Clear debt! Borrow money! Find working capital! How to set up a financial system to revive a restaurant
After the relaxation of COVID-19 control measures, many businesses have started to recover again after being affected to different degrees. Restaurants are the same. Their storefronts are opening their doors to welcome customers. After the relaxation of COVID-19 control measures, many businesses have started to recover again. I believe that one of the most troubling things is money. It would be great if there were a knowledgeable guru to recommend a way to organize and adjust the formula for money management to be in the right place.Coach Noom - JakkraphongMesaphan or Num Money Coach, a financial guru, will share his ideas and techniques on managing everything from working capital, debt, to applying for loans, so that restaurant owners can turn things around and survive this period in the long run.
The heart of financial management that restaurant owners must knowWhether it is a food business or any other business, 'working capital' or '
Cast Flow'It is the heart of the matter. It is whatYoung CoachThe first thing to consider when managing money during the COVID-19 crisis is that businesses need to think seriously about this. Coach Num explained that when doing business, everyone looks at profits, but when managing, we need to look at the key factor, which is working capital. We need to ask ourselves what can stop the business. It’s not a loss, but a lack of working capital. Even if there is a loss, we can still continue doing business if we have cash on hand. Working capital can be obtained through many channels, such as profits, loans, or even using money that customers pay in advance to circulate, such as pre-order products. Therefore, the first principle is working capital, which is the number 1 goal that must be looked at and must be constantly supported. Those who do business and survive are those who always look ahead to see if there will be working capital in the next 6-12 months. And ideally, working capital must be working capital from profits, which will allow the business to truly survive.
How to manage working capital? Something to think about amidst this situation is if any restaurant has working capital, how should it be managed? Coach Noom has advised that during this period, you should try to keep cash with you for as long as possible and prioritize it well. 'Pay for important things' that you really need to use to circulate, such as raw materials and employees, which are what make the business run. For other things, I would like you to withdraw the money first. Use negotiations, such as trade creditors, equipment, and rent. If you can negotiate with them, try to negotiate. Ask to withdraw a little bit. Have some credit to pay. As for marketing, you have to look carefully whether the spending is worth it or not. "Right now, you should have working capital for about 6 months because looking at the situation, there is a chance that it will last until the end of the year. So if you want to add cash to circulate the business, you may have to think about surviving for 6 months. But if you can't do it or you think that the business can still sell, you can add cash for 3 months. But it will be tiring. You have to think about what will make you get your capital back quickly, such as new product formats, new menus, new products."
Re-engage the financial system to rehabilitate the businessAfter the arrival of COVID-19, many businesses are in trouble today. Therefore, if you hope to revive your business to continue, Coach Noom invites you to reexamine your business again, especially the finances, which are the main source of income that will make your business survive or not. There are 2 things that you should look at as follows:
LiquidityWhat you need to look at is your current expenses, which can be divided into two parts from a financial perspective.
-The burden of expenses arising from various operationsDoing business involves operating expenses such as employee salaries, shop rent, raw material costs, etc. I believe that entrepreneurs know very well what they need to reduce. However, one thing that comes to mind first and foremost is people, because people are quite hard to find during the business recovery period.- Expense burden resulting from capital costsOr debt, which I would like to emphasize a lot. During this time, entrepreneurs must be diligent in running to creditors to negotiate. The debt part will immediately ease our burden (advice on debt management is in the next section).
Pull in cashThe mantra to remember first is: Don't borrow money. Be patient. Your business is not good yet. If you borrow money, it will only make things worse. You may find a similar approach and make changes. For example, instead of selling to small customers, some places have started to tie their services to companies, resulting in a large number of sales at a time. They also have delivery services and have launched new and suitable menus to generate cash flow. The key is to use the available resources to maximize their use. Some shops have receptionists driving delivery trucks. During this time, you may have to completely transform yourself. You have to do other things as well.
In addition, you must make an estimate 6-12 months in advance to see your own situation and check it regularly every month to see if it is according to plan or not. You must do it with detail, carefulness and discipline.
