In times of so much upheaval and shifting, how can you keep your business healthy? This is the question that Amber Hawley’s guest for this episode is going to answer. She has over Hannah Smolinski, the founder and CEO of Clara CFO Group—a virtual CFO company that helps small business owners reach their goals. Highlighting first the strengths of small business owners, Hannah talks about the nimbleness that they can use as an advantage to move through the changing tides of the business environment. She discusses how they can keep their personal and business goals in line as well as make good financial decisions, especially during the current COVID-19 pandemic. Amber lists down some ways you can cut down expenses, prepare for the worst-case scenario and the future, and even alleviate the demands you put on yourself and save your employees. 

How To Keep Your Business Healthy In This Uncertain Time With Hannah Smolinski

I’m excited about the conversation. I have a very special guest, Hannah Smolinski. She is a small business CFO. I think of you as a virtual CFO like small businesses can hire you to be a legit CFO for them. You know all the things business finances and that’s what we’re going to talk about. How to keep your business healthy during these times while there’s so much upheaval and shifting. It’s going to be a great conversation. Why don’t you introduce yourself if there’s anything else I’m sure that I’ve missed or left off?

My name is Hannah Smolinski. My business is Clara CFO Group and we are small business CFOs. We work virtually, so it’s a virtual CFO. Most of the time we work virtually. Every now and then we have local clients. We help business owners. They get their financials from their bookkeeper, but then they’re like, “What do I do with these? I’m good at therapy, I’m good at other things. I’m not necessarily the one who needs to look at the numbers and decide what to do next.” If you need support with any of those types of decision-making, that’s where the CFO role comes in. We try to help people make the decisions that they need to do so that they can reach their goals. Small business owners, it’s so intrinsically tied to our personal finances too. There are lots of personal goals and business goals that need to be considered. We try to help people make the best decisions they can in their business to help achieve all of that. It’s fun and I’ve been very busy with all of this wonderful economic/healthcare crisis. I think we’re going to talk about some of that.

Hannah was saying that she did a lot of extra research and I was like, “I’m so impressed. I watched Real Housewives.”

I’m hoping that I can get into some of that. It’s been nuts.

This is your go-time and this is why I’m glad that you’re here having this conversation. Many of us small business owners are concerned. We can be smart business owners and we can make good money, but we’re not financial experts. Knowing what we should be doing or what are the first steps, this is where having guidance is important. To start with that, thinking about where everybody is, and I’m assuming we’re talking to the people whose businesses aren’t super booming because they happen to be in an industry that’s necessary right now. What would be the starting suggestions you would give to the average small business owners that probably had seen a dip in business or complete lack of business?

First of all, everybody’s affected. Maybe you’re having no problem with revenue. Maybe you’re in a situation that your sales haven’t dipped at all and if anything, they’ve gone up. If that’s not your problem revenue, then it could be a supply chain issue. It could be an employee issue. I had one client whose employees walked out. They said, “No, we’re not going into people’s homes. We’re not doing it.” Even though it was a contractor that could have stayed employed. They could have kept working. The employees said, “No, we’re not going to do it.”

Sometimes it’s the things that you don’t even think about that might be affecting the business. The first thing that I try to tell anybody that I talked to is this is heavy, it’s big and it’s not normal. Calling it out is helpful from the very beginning to say like, “This is not what we planned for. It’s not what we wanted to happen.” Nobody ever makes their business plans for the year. I guarantee you nobody in January was writing out their budget for the year and going, “In March and April, all of my revenue is going to dry up completely.” Nobody did that.

Recognizing that this is a major hardship and it’s something that is affecting people in lots of different ways is the first thing. Take a deep breath and go, “Okay.” It gets into like, “Let’s assess what our strengths are. Where do we have strengths?” For small businesses, one of our biggest strengths is that we’re nimble. We can be nimble. We don’t have to go through the bureaucracy of getting something approved before we want to do something. If we want to put up a landing page and start selling a new product or something online, we can do it and we can do it in the day. That’s one of our big strengths. Holding on to that piece is what I’ve been trying to encourage people to do. Trying to think about what’s necessary right now. Maybe our goals might have to shift. What is our goal right now? It’s looking at what decisions we need to be making right now to make it through this day, to make it through this week, to figure out exactly what we need to do in this moment. The financial advice I would’ve given you in January would be slightly different from maybe what I’m giving you now.

I like that you start the conversation with addressing the mindset because I do think that’s a big piece. It is very scary. Even if you’re not, but if you’re the sole breadwinner for your family, you didn’t have this expectation that all of a sudden business was going to dramatically change or dry up or whatever it is. Starting with the idea of trying to focus on the strengths and have a little bit more hope about it is a great strategy. When we were more optimistic, we have more energy to do things or address things. When we become too overwhelmed, we shut down. I love that you start there. I agree with you, we are small business owners. We have this nimbleness and we have this ability to change it up or be flexible with things because there aren’t all of these extensive structures in place.

