Your Supply Chain
Written by CMG News Contributor, Doug Carleton
Do you sell or distribute a product made somewhere else? The economic outlook is continuing to improve. They are distributing vaccines. A stimulus bill has been passed by the Senate, providing an economic lifeline to millions of people. Spring is coming.
Will you have enough product?
In the wreckage of so many companies, could one of them be one of your suppliers? Or a supplier's supplier? Manufacturing the now-famous disappearing Clorox Wipes, for example, takes four separate parts and at least five different disinfecting agents, all made by individual companies.
Suppose one of those links broke down? How many links are there in your supply chain? Are all of your links still in business? What about any problems in their supply chains? Are there any shortages of materials used to make your product even if the producer is still in business?
Assuming you don't have any problems in your supply chain, then the $64 question becomes, "how many or how much of my product am I going to sell when things start picking up?". You've got to create detailed sales projections, possibly made much more difficult by the fact that the customer you knew pre COVID-19 might not be the same customer post COVID-19. You should plan sales for at least three months down to the week-to-week level. If you have multiple products, which ones are likely tobe the highest revenue or profit-generators? Can you get enough of them when you need them? How many weeks' worth of sales do you have to have on hand? How many should you have on order? The worst thing that could happen is for the economy to open up, people want to buy your product, and you are out of stock. They may not return.
Will you be able to pay for it?
Hopefully, this is a question that you already have the answer to with a solution. Such as a line of credit already in place with your bank. If you haven't got a line of credit, you should go to your bank now and get something in place, if possible. Bank lines of credit are the most inexpensive money you can get, and this is where those detailed sales and inventory projections can payoff. Your companies projections will show the banker the best possible analysis and forecasts, based upon your business knowledge and the effort put into them. The banker will have a level of confidence that you can pay the line of credit down. If you cannot get a line of credit from your bank, there are online lenders, but the costs are substantial. Also, remember that many of your suppliers may be hurting as well. For the suppliers to make their sales, they may be willing to offer more favorable terms than when in good times. Know your options - bank first, suppliers and vendors, maybe even some local economic development funding of some kind, then online lenders.
Spring is coming. Be ready.
This blog entry is a slightly edited excerpt from Doug Carleton's 'The Daily Life Of A Small Business Owner' series. Doug was a mentor with SCORE, Startup Virginia, and Lighthouse Labs, and has 25+ years of experience in small business finance including 12 years in SBA lending. To contact Doug directly, please email him at firstname.lastname@example.org.