More than ever, cash is king. How can you stimulate cash flow in this era? How do you turn a trickle into a flow?
Business is down globally, with large and small businesses struggling with cash flow and supply chains everywhere you look. People are staying home and trying to spend less money, as many of them have lost their jobs or income.
We’ve rounded up the best advice from several sources to help you make some sense of it all–and hopefully some money, too. Nothing is foolproof, but we sincerely hope these tips help you and your business hang in there. These times are challenging, but we know things will improve eventually.
One piece of advice each of these experts notes is to look at your business differently during this period. One way to do this is to prioritize short-term gains vs. long-term plans. This doesn’t mean to act recklessly, but rather to evolve a little. Let’s face it, if you aren’t bringing in money and reining in costs at this point, you may not survive to bear that long-awaited fruit of your labor.
An outstanding example is the restaurant industry. Since most restaurants around the country have shifted to takeout only, the ones who are staying open have been creative in transforming their business model. Some clever shapeshifting I’ve seen in restaurants include: offering family packages, offering meal kits (i.e., uncooked meat, pasta, and sauces to be cooked at home), offering a popup market for basic groceries, offering virtual tastings (where you pick up the food, and they conduct the tasting or class online), giving discounts on gift cards, and offering cocktail kits.
Another key factor is to treat people well during this time: employees, customers, and suppliers alike will remember your behavior during the crisis once we return to better days. Remember, they are likely hurting, too. Ask yourself how you can best bring value to them while taking care of your bottom line.
Here is some specific advice we’ve collected from experts such as The Harvard Business Review, Deloitte, KPMG, and ECG Management Consultants.
- Adjust variable costs to the extent possible. Of course, curtail non-essential company travel plans, training, meetings, and entertainment costs. Looking at labor costs, it is more challenging. Yet, try shifting contract work to permanent employees as a cost-saving–and employee-saving measure. Consider encouraging employees to take available paid leave, and encourage voluntary unpaid leave.
- Verify your own lines of credit. Make sure your sources of financing are going to remain available to you.
- Be cautious and do plan ahead with your inventory. You want to confirm that your supply chain of essentials is likely to remain reliable, but plan for a disruption. You may want to seek out additional sources or viable alternative products and raw materials. You need to be able to continue to supply YOUR customers.
- Look realistically at any possible delays in your payables. Check in your area–you may be able to defer utility payments temporarily, or make a mutually agreed-upon arrangement with one or more of your suppliers to change the way you pay them. Do not do this willy-nilly, though–those supplier relationships are crucial, and you definitely want to keep the actual lights on.
- Review your invoice and collection practices. At all costs, invoice on time with clear payment terms.
- Consider your customers, their payment history, and reliability. Ask yourself–or them–how hard hit their industry is, how likely they are to struggle with payments. An honest, up-front conversation about ensuring payments (even if through a new agreement, like the ones you want to make with your suppliers).
- Elect to deduct 2020 Disaster Losses on your 2019 taxes. Section 165(i) allows for this accelerated loss deduction on your tax return.
- If you own or run a larger company or one with an almost certain return to good times and can afford it, you may even benefit in the future by pausing or greatly reducing your larger salary in order to keep paying employees and keep the company flush. I know, I know, this option sucks, but it garners good will among employees and the community that should ideally come back to reward you sooner rather than later. Save the company’s butt? You get a juicy bonus on the flip side, no doubt!
- Throw out the rule book for some things. Waiting to release a product or content for a traditionally optimal time? Reconsider that–would people benefit from it? If it’s software, training, or intellectual property such as a book, musical content, or film, get that out the door NOW. People want it and need it. This means new customers! You may want to offer these cheaper than usual or even free, as an investment in the future.
Look into funding through no-interest or low-interest loans and grants. In addition to the SBA Disaster Loan government loan, search for additional sources of funding through private sector grants. Here’s a partial list of entities offering this type of relief, particularly for small businesses.
- Facebook is offering $100 million in small business grants, given in cash and also some Facebook ad credits.
- Amazon is offering $5 million in a Neighborhood Small Business Relief Fund for Seattle businesses.
- Kiva, the international microloan organization that offers small businesses zero-percent interest loans of up to $15,000.00, has recently expanded their loans available to U.S. entrepreneurs.