I can’t imagine going to someone of these large corporations right now. I used to work at a large public accounting firm and I’m thinking, “They’re having to shift potentially all their audits completely digital, completely online.” That would be a nightmare. I can’t even imagine what they’re having to go through right now, but the fact that we can move our meetings online or you can do telehealth. I know that those types of things, you’d have to get over the hurdle of maybe the customer getting used to it or the client getting used to it, which is definitely a hurdle that we have to overcome. It’s something that we can make a shift a lot easier.

I do want to celebrate that. I also want to say I have gone through that moment of, “Oh, crap” and shutting down. I completely shut down and I’m paralyzed. I can’t do anything. It was that feeling of too overwhelmed to even be able to do anything. The only thing I could focus on was my clients for the day and making sure my daughter and I was fed. That was the level that I could operate at. It does take a little bit to get over that hump, but realizing that this is where we are right now was helpful in getting over that.

Sometimes you have to give yourself that. I went through the same thing where it wasn’t denial because I was aware, but I was not motivated. I said, “I should be doing this. I should be doing all the business finance stuff.” I know I was able to do the personal because it’s already so on point. I was like, “That was easy,” but that’s it. The business stuff was very overwhelming. This is why I believe in paying experts. If people are finding themselves in a place of, “Now I’m ready. I need to start addressing this and I go through.” We’re going to assume people have a budget. It might be a generous assumption. It’s been a little shocking and then I totally understand it. Let’s pretend they have at least listed out all of their expenses.

They have at least a record of what they’ve done in the past, which would be your financials if you have a bookkeeper or you do your books yourself.

They’re going through and they’re saying, “I’m in this place of uncertainty or a dip in revenue,” for whatever reason. What’s the first strategy to focus on? We know in these times it would probably be thoughtful to spend less and try to increase revenue. If we’re focusing on the expense side of things, do you have any advice there of where to start?

I’ve done this with clients and I’ve done this with previous businesses that I’ve worked for where during 2008, everything turned or other business things happened. Maybe your biggest client goes away or something that you’re not expecting. Over time what happens is as businesses grow, they start to accumulate and time happens and it’s the subscription that gets added on and doesn’t get taken off or we grew that software because we had extra people on our email list or the capacity starts to expand. We don’t oftentimes take the time to go back and cut down things or even critically look at things and say, “Is this necessary? Is this something that we have to use?” I like to go through expenses in this time and I like to put in austerity measures. That’s what I call them because it’s like, “We’re in a different time than we were before.” It’s important to think that we need to think about what is critical for the survival of the business.

Sometimes that is hard to determine. It might be something that’s like, “It’s not something that I need right now, but it’s something that if I turn off, I can’t get it back,” or something like that. There are some decisions that need to be made. If you’re on a contract with a consultant and you’re locked in at a rate, you might not necessarily want to cut off that contract because if you want them back, they might be at a totally new rate. You might not want to do something like that. In those situations, I would call that contractor up and potentially say, “This is what we’re doing. We can’t use your services right now. Can we push it back by a month? Give me a gap or a break,” or something like that. This is a time to call up people and say, “What can we do?” Everybody knows what’s happening.

Everybody has this particular challenge. We’re all in it together.

I saw an email back and forth between my client and his landlord. The client was saying, “This is what’s going on. Can we push this back? What can we do here?” They’re negotiating back and forth with the landlord like, “What can they do?” They’re talking about maybe having a higher rent across other months, maybe pushing this month’s rent back, but then spreading it out over a different time because they know that right now cashflow is low. We’re trying to have those conversations. If you have lenders that you can call up, maybe you have an auto loan. I have a couple of clients that have service vans and they have car loans. That means that they have principal and interest. Maybe they can call up those people and say, “Can we move this to an interest-only payment? Can we push this payment back by two months without any penalty?” Things that could potentially reserve cashflow.

Healthy Business: One of the biggest strengths of small businesses is that they are nimble. They don’t have to go through the bureaucracy of getting something approved if they want to do something.
Healthy Business: One of the biggest strengths of small businesses is that they are nimble. They don’t have to go through the bureaucracy of getting something approved if they want to do something.

It’s all about assessing line by line what is necessary, what can be cut, what is essential and critical to the business that I’m running. I have clients that have line items for meals, office and office kitchen, and nobody’s going into the office. We can strike that. We don’t need that. You might be buying an extra monitor for your home office or something, but you’re not necessarily needing to stock up on office supplies. Now’s the time to maybe consider pushing back some purchases that had maybe been planned. If you had planned a rebrand, maybe it’s time to not do that in the moment. Maybe it is the time to do it. I don’t know. It depends on which way the business is going. Every single line item could be assessed and it’s asking yourself that question, “Is this necessary right now? Do I need to spend money on this right now?” Not look too far ahead, but look at right now, is this critical?

