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Spend years building a small business, and see it ruined in weeks, by John McGauley

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I recall an accountant telling me one time that there’s only one thing that matters if you own and run a business of any type, size or location.

Cash flow.

Cash flow is the difference between how much money came in during the month, and how much money went out.

In a business, negative cash flow for one month is a minor heart attack. Negative cash flow for two months is a heart attack and a stroke. Three months? It’s a heart attack, stroke and you got hit by a runaway car.

You might think that the strength of the United States rests on the shoulders of great corporations like Microsoft, Apple, Exxon Mobil, Starbucks, Walmart and hundreds of other well-known names traded on the big stock exchanges.

No, no, no, no.

It rests upon the shoulders of the dry cleaners, locksmiths, car washes, dress shops, shoe stores, aluminum-siding companies, restaurants, butcher shops, insurance agencies, real estate agents, interior decorators, golf courses, wedding venues, bowling alleys and the millions — millions — of other little businesses in this nation.

Businesses that employ 10 or fewer people make up about half of the United States employment. Those with 20 or fewer employees make up 70 percent. We are a nation of small businesses. Always were, and always will be.

Positive cash flow stopped for many of these enterprises about two months ago. For them, the next two months will determine whether or not they go out of existence.

I owned a business, so I kind of know what I’m talking about in this matter.

When money is coming in, through customers or clients, then things are going OK, fine or great. You’re paying your employees, the bankers are willing to extend loans, morale is steady among the employees. Maybe you’ll add an extra employee, buy a new service truck, or pay bonuses to key employees.

Your nightmare is that out of the blue, suddenly, you have a month of negative cash flow.

The main difference between a business owner and an employee is that the owners must meet payroll. Even if they’re a one-person firm, that means their own salary.

Payroll is the King Kong of overhead, normally anywhere from 40 to 70 percent of gross revenues. There’s no expense that comes close to it, an outlay of revenues that must be paid every two weeks.

Next in line are taxes. Income taxes, sales taxes, unemployment insurance taxes, payroll taxes. These are inexorable, and you have no control over them.

Then, thirdly, are employee benefits, followed by repayment of debts, and then rent or mortgage on property.

Then, COVID-19 strikes — a true black swan — and even if you graduated from Harvard Business School, this is way out of your skill set, as they say.

And that was your March.

By April 15, when your personal income taxes were usually due, customers have begun disappearing. Your car wash only did 30 percent of what it did last April. Your plumbing business is about half of what it is normally, maybe because people don’t want you in their home because of the virus, or they’ll put off fixing that leaky faucet or will wait until next year to replace the upstairs toilet.

The CPA was working on a big merger deal for one of his big clients, but the thing was called off at the last minute and he had kind of already spent that money so his kid could enroll in a prep school. That’s not possible now.

You get my drift.

By the end of April, you were looking at your employees and calling them into your office individually and reciting the same thing: “You know, I hate to do this …”

Then the real estate tax bills will come in, to both your home and your business, in May; the city of Keene and the school district are going to get their money, come hell or high water. Pandemics don’t stop taxes.

Your customers and clients are in the same boat as you, so they’re pulling back on putting siding on their house. You were counting on that one big job for that orthopedic surgeon, but the hospital’s been closed to elective surgeries, so she’s postponed it until … sometime. Like probably never.

And on it goes, millions of iterations of these stories, but they all mean one thing — a whole lot less business for everyone, including those gigantic corporations who rely on consumer spending.

Then there is June. It took you 10 or 20 years to build your business and six weeks to kill it. You’re 55 years old and don’t have the energy to start it all over again. So, you go underground and stop spending on a bunch of stuff, which affects other businesses.

Did we overreact to the COVID-19 pandemic? I think we all did the right thing, at the time, based upon the very limited knowledge we had — at the time. No one ever intentionally set out to do the wrong thing, they just did what they thought was correct. There was no time to wait to find out all the information and answers, something had to be done that day, or that week. We had no luxury of time.

We are now faced with having to do two contradictory things — limiting the fatalities from COVID and at the same time trying to save what remains of our bedrock, small business economy, by opening up.

Unfortunately, we’re going to have to settle with being only partially successful on both fronts.

John McGauley, an author and local radio talk-show host, writes from Keene. He can be contacted at

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