Do small businesses have EFs?

[Tiny]

I've been so focused on my own financials that I haven't really put much thought into the headline blubs about the effects on businesses (small and medium). 

Are small businesses encouraged to have an EF of sorts (I'm assuming most businesses have some sort of 'business plan' and/or budget).     Or do businesses just hope that they don't have a slow week or two during a month which would impact their ability to pay their fixed expenses (loans, rent, paychecks, utilities, supplies, etc)... 


I realize a business with cash in reserve would be able to blunt some of the hurt that is the pandemic closings - they would still be letting go their help (employees) I'm thinking of the small family owned franchise/non franchises (restaurants, I'm guessing cell phone stores, florists, salons/barbers, hotel workers).   

And a sub topic:  
I'm getting the feeling (from the people I talk to in real life -mostly white and older) that these lost jobs aren't considered "breadwinner" jobs.  They are the "second income" or "pin money" or "I need extra money" kinds of jobs. Which seems to imply that the workers have a spouse (or someone) who has a "bread winner" job to rely on.   So, while it might be uncomfortable for some people, they should get by.     

Which makes me also wonder if that kind of antiquated thinking - that a 1 income (or 2 income) family WOULDN"T have atleast ONE income that provides the majority of income AND employer sponsered healthcare  is part of the issue with providing affordable healthcare to everyone.   
 

[TheHaitian]

The following not so small business filed for bankruptcy due to losses during COVID : J.C. Penney, J. Crew, Neiman Marcus, Gold’s Gym, Pier 1 and the McClatchy newspaper chain and Hertz.

And unfortunately I know people with kids to feed, mortgage to pay that have lost their primary jobs due to COVID and some will be ok thanks to unemployment, savings, family help; some will not be ok and it will take them years to get back to where they were before this epidemic hit.

But I am 35 and black / immigrant so my circle is affected differently.

[billisonboard]

May 24, 2020 12:55:17 GMT -5 Tiny said:

...

And a sub topic:  
I'm getting the feeling (from the people I talk to in real life -mostly white and older) that these lost jobs aren't considered "breadwinner" jobs.  They are the "second income" or "pin money" or "I need extra money" kinds of jobs. Which seems to imply that the workers have a spouse (or someone) who has a "bread winner" job to rely on.   So, while it might be uncomfortable for some people, they should get by.     

Which makes me also wonder if that kind of antiquated thinking - that a 1 income (or 2 income) family WOULDN"T have atleast ONE income that provides the majority of income AND employer sponsered healthcare  is part of the issue with providing affordable healthcare to everyone.   
 

I can only speak to my personal situation.

My facility management job provided approximately 2/3 of our household income. My wife's essential union grocery store job provides us healthcare insurance. My faculty is nonessential and I am only working 3 hours twice a week on site to check the faculty and process mail. I determined 3 hours makes the 10 mile drive worth it. Financially it works well with unemployment. With no one coming to use the facility, there isn't a need for our nonprofit organization to pay me for more hours.

[haapai]

Sometimes the business or the owner of the business owns the building outright.  Sometimes the owner has the ability to receive, but not cash, a paycheck, provided that the business has enough revenue to make the necessary tax deposits.  These tricks can help a small business survive a cash crunch but generally the answer is "no, small businesses usually don't have much in the way of EFs".  Their owners may have assets or reserves, but they usually aren't held as part of the business. 

[Artemis Windsong]

A Portland Oregon GF who owns a bar ran by her son said they could last 3 to 4 months. I am assuming they closed March 15 like the rest of the country. So, yes, they have EF. I don't know if it's personal funds or retained earning.

I don't know if either of them were paid employees so eligible for UI.

[mollyc]

To the headline question, like the rest of us they should but they may not for reasons or excuses.

About 13 years ago I did client books at an accounting firm. Most of the independent retail stores needed to show suppliers that they had funds held back to cover the cost of inventory during a downturn. Of course the same $25,000 GIC might be used for $100,000 of inventory from multiple companies but it was something

[Deleted]

May 24, 2020 13:20:07 GMT -5 TheHaitian said:

The following not so small business filed for bankruptcy due to losses during COVID : J.C. Penney, J. Crew, Neiman Marcus, Gold’s Gym, Pier 1 and the McClatchy newspaper chain and Hertz.

These companies were in trouble before covid-19 hit.  You can't blame their bankruptcy on the virus.

[pooks]

I wondered about a business EF when the shutdown started. One of the first stories I saw was about how restaurants tried to file a claim with their insurance company under business interruption but were denied.  