I’m guessing let’s say a month or a few weeks from now, it’s even worse or your business is taking a dip, that you’re probably going to have to revisit and be a little more cutthroat next time.

I would probably try to do a deep cut if you can from the beginning because it will help you that much more. Especially when it comes to breaking contracts, that’s when I start to go, “Do I want to do that right now?” Breaking contracts is a big thing. If it’s a subscription you can turn off or an expense you can hold off on, I would go ahead and pause on it for now. On the other side, that is affecting contractors like myself. I’ve had to advise some people to say like, “It doesn’t make sense for you to pay me right now,” which is horrible. That’s the role that I’m in as a CFO is to say like, “We need to look at every single expense,” and my expense is even on the chopping block for what we do.

There are a couple of clients that we’ve said, “This is the strategy we’ve set you up. We’re going to revisit in May because this is realistic and this is what we’re doing right now.” Although financial strategy is super important. I can also give some strategy, send you on your way, and then touch base with you the next month. Maybe we don’t need to do the exact same things during the month as long as they’re executing on what we’ve talked about. Contract breaking is one of the big things that I would pause on, but everything else, if you can cut deep, I would do it right away.

That’s helpful. We’re in this different kind of crisis, but that process is probably good for people to do. I talked to a lot of business owners and most of them do not have budgets or even everything written down. It is an important activity to go through and be questioning that stuff anyway. It’s necessary to stop the bleed.

Even if you don’t have books, if you don’t have a bookkeeper and you haven’t done that yet, go through your credit card statement, go through your bank statement and highlight anything you don’t know what it is, investigate and say, “What was that charge?” You’ll probably find some things that you could pretty quickly turn off.

I know I’ve done that before. I remember doing it. Being ADHD, I lacked the follow-through to cancel them, but I identified $360 a month and I was like, “That’s so much money,” then continue to pay for a while. I heard this strategy from Mike Michalowicz. I’m not sure what you think of it, but I understood it from a psychological standpoint of money can be very overwhelming to people anyway. This is why people like you are very helpful. He said, “If you’re in a place where you don’t have that list, you don’t have that budget, and you’re so overwhelmed. Call all your credit cards and debit cards and have them canceled and get a new number.”

That way, all of the people on these subscriptions will contact you and then you can make the decision. He’s not saying don’t pay somebody. I have things like that where I accidentally cut up the wrong debit card. I cut up the new one instead of the old one. It was interesting because I was like, “I liked that.” If you’re in a place that’s overwhelmed, it might be easier to do that. Although that is overwhelming to get all those emails from people, but then you can say like, “I don’t use this membership thing anymore. I’m sorry, I want to cancel.” It’s not about not paying people or not finishing contracts, but it is a good way. I don’t know what you think about that one.

I can see why that would be a good way. For me personally, that would drive me crazy to sign up for things and type in my number again.

When I see people who are overwhelmed and they’re in that financial or overwhelmed with their lives especially because there is a lot of chaos going on. I lost a credit card and I was like, “I know it’s in the house somewhere. No one’s been using it. I have to cancel it.” As soon as I do, I had it saved everywhere. I know as soon as I do then I have to deal with all those emails. Going through and trying to be a little more cutthroat in how you’re approaching it the first time ideally.

I don’t know if you do this, but I do this. I’ve had things even like tools. I don’t know if this is a paid tool that we’re using to stream live, but I had a tool like this that I was paying for it because I was doing occasional Facebook Lives and streaming. For six months, I didn’t do any Facebook Lives, but I was paying $20 a month for it. I had signed up for it and I did it for a while and then I was like, “I might do it again sometime,” but then that would be a thing that I would cut because I’m not doing that right now. I know that at any point in time I can go and sign back up for that service, it’s not a big deal. I can move to the free version and downgrade. There are lots of options to downgrade. Do it. It’s going to take you five minutes and it’s going to save you a little bit of money. Think of that money as opportunity cost for something else. That $20 or that $360 that you saved could have been spent on something else like a VA to help you with something that was important or your bookkeeper or whoever it might be. Those things are freeing up cash for something else that could be more helpful to you. That’s how I look at it.

It’s like that just in time learning or just in time utilization of something. I know when I signed up for this, I meant to hit the monthly thing and instead I prepaid the year. I was like, “I’m committed to doing video now because I prepaid the year.” That is why you want to make sure they’re going to charge your credit card in a year to make sure you watch that. I had started a list. I need to keep the list in one spot though. The list of, “On May of 2021, cancel whatever.” That’s a good idea.