- The Opportunity Fund offers grants and low-interest loans mainly to small businesses owned by underserved entities, such as women and minorities. They are expanding their resources in light of the coronavirus impact.
I hope these tips help you with your business. I’m not only a writer cranking out content, but I’m also a small-business owner biting my nails over the income loss this has brought. I’d love to hear any ideas you have that you’re implementing for cash flow and survival. I want us all to make it!
Succession planning: Your options when not allocating to dependents
(ENTREPRENEUR) We’ve all heard the phrase “You can’t take it with you,” but succession planning provides peace-of-mind when leaving behind personal assets.
Succession planning is a forward-looking strategy to ensure the “next in line” is prepped for what is to come. Within an organization, executives or management create a blueprint in hopes of a seamless transition of operations to “partners, future generations, or successor owners,” as Patrick Hicks, the Head of Legal at Trust & Will, states.
Succession planning can be useful in both professional and personal environments, including handing off entrepreneurial businesses or assets of any value. It’s important to create an Estate Plan for whom you plan to replace you in regard to property ownership.
Hicks says that, “Property rights are the cornerstone of modern society.” Property rights include the authority to determine how a resource is used or disposed of after death. This can include giving in a neighbor, a charity, or the most common choice, your family.
“Giving it all to family is typical but giving it all to non-relatives gets second looks. An estate plan is the manifestation of your wishes. It doesn’t matter if anyone else approves.”
It can come as a shock to hear if your assets are undesired by family- or even worse- if it comes as a surprise to them after a loved one’s death. Some choose not to communicate succession plans during one’s lifetime as it could damage familial relationships, but on the other hand, it could also provide a smoother transition. If an heir does not wish to take on the property, there is a chance for contest or litigation that could reduce the benefits of having a succession plan in the first place.
Another scenario is if your dependents do want a hand in property assets after death, but your wishes are to relinquish it elsewhere. Hicks says, “Typically, children do not have a right to claim their inheritance, unless some special rule applies.”
An example is if you leave behind a minor child or surviving spouse, where in that case, they may be entitled to receive support. This could include at least of share of property if no estate plan was in place. However, the necessary support can also be provided by the dearly departed through life insurance or another means.
“When it comes to estate planning, there are societal norms and bounds,” Hicks says, but ultimately, no matter the wishes, having a succession plan can provide peace-of-mind when thinking of the future.
Tips on setting a more accurate freelance rate
Setting a freelance rate can be difficult given that any industry has conflicting norms regarding an appropriate billing amount – a fact made more difficult by about a billion other factors such as experience, location, and so on. Whether you prefer to determine your rate the long-form way or you just want a calculator to point you in the correct direction, here are some tips for figuring out how much you should be charging.
Jennifer Bourn, business guru and freelancer extraordinaire, eschews the general “start with the salary you want and work backward” approach. Under this model, you would theoretically determine the amount of money you want in a year, divide that number by the number of hours you plan on working in a year, and charge whatever the quotient is (for example, $100,000 divided by 2080–which is 40 hours per week times 52 weeks in a year–is roughly $50 per hour).
The problem with this model, Bourn posits, is that it doesn’t actually get you what you want to earn. Once you take into account things like your overhead spending, vacation time, insurance, profit margin goals, and actual billable time versus the time you need to do administrative things, you’re looking at a substantially smaller figure at the end of the year.
Bourn’s solution is to start with the salary you want, add all of your expenses, multiply that result by your desired profit margin (e.g., 1.10 for a margin of 10 percent), and then divide by a realistic look at your billable hours for the year–not just the standard 2080 work days in a year (which is already problematic due to the aforementioned vacation time and potential for sick leave).
If all of that sounds like way too much effort, there are a myriad of rate calculators that you could use instead. Each of our following picks has a variety of applications:
- Clockify is a simple, straightforward calculator that looks at your industry, location, and experience level to generate an average hourly figure.
- Nation 1099starts with your desired salary and then gives you an hourly rate and a daily rate based on many of the factors espoused by Bourn.
- Your Rate asks for your desired annual income, your number of weekly billable hours, and your anticipated time off per year to come up with a set of rough figures for weekly, daily, and hourly rates.
