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Entrepreneurs are dreamers. We have the chutzpah to create our own livelihoods. We love setting big goals and shooting for the stars. That’s part of what makes us who we are. So what happens when the $#*! hits the fan? When half your team quits, when a natural disaster closes your location, when you get a bad diagnosis, when a family member passes away, when there’s a global pandemic?
Survival mode. Sometimes it’s for a little while. Sometimes it can be a longer while. Sometimes it’s not too bad and sometimes you’re not sure you can make it through. Some of us tend to make decisions based on facts, and some of us on emotions. The truth is, you need a little bit of both.
If you could figure out exactly how long you can last in survival mode and what levers you can pull to adjust that length, wouldn’t that make you feel better about making decisions? As G.I. Joe says, knowing is half the battle (my husband will love that I threw that reference in here!). Let’s arm you with that information.
Step 1: Figure out your “normal” break even.
That’s accounting lingo for everything you spend money on every month. Make a list. If you have your books together, this shouldn’t be too hard using your financial reports. And if you have a bookkeeper, ask them to work on this with you. If you have neither, your job is a little tougher. You’ll have to pull a couple months of bank and credit card statements to comb through and make your list.
Step 2: Figure out the lowest you can possibly make your break even.
Copy the list from Step 1 and work on what you can lower or temporarily cut. You may have to think about some tough things here. For example, will you still pay employees if they can’t come to work? How little can you afford to pay yourself? This list contains some of those levers you can adjust.
Step 3: Run multiple revenue scenarios.
What is your conservative monthly sales estimate? What is your optimistic sales estimate? Brainstorm some ideas here. What are alternative ways you can make money? How can you adapt to the situation? Write them all down. Find a coach or business bestie to talk through some of them, and pick one that seems feasible. Re-run revenue projections based on your new ideas. If there are any costs to get them up and running, note those estimates as well.
Step 4: Cover the gap.
Take each scenario in Step 3 and find the difference between that and your break even in Step 2. Does your revenue cover your expenses? Great, that’s a relief! If not… now you know what you’re dealing with. Make a list of all of the sources of money you have access to. You may have cash reserves in your business. You may have room on a credit card or Line of Credit before you max them out. You may be able to put some personal funds into the business. Can you get any additional loans? Now, take that number and divide by the monthly gap. That’s how long these funds will last.
Now you know. Do the numbers surprise you? You can also play with these models a bit. Steps 2-4 are all opportunities to get creative and make the situation better.
If this sounds like a lot of math, check out this free downloadable spreadsheet to make it easier!
It’s not a perfect model. But it can help you get perspective to last survival mode. And before you know it, you’ll be back to shooting for the stars.