They don’t always send you notifications, which is wrong. I did have a client that naturally she had an employee and so she was using Gusto as her payroll service. The employee decided to take a full-time job, so she was off the payroll. That was the only employee that was using the payroll service. I was like, “That’s about $35 a month for Gusto.” I went onto their site to see can we get this pushback or something. They had a button that you could defer if you didn’t have the payroll. There are some things and then there are a lot of software companies that are offering some free or extended trials. Potentially if the service that you’re working with is not working, it might be a good time to switch if you can get a three month free of something else.

Write it down. Have a page or a notebook so that you can remind yourself because I can’t tell you how many things where I paid $50 because I needed to edit a PDF and it had a one-week free trial and I forgot to cancel. That’s a good idea. I love Gusto. They’re great and I love when there are companies out there like that. I use them as well from my payroll. When you have companies, they make it easy. There are other companies where I’ve had horror experiences trying to cancel and they continue to charge me years after I cancel or hold them. Also, let’s remember this when we’re all through this to support those companies who make it easy and work with us as opposed to the ones who are difficult.

I’m not going to name names. I’ve had some pretty bad experiences with moving people from Paychex, but I’ve already been moving most clients over to Gusto anyway because it’s way better.

Mine was a social media scheduler. I can’t remember. They still pretend that I’m a member and they still send me emails and I’m like, “You’re charging me $150 a year. I hate you people.” People are saying, “I’m going to go through and be judicious with my expenses and try to cut out anything that I’m not utilizing or that I no longer use or doesn’t make sense.” It’s like that luxury thing. I know some friends who have big practices and they would spend $1,500 because they had multiple locations. $1,500 a month on snacks and drinks for their clients and their staff. Nobody’s going to the office. That was an easy expense. There’s that side of it of going through and being thoughtful about what we don’t need right now. The part that is hard for a lot of people and for me as well is I know you’ve talked about, how do we assess our projections? That feels overwhelming in the sense of how could I even possibly know? It’s not normal business. I don’t know if that’s even something you can answer, just giving us an overview. How do I try to figure out what’s likely in this scenario?

It goes back to cutting expenses too. What if you don’t have to cut expenses? Is your business okay? For the next couple of months, you don’t even have to cut anything. Do you even know that? Those are the questions that we’re trying to figure out. What I like to do with people, and it seems to be one of the most helpful things, is to try to put together a cashflow forecast. It’s trying to say, “How much cash do I have right now? What do I know is coming in?” It might be zero. We might say, “It’s zero.” We know that no money is coming in this next month. What do I know is going out? Where’s my comfort level with that? Different people have different comfort levels too. Maybe you have $50,000 in the bank and that would feel to some people they have hit the jackpot. If they had $50,000 in the bank, they could conquer the world. For some people I’ve worked with, they freak out if there’s only $50,000 in the bank and it’s not okay. It’s also trying to feel where you’re comfortable with.

With a cashflow forecast, you can say, “I’m starting with this amount of money. I know I’m going to get in this. I know this stuff is coming out. What’s my net change during the month?” Maybe I lose $10,000 in a month, but that still feels comfortable for me. What if the same thing happened next month? What would that look like? What if things started to pick up in May? Maybe it was half of what I did in February or maybe it was a quarter of what I did in February, but you can start to put real numbers into a spreadsheet. I’m a numbers person and I do love my spreadsheets. Once you put real numbers into it and you put in what you know, then you can start to say, “What am I comfortable with and what am I not okay with?”

That can help you to go back and say, “I do need to cut deeper,” or “I don’t have to cut anything because I’m going to be just fine. My savings are enough to get me through this.” I’ve had those conversations with clients that are like, “It’s okay if I don’t get any revenue for the next two months because I’m okay.” That’s refreshing that you’re okay with that. There are still some options if you did want to try to get some revenue in the door. We can still talk about that. Some people are like, “I’m going to hunker down and I’m not going to worry.” Because we knew the cash she had and the money going out, it was going to be okay and she made some cuts. She called up the landlord and did a couple of things. She moved to a smaller office space. She had rented one of those office coworking type spaces. She rented a smaller space to save some money that way.

Healthy Business: You can use historical data to inform the future, but you must use it with the knowledge of what you know is going on in the business right now.
Healthy Business: You can use historical data to inform the future, but you must use it with the knowledge of what you know is going on in the business right now.

It’s about figuring out what you’re comfortable with, what you have, what you do know, and then you can try to fill that last variable of what you don’t know. The last variable, in a lot of our cases, is our revenue because we don’t know. We don’t know when that’s going to pick back up again. Maybe it’s fine right now, but maybe you’re thinking April or May might be bad. You can start to plan a worst-case scenario in those situations. What would it look like in a worst-case scenario? What would it look like on a normal basis? What would it look like if it picked back up and did fine?