- Freelance Rate Calculator is a Google Sheets template that takes into account your goals, expenses, billable hours, and more.
- All Freelance Writing is a more intensive calculator with an advanced option to determine all of your costs, goals, billable hours, time off, and so on, making it a pleasant option somewhere between Bourn’s long-form calculations and something like Clockify.
You should test your salary calculations in a variety of spaces if you have the time. This will ensure that you end up with a solid, well-corroborated result that you can quote to clients rather than having to fall back on one website’s opinion. Whichever option you choose, though, remember that you deserve to be paid what you’re worth–not just what your services are worth.
How should freelancers be saving for retirement (is it even possible)?
(FINANCE) Adulting is hard, but retirement looms no matter your age – here are some ways to start squirreling money away so it’s less stressful later.
Freelancing is a tenuous approach to employment, made all the more so by a profound lack of amenities usually offered by more stable arrangements – chief among which is a retirement fund. It can feel impossible, especially when your business suffers amidst a pandemic, so some of what follows can be ignored until the ship isn’t sinking, but don’t wait a minute longer than that – deal?
So there are several schools of thought regarding the best way to start saving and where you should put your money, but the bottom line is that, if you’re a freelancer, you should be allocating your own retirement funds. Here are some ways to do just that.
Before you can even get into the weeds of how to invest in retirement, you should have a parachute in case things go sideways. My Bank Tracker suggests starting with an emergency fund of $1,000, adding to it as you can until you have anywhere from 3 to 12 months of expenses covered.
This serves two purposes: ensuring that you’ll have the luxury of time if you need to perform an abrupt job hunt, and establishing how much you can safely put away each month without jeopardizing your business or standard of living (within reason).
Having a relatively large sum of money on hand for emergencies is always good, and if you never have to use it for the purpose for which you set it aside, it can supplement your retirement whenever you decide it’s time to cash in.
My Bank Tracker also suggests storing your emergency fund using a “high-yield” bank account, such as an online savings account, rather than sticking with traditional, low-interest savings options.
You also need to plan for taxes, which in addition to whatever your tax bracket percentage is, includes allocating 15 percent of your income to pay Social Security and Medicare. This means that you’re probably putting aside a pretty hefty sum (at least 30%) each month.
Once you’ve established your emergency fund and planned for taxes, you should have a general idea of what your wiggle room looks like vis-a-vis saving for retirement.
The actual saving part of retirement entails investment in a retirement account such as an IRA, Roth IRA, a 401(k), or a pension plan (referred to as a “defined benefit plan”).
Each of these account types has benefits and drawbacks depending on your situation.
- A Roth IRA will allow you to contribute a certain amount each year, and you can usually set up an account quickly from a variety of online locations. The money that goes into a Roth IRA is post-tax, meaning you don’t have to pay tax on the retirement funds you pull out. Your income, however, can disqualify you from investing – if you earn above a certain threshold ($140,000 in 2021), you won’t be able to use a Roth IRA.
- Other IRA options exist as well, each with a cap on how much you can contribute per year and varying tax requirements. For example, a traditional IRA account requires you to pay taxes when you withdraw the money, and there’s an upper limit on how much you can contribute.
- A SEP IRA is similar, but the upper limit on investment is substantially higher – and you need to be self-employed (or an employer) to have one.
Nerd Wallet also points out that a 401(k) is a reasonable option for self-employed people who don’t employ anyone else, especially if you plan on saving “a lot in some years — say, when business is flush — and less in others.” 401(k) accounts allow you to put up to a certain amount ($58,000 in 2021) in each year pre-tax, and you pay taxes on withdrawals whenever you start pulling out money.
More eccentric retirement options exist as well. Taxable Brokerage Accounts let you invest in stocks and securities through a brokerage, and you’re able to use the money whenever you please – but you’ll have to pay taxes on your gains each year, which can become expensive in the long run.
And defined benefit plans are expensive and entail high fees, but they allow you to set up a pension with high investment opportunities as opposed to some of the lower-investment options.
Whichever option (or options – you can always invest in multiple accounts) you choose, make sure you’re saving for retirement in some capacity. And remember that these accounts represent exponential growth, meaning that the sooner you start saving, the better off you’ll be when you begin your retirement journey.
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