Credit: Dave Mogle

For most of us, the “Summer Lull” is coming to an end, and the phone is starting to ring a few more times a day. We generally put our heads down and grind it out to the finish line to fill up the coffers from here on out. That said, it is important to have our sights set on the right number to comfortably make it through the winter without that feeling of wondering if we’ll run out of cash and need to borrow money to make it through to the next season. Now, I’m up in Minneapolis, so this is serious business for us northern tier folks. While still useful for those in the southern tier, this exercise may not be as life or death. That said, here are some things to be thinking about and some frameworks to use to get the most out of your fall run and plan accordingly for the winter.


No Projects, Just Execute


The first step, fill up your bank account as much as possible. Avoid all distractions and shiny objects. Just maximize your capacity and demand. Now is not the time to implement a new process, change CRMs, or switch your banking relationship. All efforts should maximize the existing infrastructure. You have to put as much away for the winter as possible. Focus on reactive-based marketing (Google Ads, flyers, Facebook) where you can have an offer, a call to action, and a deadline. Limit any proactive brand marketing that doesn’t immediately convert, and where you have the price risk, save that stuff for the springtime. Max out your pay-per-click style marketing first, as that generally has a better-guaranteed return over flyers or social media. Even more importantly, leverage your existing client list with emails, voicemail bombs, and text message blasts to make sure they get on your schedule before the season wraps up. Lastly, make sure you have enough capacity! Nothing is worse than coming up short in the fall because you don’t have enough employees to get the work done. The sooner you start recruiting for the fall push, the better. See last month’s article on the ABC’s of recruiting.


No Big Investments


Credit: Richie Pettet

Like not enlisting big new processes or projects, don’t enlist any big new assets. They don’t generate enough of a return fast enough to warrant a big purchase. The cash will serve you better over the winter and going into next spring rather than being tied up in a big new truck or fancy new equipment. If trucks or equipment go down, try to use creativity rather than money to solve the problem. If you can limp by for another month to avoid a big cash outflow, then that is generally the best course of action. Let the spring surge buy the new equipment that is needed going into the next year. You can argue there is some tax benefit to buying now, which I’ll address in a couple of paragraphs. At the end of the day, it’s simply better to hold onto your cash until you have no other options available but to use it, than to use it now and create a scenario where you truly are out of options later.


Winter Cash Flow Budgeting


Every fall around this time, I start our winter cash flow budgeting. While I love seeing my bank account grow this time of year, I am always surprised by how fast it shrinks once winter shows up. I generally find that we need about $60K to make it through the winter covering all of our overhead/infrastructures and allowing us to get a strong start in the spring. That doesn’t include money that we need to pay our income taxes; this is just for our ongoing business expenses, so definitely ensure you have the cash to cover distributions for tax purposes. Each month I start with our Beginning Cash and add our expected operating earnings (or loss) for the month. From there, I add in the net amount of our Accounts Receivable I expect to collect during the month (I conservatively assume we won’t collect it all) and subtract the pay down of any credit card balance we are holding. Lastly, I forecast monthly debt payments that I’ll have to make throughout the winter. That gives me an ending cash balance forecast for each month that I can roll through to March and see where I should be standing next springtime. If that balance goes negative before April rolls around, then I’ve got a problem. If that balance is positive, I’ve got work to do to execute and make sure that forecast holds.


Tax Planning, Investments


There always seems to be a big push to buy assets at the end of the year to capture that expense’s tax benefit. While there are benefits to executing that strategy, I’m not a huge fan for a couple of reasons. 1) It distracts you from doing things that help your business grow (assets don’t), which will generally make you more money than the little bit of tax savings you pull forward; 2) It only moves things forward by a year and traps you into having to do the same exercise year after year to keep up the game, so your savings aren’t truly the $10K (pick your number) of expenses you recorded that saved you $2K in taxes, but are just the time value of $2K for that one year delay (that time value saving is a few hundred bucks at most even with a high rate of return), and in a decent market you would have made more investing that 10K in something other than assets; 3) when there is an administration change, and likely a tax policy change, you don’t know what rate you’ll be saving at anyway. It seems likely with the new administration, we’ll be seeing some tax hikes, so if we rushed to expense something at the end of last year, we actually would have given up the benefit of being able to expense it this year at likely a higher tax rate. I’m not saying tax planning isn’t important. Just don’t throw out the baby with the bathwater. Make sure you are holding enough cash to make it through the winter and hit the springtime aggressively. Don’t go buying a new truck to save a few bucks on this year’s taxes (which you will give back the following year anyway) and not have the cash necessary to make aggressive marketing investments in the spring. To that end, if you are going to spend money at the end of the year to reduce your taxes, go ahead and spend it on your spring marketing. That will make you far more money than buying an asset to sit on for the winter.

As always, don’t forget to head to our website and grab our free chart of accounts download and free target budget template so you can keep your financials dialed in and your profit margin maxed out.


Dan Platta – CEO – Blue Skies Services

Bookkeeping, Beer, and BS on Facebook