Hopefully, it’s comforting for others to hear that. Sometimes you think these magic money people know exactly what it’s going to be. There’s no way to know. Using all the rest of the data that you do have to help inform that decision. As overwhelming as spreadsheets are to some people in numbers, when you do have that concrete data, it is very comforting on a psychological level. It may tell you bad news but at least you know and then you have your options. You have your choices about what can I do. Do I cut? Do I pivot? Do I try to increase profits? That’s helpful for people to hear and it is taking the time. I’ve talked to enough money people that if you do those numbers on a weekly basis, you’re going to start to see a trend. If you see like, “We dipped down 20%,” or “We’re back up 5%.” Otherwise, if you’re like, “I have no idea,” it’s scary.

If you look at historical data, it will inform the future. You can use it but use it with your knowledge as the business owner of what you know is going on in the business right now. We can’t look at March or April of 2019 and say, “Copy paste. Revenue’s going to be the same.” We can’t do that. It’s not going to work for us. Most people are going to be probably in the decline. Some people will be the same and then some people will be better, but only the business owner and the people who are closest to operations will understand, “What do you think is going to happen?” I’m sure you and I have a real good sense of what our businesses are feeling like. Is it feeling like it’s going to be slower? Is it feeling like it’s going to be better? In my case, I’m working a lot more but not necessarily getting a lot more revenue.

There’s a lot to do, but it’s not because it’s a bunch of new clients. I have a sense for what it’s going to look like in the short-term. I can project out what is going to happen in May. In my situation, I’m in consulting, so I have contracts with people. I know I have a list of clients and I know what technically I should be paid each month. It makes it a little bit easier for me to predict revenue. For you, if you’re seeing clients one-on-one or I’m not exactly sure how you’re doing it, but it might be a little bit harder to predict in that situation. It’s like an eCommerce store, you don’t have any control of how much traffic is coming in, but what you do have is data.

You do have, “I saw that March dipped 10% or 50%.” If you have that type of data, you can start to project out that clearly, “My customers are affected. What can I do to either pivot to what they need or what can I do to start generating? Maybe I need to send more emails.” Maybe that’s what it is because every time you send an email, you get a certain amount of money back. I don’t know exactly, but you as a business owner will know what those triggers that are either indicating revenue is going down. What are those things that you can do to try to stimulate interest again? The revenue is definitely the hardest part to predict by far for anybody. Even if you have a contract, that doesn’t mean you’re going to get paid at the right time. You might invoice somebody, but it doesn’t mean your money’s coming in.

Even if you have a contract, people all of a sudden have zero revenue, they might have to break a contract or try to negotiate or something. It is unprecedented times. You always probably have those one-offs. Now it’s on a bigger level. That’s why going through the numbers is helpful.

Definitely having that worst-case scenario, you have it there. You know what it could be, knowing what it is. Also, if you know how bad it could be and then it doesn’t end up being that bad, that makes you feel, “I’m doing pretty good.” I’m not necessarily comparing it to what you thought you were going to do in January for the year. I still have annual revenue goals, but I’m tapering all of those expectations because I’m trying to get through the coming months knowing that it’s still going to be all up to me here and we’re not sure where it’s going to go. Tapering expectations is helpful. You’re not also beating yourself up trying to be a full-time working person, and maybe full-time homeschooler, and also trying to reach revenue goals that are not realistic in the moment.

It can be very demotivating because if you’re already feeling extra stress and extra burden and things you’re having to take care of. For a lot of people too. I’m even thinking about for those of us who had people that were coming into our homes to help us alleviate some of our demands on ourselves, now that’s gone too. You no longer have that help. There are lots of extra pressure on you. You said something and I wanted to come back to it.

I’ll bring up another topic if you’re open to it. I was thinking about that worst-case scenario situation and specifically using a cashflow forecast. There are loans available and the government has opened up SBA lending for economic injury, disaster loans. They’re also offering another program called the Paycheck Protection Program. Those two things specifically are important to use something as cashflow so that if you have any say in how much you think you need to get through a certain period of time, those can be helpful. If you say, “What does it look if I completely have no cashflow coming in for two months? Maybe I need a loan,” and you might not know how much to ask for from an injury loan.

Having those numbers because you might be like, “If I had $20,000, this would be all okay.” Maybe it’s $200,000. If you don’t have any reasonableness on how much you need, then that can be confusing. The cashflow can help bring a lot of clarity to that. You can plug it in too like, “I know I’ve applied for this loan and I’m supposed to be receiving it three weeks after I applied.” You can put it into your cashflow in the right time. You can see what that will look like if you have any dangerous dips in your cashflow in the short-term. You can figure out if you need to move some money around or you need to ask somebody for a personal loan or something that if you got into a dire situation or if you needed to take some money from personal savings and put it back into the business. That type of stuff could all go into a cashflow, which could be helpful.