[movingforward]

I work for a small organization of only 7 employees and we have reserves for emergencies. I am SO glad we do...if we didn't i would probably be having to cut staff and salaries.

We keep enough to sustain us for 2 years, and that is with zero revenue. We still have revenue coming in but probably about 1/2 - 3/4 of our ordinary.

[TheOtherMe]

May 24, 2020 12:55:17 GMT -5 Tiny said:

And a sub topic:  
I'm getting the feeling (from the people I talk to in real life -mostly white and older) that these lost jobs aren't considered "breadwinner" jobs.  They are the "second income" or "pin money" or "I need extra money" kinds of jobs. Which seems to imply that the workers have a spouse (or someone) who has a "bread winner" job to rely on.   So, while it might be uncomfortable for some people, they should get by.     

Which makes me also wonder if that kind of antiquated thinking - that a 1 income (or 2 income) family WOULDN"T have atleast ONE income that provides the majority of income AND employer sponsered healthcare  is part of the issue with providing affordable healthcare to everyone.   
 

An example of a two income household:

My niece is a surgical nurse.  She did not have enough seniority to be one of the nurses to continue working until elective surgeries started back up so she was on furlough until last week.  During her furlough she got 3 shifts:  1 on Mother's Day, one on Easter and one on Good Friday, all evenings.  The hospital did continue to provide health insurance for it's workers but has stated that can't continue indefinitely.

Her husband works in manufacturing.  He has been on furlough since this started.  He "thinks" they might return to work on June 1.

Yes, they have been receiving unemployment, but would rather be working.

Here, John Deere is presently on a two week furlough of all employees.  They are also permanently laying off over 250 employees at this location.  The jobs at John Deere are definitely breadwinner jobs.

[teen persuasion]

May 24, 2020 12:55:17 GMT -5 Tiny said:

And a sub topic:  
I'm getting the feeling (from the people I talk to in real life -mostly white and older) that these lost jobs aren't considered "breadwinner" jobs.  They are the "second income" or "pin money" or "I need extra money" kinds of jobs. Which seems to imply that the workers have a spouse (or someone) who has a "bread winner" job to rely on.   So, while it might be uncomfortable for some people, they should get by.     

Which makes me also wonder if that kind of antiquated thinking - that a 1 income (or 2 income) family WOULDN"T have atleast ONE income that provides the majority of income AND employer sponsered healthcare  is part of the issue with providing affordable healthcare to everyone.   
 

Oh, so much this!

My pink collar job at the library has almost no benefits (just got access to a SIMPLE IRA) - hourly, no PTO of any kind, no HI.

Back when the director passed away unexpectedly, the Board of Trustees had to scramble to interview for a replacement.  They knew they had to increase the pay level (because of increased  state educational standards), but still didn't add benefits.  The retired former director, now board VP, refused to even interview the one male candidate, because "we can't afford him", implication being that as a man, he is the main breadwinner and needs benefits, but female directors would have a spouse with a better job providing the benefits!  I could not believe her attitude, OMG.  For the job she used to do.

The candidate the Board selected was not married.  Health insurance was an issue, despite ACA, because of cost.  She ultimately left abruptly, leaving for a different position closer to her soon to be husband.  The board once again had to hustle for a replacement.  She is also single, and used what leverage she had to insist on paid vacation time (for her salaried position) and some type of retirement account (hence the SIMPLE IRA, but we all get access).

It's slooow progress, one step every few years. The retirement came only after former retired director left the Board. Another board member who had worked in a bank (and had access to retirement accounts of her own) made it her mission to get the SIMPLE plan to reality for us. Sadly, she just passed away last month.

[Tiny]

May 24, 2020 13:20:07 GMT -5 TheHaitian said:

The following not so small business filed for bankruptcy due to losses during COVID : J.C. Penney, J. Crew, Neiman Marcus, Gold’s Gym, Pier 1 and the McClatchy newspaper chain and Hertz.

And unfortunately I know people with kids to feed, mortgage to pay that have lost their primary jobs due to COVID and some will be ok thanks to unemployment, savings, family help; some will not be ok and it will take them years to get back to where they were before this epidemic hit.

But I am 35 and black / immigrant so my circle is affected differently.

Those businesses have been limping along (or smothering under debt) since before the pandemic. A couple of them had already gone thru different stages of bankruptcy. None of them were "strong businesses". Also they weren't on an "upswing" before the pandemic - they were still limping. I would expect these kinds of businesses to throw in the towel at this point. Months of poor or no sales just puts them all further in debt.

How much debt does a "local" business carry?

[TheOtherMe]

I used to be the bookkeeper for a small women's boutique.  That man was playing credit card roulette.  He had no emergency funds and tons of debt.  