How to find a loan as an option to recover from financial crisis If you reduce expenses, increase income, but still can't do it, and still believe that the business still has a future, you may end up having to enter the credit system to keep the business running. Regarding applying for a loan, Coach Noom gave some interesting advice, pointing out that the phrase "believe that our business has a future" is important, don't think by yourself. You should make an estimate of how much income you will actually have if everything returns to normal, where it will come from, and how it will come from. Then plan to apply for a loan. Applying for a loan has the following things to evaluate:
Don't use the wrong type of creditMany people, when they are in dire straits, choose to use cash cards or credit cards to get their business going first. This is extremely dangerous because the interest rates are very high, at 20% or more, causing all profits to disappear. This is a loan to keep them going, but it is not a recovery. Therefore, it is forbidden and should not be left out of the system.
Use low-interest loans from financial institutionsThere are many special loans available these days. If you apply for a loan from a bank, you should go to several banks because they have policies that are injected to help, such as an interest rate not exceeding 2%. However, when you go in, don't be surprised if the officer tells you that the loan is gone. Ask if there are other similar ones. If it's 2.5-3.5%, I believe it's still possible. And don't just ask for a percentage. You should make a figure, such as if you have to borrow 1,000,000 baht, how many installments will you have to pay? How much is the interest? Then compare all the interest figures.
Don't borrow money without any repayment plan.You should prepare a repayment plan by looking at how much you have to pay per month and then put that number into your financial statement to see if you can afford it. If you can't pay, ask for an extension to lower your payments.
How to manage debt well? As Coach Noom suggested at the beginning, during this period, entrepreneurs must diligently approach creditors to negotiate. If compromise can be reached, it will help to alleviate the burden a lot. The guidelines for going to negotiate and talk with creditors are as follows:
Negotiation must be done openly.When negotiating with financial institutions, you should go with profit and loss figures to clearly show that the money has not come in, to show that we really have a problem and will continue to lose for another 3 or 6 months. What will help us with this? Usually, there are good conditions.Do your homework first.The important issue in negotiation is to do your homework first. You have to think before you go to negotiate. There are 5 main options: 1. The best is to suspend payments of both principal and interest. 2. Pay only interest. 3. Reduce interest. 4. Ask for a reduction in installments. 5. Extend the short-term debt into a long-term debt. You have to reduce like this to survive, which will give you options. Don't let the financial institution make only offers. They won't know if you'll survive or not. In the end, it will fail anyway. Therefore, try negotiating by following the 5 conditions above, which I believe will help you survive.
Leave your thoughts and encouragement.Finally, Coach Noom left some thoughts on doing business during the COVID-19 crisis. If any business recovers from the COVID-19 situation, he would like them to remember this as a lesson. It is clear that many businesses have 'no reserve capital' and often do not look at 'cash estimates'. In addition, when the business grows well, they tend to rush to expand. And many times, it is done by using loans, which creates hidden burdens. When sales are good, they will not be seen. But if sales are not good, debt will arise as a problem. "I would like to recommend everyone that if we can get through this situation today, do not forget about today. Every time you do business, I would like you to estimate cash in advance for 6-12 months to see if there will be enough cash flow in the business. Every time there is a profit, I would like you to keep some for business circulation. Also, if you have to expand the business, I would like you to expand with some profit. Do not use all the loans. Otherwise, it will be a problem and exhaustion in the future. If there is another crisis next time, it will return to this cycle again. In the end, it turns out that you have worked hard to do business, but you are not more wealthy." "Entrepreneurs are people who work hard because they have to take care of many things at the same time, whether it is customers or subordinates. I would like to say that every problem has a solution. During times like this, you must use your mindfulness and caution in making decisions to fight. Especially when it comes to money, don’t rush into making decisions. Every time you make a financial decision, in addition to thinking about where to get the money, think about the following question: When you get this money, will there be any consequences or burdens that will follow in the long run that will cause problems? To answer this question, you have to go back to the cash estimation, which must be prepared in advance in order to see the facts before making a decision. I would like to encourage you to be patient and fight a little bit, because this kind of situation will have to go one day. I believe that it will pass if everyone has the awareness and determination to solve the problem.”
