The U.S. government is currently in the midst of a partial shutdown. This is not a new thing; after all, there have been 21 shutdowns, including this one. So as painful and frightening as this has been for some business owners and their employees, it will eventually end, hopefully sooner than later. In the meantime, if you’re a business owner or executive looking for insight in getting through this government shutdown—or the next one—here are some tips that can help you get through this tricky time.
Strengthen your cash flow.
Cash flow is as important to a business as a parachute is to a skydiver. Gloria Larkin could tell you that. She is one of the many business owners who have been affected by the current government shutdown. Larkin owns TargetGov, founded in 1997 and headquartered in Linthicum Heights, Maryland. Her company focuses on government procurement and related business development and marketing services. In other words, her business helps other businesses land contracts and work with the government. Her firm is also a government contractor, doing consulting work for government agencies.
Larkin was always a believer in having lines of credit and cash reserves that could keep her business running for three months in case of an emergency, but last year, she worked hard to extend that line of credit and put away more cash.
And when the most recent government shutdown began on December 22, 2018, Larkin’s company had enough in credit and cash reserves that her business could theoretically run on its own for about six months before encountering serious trouble. Not to suggest that this shutdown has so far been a picnic, however. Larkin estimates that the company is bringing in 20 percent less revenue than normal. But with her careful planning, Larkin’s company has money and cash flow—and she can pay her 10 employees.
If you’re being impacted directly, the best thing to do is talk openly and honestly about what’s going on, and how you’re going to satisfy your cash flow and payroll.
—Gloria Larkin, owner, TargetGov
Now, you might think to yourself that government shutdowns are rare, and they’re usually short, and it would be silly to save up a lot of credit and build up cash reserves just in case there’s a shutdown someday. And you would be correct. But emergencies do happen all too frequently, and there are benefits to future-proofing your business. If you’re overprepared for a future government shutdown, and one doesn’t happen, you may instead end up using your cash, loan or line of credit to feed your business after a natural disaster or economic slowdown. And if you wind up with more than enough money on hand or credit, that’s a good problem to have, and you can always use those resources to build your business.
In Larkin’s case, she says that throughout 2018, she wasn’t putting money away in case of a shutdown. She expanded her lines of credit to expand her business.
“If we have to put these funds toward just existing, this will be a huge hit to our personal economy,” she says.
Manage your debt.
While managing debt is always important for business owners, it’s even more important during times of crisis. Not being burdened with a lot of unnecessary debt, she says, has helped her business in this shutdown. Her management and marketing agency, Red Carrot, is based out of Miami, Florida, and many of its clients are federal government agencies.
She says that by monitoring her cash flow, not keeping a lot of unnecessary debt on her books and having ample lines of credit, it has helped ease her mind during this shutdown—and she can focus on paying her employees.
During a government shutdown, it may be good time to discuss payment plans and the possibility of creditors cutting your business slack. It may seem like a long shot, but it isn’t as if your lender isn’t aware of what’s going on in the news.
Communicate with your employees.
You may have confidence in your ability to get through a government shutdown, but how is your staff faring?
“A shutdown can really create a fear factor for many employees, whether they’re new or have been with the company for a long time,” Larkin says. “If you’re being impacted directly, the best thing to do is talk openly and honestly about what’s going on, and how you’re going to satisfy your cash flow and payroll.”
She adds that your workers may be hesitant to speak to you about their concerns. “It can be embarrassing for many people, who two weeks ago, had a well-paying job and had no problem making a house payment, to say that they now don’t have the ability to put food on the table,” Larkin says.
“It’s a good idea to have processes in place, so if you’re working a project that’s time dependent, and there’s a chance that the people you’re working with will be furloughed, you’ll want to talk to them before the shutdown, so you can ask them what you should do if there is a shutdown,” Gosthe says. “If you see it coming before it comes, and you can get insight on what to do when your client isn’t around, you may be able to keep working in the meantime.”
Diversify your revenue streams.
Just as it can pay off to have a variety of lending sources, you don’t want to depend too much on one or two sources of revenue. Gosthe’s business does a lot of work for the government but there is a reason, beyond having ample lines of credit, she hasn’t worried much about making payroll.
“Not every government agency has shut down, and we’re some of the lucky contractors,” Gosthe says. “We do a lot of work for the military, and the military has not shut down.”
If you do have a contract to work for the government, it could pay off to get more contracts with a wide variety of agencies—or branch out into non-government work. Likewise, if you don’t do any work for the government, that may be a path to consider. There may be dangers of stretching one’s business too thin, and you can certainly expand too quickly, but in general, it’s never a bad plan to have multiple streams of revenue.
“You should never depend on one key customer,” Gosthe says. “If you’re dependent on one customer, anything that happens to them will happen to you.”
That’s why it can pay off to also have various places to turn to for credit, loans and funding. Having choices, after all, is power, and if an emergency hits, you won’t want your decision making to be limited. If you can fortify your firm to be ready for anything, it will be. The government may shut down, but you’ll always be open for business.
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