I tried to explain that to him many times.  I knew the business didn't have enough cash to get out of debt because sales were dropping.  This was in 2008/9.  I found another job and the business did close.  The owner did send me an email that said I was route.  The balance transfer game eventually fails.

[msventoux]

Many small business owners are no more savvy with their business financials than they are with their personal financials. They understand their product or service but are largely clueless about most other things that make a business successful, including financial planning.

None of our clients have gone under yet, but I suspect some will. A handful understand the business side of things and have solid emergency funds personally and professionally and immediately set out to adjust to conditions so will be fine in short order. Another larger handful understood they don’t understand business and had good managers that took up the slack and worked to get them to a mostly stable place where they will likely recover. Others are completely lost. Whatever loans they received won’t take them far and they have no other resources to draw upon.

[raeoflyte]

I think it requires some good years to build up that 3-6 month emergency fund to keep the business going with no income coming in. Newer businesses likely dont, but hopefully more established businesses do. When airlines couldn't survive even a week on reduced income I'm not going to throw stones at the mom and pop shops that are struggling. We're at 3.5 months and the businesses that still can't open are hurting.

[Tiny]

Thanks.  I've always worked for MegaCorps (of one kind or another) which means they generally have been in business a long time and spend time and effort (and money) on long range/long term plans.   Long range is 5 to 10 years out.   And most of the 5 year and under things are fully funded (or have $$ reserved) when the projects start.  And these things are outside of day to day expenses (rents, payroll, supplies) to keep the business running.       Big business is all about the future... they can't just focus on tomorrow or next month - they have to look 1/2/3/5/10 years out into the future.... all the time.  That's how they got to be Big Business (or if they are smaller businesses - that's how they stay successful). 
 

I have no doubt even businesses with reserves  are hurting at this point.    


 

[Tiny]

May 24, 2020 14:11:45 GMT -5 TheOtherMe said:

May 24, 2020 12:55:17 GMT -5 Tiny said:

And a sub topic:  
I'm getting the feeling (from the people I talk to in real life -mostly white and older) that these lost jobs aren't considered "breadwinner" jobs.  They are the "second income" or "pin money" or "I need extra money" kinds of jobs. Which seems to imply that the workers have a spouse (or someone) who has a "bread winner" job to rely on.   So, while it might be uncomfortable for some people, they should get by.     

Which makes me also wonder if that kind of antiquated thinking - that a 1 income (or 2 income) family WOULDN"T have atleast ONE income that provides the majority of income AND employer sponsered healthcare  is part of the issue with providing affordable healthcare to everyone.   
 

An example of a two income household:

My niece is a surgical nurse.  She did not have enough seniority to be one of the nurses to continue working until elective surgeries started back up so she was on furlough until last week.  During her furlough she got 3 shifts:  1 on Mother's Day, one on Easter and one on Good Friday, all evenings.  The hospital did continue to provide health insurance for it's workers but has stated that can't continue indefinitely.

Her husband works in manufacturing.  He has been on furlough since this started.  He "thinks" they might return to work on June 1.

Yes, they have been receiving unemployment, but would rather be working.

Here, John Deere is presently on a two week furlough of all employees.  They are also permanently laying off over 250 employees at this location.  The jobs at John Deere are definitely breadwinner jobs.

yeah, that double standard is weird.  I know a couple.   The husband has a stable reliable job but earns 1/2 the income of his wife who, pre pandemic shut downs,  also has a reasonably secure kind of job (both are careers - so long term their income/benefits should go up.)   The husband is "essential" the wife was let go from the office she worked in.      No one really seems concerned that they just lost more than 1/2 their income...because the husband is still working.    I'm fairly confident the wife will quickly find a job (quite possible at the same employer) once people can go back to the dentist (and have non-emergency dental stuff done again).      I have a strong suspicion that there would have been more of a "omg... how are they going to get by! The husband lost his job.  That poor family. " response if the hubby had lost his job.       

[wvugurl26]

I think it depends on the business. Assuming you have an owner who isn't a financial mess, it's still going to take several good years to build up those reserves. There's a local bakery that can't make up their mind about being open. I understand why they closed because people couldn't act right. I don't see why curbside was such an issue. At least it would be orders coming in the door.

They did keep stocking stuff at a market but it's at least 35 minutes one way from me. Not a drive I'm willing to make when the bakery is less than 10 minutes away.

They've been open for at least 15 years. When this all started the owner posted they would use the blizzard funds she builds into every winter as they hadn't been touched due to the mild winter. She's learned over those years though to put money aside. A newer business might not be there yet.