Having those numbers is important. I do feel money is such an emotional thing for people that sometimes if they don’t have the data, they’re just going to come up with what feels okay, what feels like it’s too much or enough. It’s not based on the actual need. That’s an important place to start for sure. You could do a brief overview. I know there are a lot of places where people can get extensive information, but for the SBA lending thing. If people are wondering, “Is that something that’s even for me? Do I qualify?” What does that look like?

I’ll give a big caveat like double-check me because I’ve been doing a lot of research but I don’t want to misspeak or anything like that. There are two main programs people are talking about. They’re both essentially SBA programs or they’re backed by the government. There are two different ways to apply. I’m going to talk about them separately. The first one is the Economic Injury Disaster Loans. Those are the loans like when Katrina happened or some of these hurricanes and the whole towns were taken out. Those get kicked in.

If you’re the person who doesn’t have a bookkeeper yet, even if you have a bookkeeper, if you don’t have a budget, I’m going to throw out some ideas. The easiest way to do it would be to write a list in a notebook. That’s the old school easiest way. I personally use Excel. I love it. It works like my brain, so I love it. There are a lot of great programs like Mint. I use QuickBooks for my business expenses, but I send those off to a bookkeeper and then they do numbers and I think, “Interesting. I don’t know what to do with that.” That’s why I still keep a budget for myself and my business, which ironically I did. I did this years ago. I call the tab in Excel as SHTF. It’s when Shit Hits The Fan and I have one for my personal expenses and one for my business. If everything dries up, what are my minimum operating expenses and how to get through this? I had some conversations with people and I think their business is probably doing better even than mine.

They say I have a good business, but they have a good business. That tolerance for risk was low. They were like, “If this happens for two months, I’m going to file bankruptcy.” I was like, “I think it will recover.” It’s interesting. It’s not about the numbers, it’s about how it does impact us emotionally and how it does impact our security or sense of security. I know that you’re going to continue on and tell us about the small business stuff, but that’s a question too of, how long do I continue to fund my business or take out loans or do this thing in the long-term or when do I call it a day? You don’t necessarily have to answer that, but it’s something that people are questioning for themselves.

It’s a legitimate question to ask. We should always ask that. I appreciate it when people recognize that a business is not long-term viable early enough. They don’t get into a situation where they’re trying to bail it out with more loans because maybe you fundamentally, from a core, either have something that people don’t want to buy or a service that is not working for people. Maybe you have a bad location or maybe you have something that you’ve set up from the beginning in a bad place. I believe everything’s changeable, but you might eventually go, “This is not working. I’m going to scrap it and maybe I’m going to start something new.”

Most entrepreneurs have more than one business that they’ve started. It’s not the end of the world to close something down. That’s one of the things that we hold on to for pride or we hold on to for other reasons of, “I’ve got to make this thing work. I’ve got to make my idea work.” We’ll get loans and try to make it work. I only try to encourage people to even look into a loan or something. I usually don’t, almost always. I’m like, “It might not make sense.” Sometimes I’ll do it if you need to refinance and you have big credit card debt and you need to get it on a lower fixed amount. Sometimes I’m like, “There’s a fundamental problem if you’re having to always accumulate more and more debt.”

Personally, I feel that there’s a problem with the business model if you’re always needing to borrow more money than you’re making, especially if you’re using that borrowed money for things like payroll. If you’re using it to operate your business and you’re not investing in your business, that’s where it triggers me to go, “Something’s not right here.” It’s good to make those determinations early if you can. It might be a situation where people go, “I wasn’t feeling right and it wasn’t working. Do I want to go $50,000 into debt to bail it out or should I say let’s call it good? Maybe we’ll still get some money and then start something different.” Maybe that’s an option for people. It’s good to keep all the options on the table.

I liked that you say that because especially as small business owners, people will say like, “This is my baby.” We get so attached to our businesses and we let it reflect who we are. The idea of like, “I don’t want to be a bad business person. I want to be successful.” I think about companies like Hollywood Video, which wasn’t as popular as Blockbuster. At least Blockbuster tried to pivot. They still did manage to outbeat Netflix, but at the same time, that idea was a super successful business, huge franchise all over, and then eventually the market shifted. It’s not like, “That was a bad business owner.”

You could always iterate, innovate, pivot, whatever. At the same time, there’s an understanding of maybe this is no longer the time for this thing. I like that you’re saying to question that or at least to be thoughtful. That’s my concern too. Being in Silicon Valley, hearing stories from people who take out second mortgages and put in all of this stuff into a company that ended up not being viable. Not because it wasn’t a great product or they weren’t brilliant people. For whatever reason, it didn’t catch on then. This might be an opportunity to take a look at, is this something you want to keep doing?

