Bottom Line Garry Bartecki
Your plan of attack Now that we are in the Fall of this wonderful 2020, I thought I would address planning for 2021. But sitting here 35 days before the election I find myself wondering how to address the topic I planned on covering. Considering the uncertainty on many fronts including the election, the COVID-19 mess, forthcoming stimulus programs, the rising government debt, interaction with China, mystery surrounding GDP growth, and further unrest carrying over into next year. Let us face it, this is crazy and something 99% of us never had to face before. Many of you with substantial distribution customers may find 2020 less disturbing than others. These customers may have even seen substantial growth if they play in the digital distribution business, leading to increased demand for material handling products and services. A win-win. What also helped across the board were the PPP funds and other stimulus programs that kept consumer spending at meaningful levels, which in turn kept these digital warehouse companies busy along with all other business entities that were exempt from closing. A second stimulus program is in the works as I sit here today, but one that will be for a smaller amount compared to the first which eventually could slow consumer spending, lower GDP, and thus cause those distribution companies that were at 100% capacity to slow down in Q4 and probably in Q1 of 2021. And If this slowdown turns into a recession in late 2020 or 2021 you can expect decreases in revenue and potential collection problems that could impact cash flow. The timing of these potential occurrences being the 800 lb. gorilla in the room. So where do we start with your Plan of Attack for 2021? 1. Make an honest assessment of where you stand so far in 2020. NO BS ALLOWED. 2. Do the same for Q4 2020. 3. Consider tax planning and how it can help with current and future cash flow. Time is running out regarding the 100% Bonus and Sec 179. See Steve Pierson’s article in last month’s issue. 4. Cash flow is still king. Not only breakeven cash flow but cash flow to cover debt service and bank covenants. 5. Produce conservative revenue budgets thinking there will be a slowdown within the next six months. 6. Adjust expenses to meet cashflow requirements using conservative revenue estimates.
Original & Aftermarket Parts for Most Equip.
FORKLIFTS & TIRES 713.460.8197 • 800.687.3884 fax: 713.460.5941 www.forkliftsandtires.com 12
www.MHWmag.com
November 2020
7. PUT EVERY EXPENSE ON THE TABLE FOR REDUCTION including payroll, related party contracts, and discretionary expenditures. 8. Personally, contact every major customer to get their input regarding the balance of 20 and the full year 2021. Pay particular attention to their budgets for parts and service. 9. Avoid additional debt from any source. 10. Stay in touch with our OEM’s and other dealers to see how things are going and what they are doing to meet cashflow requirements. 11. Investigate how technology can help reduce internal costs or reduce customer costs. 12. Stay out of trouble with your banks. Understand your loan agreements. 13. Use sensitivity analysis to guide the execution of your Plan of Attack. 14. See what revenue silos are going to deliver the highest profits and cashflow. 15. Keep your eyes open for opportunities, especially if you find yourself meeting your goals. 16. Take on weak competitors who have less control of their business. 17. Do not give up on marketing and sales programs. Be in constant touch with existing as well as potential customers. 18. GET YOUR PLAN DRAFTED ASAP. GET HELP IF YOU NEED IT. Thinking ahead beyond 20 and 21 our total government and personal debt loads along with increases in money supply are sure to cause both overall lower GDP growth and inflation. It is the “when” we cannot currently pin down, but it is out there to impact the future. Economists I follow are talking anywhere from $40-50 Trillion of government, business, and consumer debt. I believe the more you borrow the less you can spend or buy going forward. Said another way, debt brings future revenues forward, meaning less revenues in future years. Many of you may have experienced this phenomenon in your own business when you find that adding more debt is not feasible even though the reason for taking on the debt would increase revenues. In short, the more you owe the less flexibility you have in making financial decisions. Debt increases along with a slowdown = potential tax increases at all levels. But increasing taxes during a recession only makes the recession worse. As I said earlier THIS ENTIRE SITUATION IS CRAZY AND REQUIRES MANAGEMENT TO PLAN AND EXECUTE FOR POSITIVE CASH FLOW, not only for 20-21 and beyond. To me, it looks like we will be constantly looking over our shoulder to what is coming at us. Current financial setbacks have taken three to five years to correct themselves. This one will be no different and require constant revision of your PLAN OF ATTACK for the next few years. Garry Bartecki is a CPA MBA with GB Financial Services LLC. E-mail editorial@mhwmag.com to contact Garry
