flexible financial solutions that can be dialed up or down as your business ebbs and flows. Determine if your bank has the capacity and the speed to meet you where you are.
At Piermont, we’ve been in your shoes. As a bank founded by entrepreneurs, we understand the importance of focusing on your financial health. That’s why we’ve established peer banking to be alongside you for what’s next.
If you are ready to move forward and start planning and positioning your business for what lies ahead, complete this form and a Piermont team member will get back to you.