EntreLeadership - Cut Expenses with Creativity and Compassion

Episode Date: March 28, 2020

Tune in to hear Daniel Tardy and Sarah Sloyan respond to some business owners' fears around Coronavirus.   Get access to the EntreLeadership Weekly Report Tool, FREE, for you and your team for 3 months: Text TEAMHEALTH to 33444 or visit entreleadership.com/weekly-report   Follow us on social media to stay plugged in to everything we’re doing to help the small business owner win: LinkedIn Instagram Facebook Twitter YouTube Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey, this is Alex. I think one of the things that we're all realizing right now is that this whole coronavirus situation, it's developing so fast, like every single day, if not every single hour. And so we want to make sure we're doing our part to give you the most up-to-date information about how our company is handling this, but also how we see small business owners around the country leading through these uncertain times. So we're going to be releasing some bonus episodes where senior leaders, here within Entree Leadership and Ramsey Solutions, address some of the big topics and big questions surrounding the whole coronavirus issue. Make sure you subscribe to the Entree Leadership podcast to get these bonus episodes at the top of your feed. And here is today's bonus episode. Hey, Entree leaders, it's Sarah Sloyan and Daniel Tarty here. We have sat down to talk about some of your questions that we're hearing. We want to dive a little bit into some of these today. So Daniel, A lot of folks are asking, and you just went through an exercise like this with our board, even though we're not in that situation yet, what happens if my back is against the wall right now? You know, the phones aren't ringing. I don't have a lot of cash in reserve. What should I be doing?

Yeah, no doubt. Well, I would challenge, the first thing you need to do is just get creative. You know, your back may not actually be against the wall. It may just be really difficult right now to operate the way you've been operating. And so get creative. Look for ways to slow down expenses. to jack up cash flow. Maybe you got an opportunity that you weren't thinking about before that if you get your team together and say, hey, is there any short-term wins to drive cash in the door? We've got to get our bottom line up so we can keep jobs. You know, that's kind of the conversation right now if you're a business owner is how do we protect the bottom line. And, you know, there's two levers on that. There's expenses and there's revenue. And how can you really dial down expenses and how can you really jack up revenue? So start there, get creative, and see if there's anything there.

And then after that, if it's still bad and you're like, look, we've done everything we can. There's really no other way to dial back. You might have to start cutting people. That's usually the bulk of overhead. And if you've got to do that, be compassionate, have conversations that are still hopeful. And, hey, if we can get through this, hopefully we can hire you back. I mean, you're not firing people from a, I don't want to work with you anymore. But if you get to that point, you're like, we just can't operate for the next two months.

You know, if we can get back on our feet in a couple months, we'll rehire you, we'll get back into this thing. You might have to have some of those conversations with your team. I would start with, you know, the highest return on investment per team member. Like if you've got salespeople that are still driving some revenue in the door, you probably don't want to cut them off first. But if you've got administrative, you know, high salary person that's a fixed cost and you can't tie cash this month or next month to their performance, as hard as that might be, you

You need to look at the ROI per team member. I mean, you wouldn't have anyone on your team if they didn't ROI over time, but I'm talking about in the next 30 to 60 days, you need to be evaluating that. And use caution and use kindness. And then, you know, if you're really against the wall and it's just down to you and your spouse, you know, then you're having a different conversation. But those are the first places I would start because you might not have to close up shop. Talk a little bit about the middle ground that you guys offered to our team

where we would look at a couple of months of lower paychecks. or some of us missing paychecks. So for some of the folks out there who have some options, talk through that middle ground. Well, you always have options. You just don't have the options to operate the way you've been operating. And so we haven't made any drastic changes yet. Of course, we're a cash-based business, and we don't have any debt.

And so we live this stuff that we teach you guys. When it's a rainy day, guess what? We have a rainy day fund. But we also have 1,000 team members. And if some of our revenue took a big hit, will that have an impact on our ability to pay everyone? everybody. And so, yeah, of course we would get creative with executive compensation. We get creative with not giving increases or bonuses for a while. We get creative with just discretionary spending,

travel, meals, entertainment. There's things that we can dial back on. We can all tighten our belt and go, hey, if we get to this point where revenue is starting to take a hit, we're going to do the wise thing, not the comfortable thing, and we're all going to tighten our belt a little bit together. And then if we get a little further into that and it gets worse than that, we're going to tighten our belt a little bit better. But we really do believe that we're a few weeks away from getting out of the woods and getting back to normal. Now, we don't know that for sure. But that's what we're, that's what we're betting on right now, because if we don't, we all got bigger problems, right? So we're planning as if we need it at that point, there's an insurance policy that we've

already kind of thought through. But we're not paranoid and freaking out and acting like it's all going to hell in a hand basket today. Okay. So what I'm hearing you say is start getting creative. So drive quick cash revenues, get money in the door today, do things differently, try things you've always wanted to try, take a risk, do it. The second thing I'm hearing you say is cut expenses. So start with the fluff, start with the things that are easier, but then you're going to start cutting into some of the, depending on how bad the situation is, you're going to start cutting into things like people. Okay. Yeah, and I think it's one of those like, you're about to go under water, take a deep breath and go under and hope that you can hold your breath for, you know, couple minutes until this passes and then pop back up and get more air. If you can't pop back up

and get more air, well, then we're probably having a different conversation. I know some people have asked about, do I cash out my 401k, do I get a small business loan, do I take out a line of credit? And you've got to make a personal decision on those things. I'm going to tell you, what Dave Ramsey would tell you, what I would personally tell you is I would rather go get a job delivering pizzas than own a business that's got debt tied to it. Because I wouldn't start a business with debt, and I certainly wouldn't try to save a business with debt. As much as that might be my baby, if this disruption in the marketplace causes me to lose my business, I would rather start over and do it from a cash position than to be leveraged. And I just think there's a principle there.

You guys know it at Ramsey Solutions. We teach, we just don't recommend ever borrowing money because the borrower is always slave to the lender. When it comes to cashing out of 401K, man, again, I think I'd rather deliver pizzas before I did that because you're going to pay all the taxes on it. You're going to pay the penalty for cash in out early. And then you're going to be selling it at half the price it was a month ago. Like you're going to be taking a bath. And so there may be a situation where you got a kid that's sick and they need medicine and the only way to pull this off is to, you know, there might be some extreme situations where you go, I don't care what Dave Ramsey says. We're going to figure.

all you can do is all you can do. But if you want to know what's the wise thing to do, focus on a one-month plan to get through the storm and swallow your pride and go deliver something for Amazon. Go deliver. I mean, there are companies hiring right now, grunt work jobs. If you just need some money to pay the bills and keep the food on the table for a minute,

and if you lose the business, don't do things that you're going to regret. You're going to look up in six months and all this comes back and everything's fine and your 401K is back up to where it used to be. You don't want to be standing in that moment going, Oh my gosh, I sold out too soon. I made an irrational, emotional, fear-driven decision.

These principles are still principles even in the middle of a storm. I think especially in the middle of a storm, what Dave would tell you is don't make a short-term problem, a long-term disaster. Yes. All right. Well, those are some of our questions. We're going to continue to chime in with you throughout the week with additional questions. So if you have those questions, send them into our team. And if you need anything while you're going through this, please reach out to our coaching team.

We are scheduling free short coaching calls right now, and we'd love to help you weather this storm.