Healthy Business: Most entrepreneurs have more than one business that they've started. It's not the end of the world to close something down.
Healthy Business: Most entrepreneurs have more than one business that they’ve started. It’s not the end of the world to close something down.

Everybody’s risk tolerance is different. That’s my opinion. It’s not worth going crazy in debt to do some of these things, but some people do feel it’s worth it if they have an idea that they want to run with. Ultimately it’s everybody’s personal decision. That’s the wonderful thing about owning your own small business. You can do whatever you want.

Everyone thinks they’re going to be that one movie, that inspirational movie where the person did that and then ultimately now they’re world-famous. I think of none of those companies right now. I won’t remember any of them, but it’s one of those things where that could be true. If you have the passion and drive, then do that. It’s something to think about.

The two loan programs that are available specifically for the COVID disaster. It’s the Economic Injury Disaster Loans and then the Payroll Protection Program, PPP. These programs are both ultimately administered through the SBA. The Payroll Protection Program is trying to keep people off of unemployment essentially. It’s trying to keep people employed and working in a business so that they’re not going out and using the unemployment system because our state unemployment systems are completely overrun at the moment. We’ve had unemployment like we’ve never seen before. It’s going to keep growing as this crisis continues.

This Payroll Protection Program gives the business owner the opportunity to apply for up to 2.5 times their average payroll. You would take your average payroll, maybe it’s $20,000 a month and you would calculate that based on your payroll reports, and then you would take two months of that plus another 25% so it’s 2.5 times. That would be $50,000. If your average payroll is $20,000, then you could potentially get $50,000 in a loan. That money is specifically used to continue paying your employees. If you do, you get almost all of it forgiven. I’m like, “This is too good to be true.”

There are some stipulations to it. It’s a pretty amazing program. The biggest thing about it is it came with almost $350 billion funding through the CARES Act. The thing about this is that once the money’s gone, it’s gone. Anybody who wants to apply for it needs to get on it. That’s what we’re saying. You do have to have payroll, and then the companies that have payroll are allowed to apply for it first. A week later, independent contractors and sole proprietorships are allowed to apply. That’s a big deal because usually sole proprietors and independent contractors usually can’t get unemployment. This is a big deal that they could potentially apply for this employment type.

You’re saying sole proprietors who could pay themselves then?

There are sole proprietors who have paychecks, but then if it was them and they were paying themselves to the profits of their business, they could potentially apply, but not until a week after it opens up for employees. I was on a phone call with my bank because I had sent an email and it wasn’t getting responded to, so I called. I said, “Are you guys doing these loans?” The PPP, you have to apply through a bank. The other program you can apply directly on the SBA site. It’s two separate things. The PPP, you have to go through a bank that does SBA loans. My local bank here that I have my checking account with does do them. I called up the business manager over there and she told me that they have a special website for their customers that you can register if you want to get one of these and it puts you in line. This is my big message that I’m telling my clients and then anybody else who will listen. If you want one of these loans, you need to contact a bank ASAP and see if you need to get online somewhere. This is such a good program or apparently such a good program that the money will run out of this program and it will get used. It’s definitely something that we want to try to get into.

Do you have to go to your own bank that you use? Is that the best option?

Probably if you already have a banking relationship. When I filled out this application for one of my clients, it said, “Are you a client of the bank? Yes or no?” I could have clicked no. I don’t know if that would put me into a separate queue.

That’s why I asked that. It might be best to go with the bank that you’re already using.

Especially if you have a relationship with a banking manager that when your email pops up or your phone call comes up, they know to answer it because they know you. That’s who I’d go to first. Especially if you go to a big bank like Chase or something that. I had been told to by this bank, she was saying they’re still waiting for guidelines to come down so they don’t even open up applications yet. We can register to get in the queue, but we can’t submit an application yet. She was saying that she thinks that the banks are getting different allotments and that her bank still had funds to allot. To me, that’s going, “Maybe if you don’t get into one bank, I wonder if it makes sense to try another one.” That’s something to think about too. I don’t think you can apply two simultaneously. You’d probably have to get rejected from one before you could apply to another one. You might be able to ask them if the funding is gone. Is it gone for that bank or is it gone, gone?

This is the time for people to contact their bank managers. Nobody’s doing that.

I’m getting text messages from Chase saying, “Use our online services.” I would say on that one, there are some parts. If you do have to let people go and you don’t retain your employees, then it turns into a regular loan. The term for the loan is pretty short. It’s only two years repayment on that, which is short for a business loan. Normally, a short period would be five years. If you are going to take that plan, make sure you comply with keeping your employees as you’re supposed to. Don’t try to pull any strings and do something weird and think you can get around it and fire everybody and keep the money for yourself.

