Business Planning During COVID-19
Having a plan for your business is more important now than ever. If you don’t have a strong financial plan, it’s not too late to start. LGA’s Manging Partner, John Geraci, CPA, MST, speaks with new partner Ken Segal, who leads the firms business advisory services practice group about what businesses can be doing during these uncertain times, and the need for financial models with assumptions built in that can be flexed during periods of economic boom or decline.
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Full Transcript:
[John]:Hi John Geraci managing partner of LGA here today. I’m with Ken Segal. He’s a new partner to LGA who leads the firm’s business advisory services practice group. So welcome Ken. [Ken]: Thanks John. [John]: So thought we’d spend a couple minutes today to talk about sort of what’s next. A lot of businesses found some solace in going out and obtaining some of the Paycheck Protection Program loans or the EIDL loans. And that obviously helps us solve a short term liquidity gap. But I guess the bigger question is with models, financial models being impacted significantly by the economic uncertainty, um, how do businesses respond to that, Ken? [Ken]: Yeah, no, the PPP is intended to be a short term fix. Um, with. very limited use of funds. So it’s imperative that companies actually have a model to be able to understand how best to weather the current storm they’re in beyond just the short term fix from PPP.[John]: Yeah. And you talk about financial models. I think a lot of people think just because they put some, some numbers into a forecast spreadsheet based off of last year, that that’s really a model. But I think the model that you’re talking about is different.
[Ken]: Yeah. The models that I’m talking about are living, breathing and highly sensitizable so that we can do a lot of different what if scenarios to see what happens if things are going really well and what happens if things are going really poorly but they have every possible scenario contemplated. [John]: Yeah. And I think that’s obviously key and I think it addresses both, you know, sort of expense reduction mitigation techniques as well as when there’s going to be some cashflow shortages that require a liquidity fill [Ken]: That’s exactly right. I mean, my favorite quote is from Gary Kasparov, the chess master who says it’s better to have a bad plan than no plan.
[John]:Yeah.
[Ken]: So.
[John]: And, and a lot of people are sort of, I guess…not sure what to do next then. And uh, I think they’re playing more of a defense. That’s not really the position to be taken now. Is it? [Ken]: Correct. We try and get our clients to play offense as much as possible. That’s understanding the risks that are driving your company, knowing what you have to monitor. And knowing when you do have the down-times, what is your immediate plan to buttress all those risks and to make sure you have as much liquidity as possible. I say It’s just like coach Belicheck with his two-sided laminated piece of paper. Every possible scenario is on that and you try and anticipate and act rather than thinking at the time. [John]: Yeah, absolutely. And of course understandably a lot of businesses maybe have gotten comfortable and haven’t really been prepared for this day, but it’s not too late, is it? [Ken]: Not at all. Not at all. I mean it’s obviously better to have a plan earlier in place, but now while there’s the most stress, it’s absolutely the time to batten down the hatches and really try and address the immediate need. [John]: Awesome.
[Ken]: You don’t always have the luxury of time. [John]: Yeah. For sure. So if there’s anything LGA can do to help you through this process, we’re here for you. Obviously having Ken on the team is a great help for us internally as well as our clients, and we look forward to connecting and seeing what we can do to help you navigate your way through all of this. So thank you, Ken. [Ken]: Thank you.
by John Geraci, CPA, MST