That’s smart, especially if it’s forgiven. What a no-brainer to be able to still support your team if you happen to have this big cut, but then still have that cushion of time, of money, however long that will buy you. It was interesting. I don’t know if this is the researcher in me. I may not like to call people, but I like to research. There was another business person I was listening to. It depends on your industry and I know everybody has their own thoughts, but he didn’t recommend taking out loans to pay for payroll. He said you take out this loan for payroll, and then all of a sudden your employees leave you two months later anyway and then you’re stuck with this huge bill. He said pay for operating expenses or things like your rent or your mortgage or whatever it is that you have to pay anyway. A lot of people are advocating being also thoughtful like, “Do you have to cut back people’s hours or cut back their wages or lay people off or put them on furlough or whatever it’s called?” This seems an opportunity to be able to still support your team and make sure that your employees are doing well and then not have to take such a huge risk if they decide to leave you.

Even if you were to potentially lay them off, they go out and they get on unemployment and you’re like, “I can hire them back. They’re not going to find another job.” What if those employees are a huge part of your business and how you show up in your community? You love those people. They feel like your family and they’re part of your team. You don’t even want to have that negative experience of being laid off. That can be a little bit traumatic for anybody. Do you want to go back to a company that laid you off and what if they do it again?

If you can retain those employees and keep them on payroll and keep them with you, it’s going to be a more positive experience for everybody. Even if you can’t have them doing the same service, maybe you do give them a week of PTO because you got the money from the government to give them some paid time off. Why not? That makes sense. Maybe you have them do some other things for your business like maybe help with social media or write some blog posts or do some things that could be helpful in moving your business forward and other ways that maybe they wouldn’t normally have time to do because they’re always client-facing or client serving or customer-facing. It’s a good program. I’m impressed with it. I’m curious to see how available it’s going to be to people. Are people going to have access to it? I don’t know how fast this money’s going to go.

I calculated that every small business, there’s an average of 30 million businesses in the US. If every single one of them took some of this, it would give each person about $12,000. That doesn’t help for the businesses that are taking the max of $10 million. They would be getting a lot more than some of us, but why not if you’re in payroll try to get some of this. There are some people who aren’t affected. Maybe you don’t need this and maybe leave it for people who do need it. I have clients who may not need it right now, but we’re looking at long-term projections. We know we have to make hiring decisions 3 to 4 months in advance. If we don’t see contracts coming in, it’s multiple months before those things affect our cashflow. We have to make early decisions. This could potentially be saving people’s jobs that we would otherwise might have to let go. It’s a timely thing and I want people to be able to take advantage of it if they can.

Thank you for the heads up and I will share it with all the small business owners I know too. I think it is important. Sometimes as a small business owner, everything feels so overwhelming. I had a conversation with somebody who said, “Technically I’m still working.” I said, “Didn’t half your clients not transition to online therapy?” We’ve had these cuts and so it’s we’re almost in this thing. Unless I’m completely broken and destitute, then I don’t qualify. Put it out there and see what happens and be thoughtful. If you’re one of those businesses that’s booming, don’t be that guy. Don’t do that. If you’re like a lot of people that I know who the future is uncertain, that’s helpful.

We will put a link in the YouTube channel to the video that gives you the cashflow forecasting resource that I have. I give you a spreadsheet and then I have a 30-minute video walking you through how to use it. That can be super helpful. Definitely make sure to watch the rest of Amber’s series because these have been great and helpful as we’re at home. We’re doing the best that we can. Keep that up. If you want to reach out to me, feel free to. My website is Also, feel free to directly message me if you’re on Facebook and you want to find me.

If we have any other resources specifically about the loans, we’ll try to tag them because those are timely and you need to know about those and take action. The last thing I would say is make sure you talk to your financial professional about any concerns you’re having and see if they can be helpful, especially if you are trying to consider one of these loans, get some advice. Feel free to talk to me or feel free to talk to your bookkeeper. I know they can be helpful because they see the detail of everything that’s happening. Talk to your CPA or somebody who can give you some advice on which of these programs to apply for or both or one over the other.

I want you to have this support you need and the government has tried to make these programs something that can be helpful to you. They’ve tried to design it so that it could be as helpful as possible. I am going to wrap up then. Thank you all so much for joining us. You’ll be able to find the replay on YouTube. Find us there. My Biz Bestie channel. If you want to check out my channel too, it’s Clara CFO Group on YouTube and find us there. Stay safe and stay sane, everybody.



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Hannah Smolinski is a CPA and the Founder of Clara CFO Group. She started the business in 2017 after seeing the need for financial strategy for small businesses. After leaving public accounting and auditing some of the world’s largest companies, Hannah left that world to run the financial side of a small engineering firm.

She realized that small companies need more than a bookkeeper and a tax CPA, they needed forward-looking financial advice to help create financial stability and success for the long term. Her passion is to create clarity in decision making for small business CEOs, and she does this through her work as a small business CFO.

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