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Planning for Survival: Holding On to the Cash You Have

What to do when not a lot of money is coming in and expenses are chugging along.

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For most small businesses—at least the ones that have drastically scaled back operations or shut down altogether—the crisis triggered by the Covid-19 pandemic poses a long-term existential threat. There's not a lot of money coming in, maybe none at all, but expenses chug along as if nothing has happened: Rent, loan payments, utilities, insurance, and other obligations still come due every month. Most small businesses don't have the financial cushion to outlast a shutdown that could last for months. Indeed, a 2016 study by the JPMorgan Chase Institute of the bank's small-business customers in major metro areas found that only half of them have banked enough money to pay the bills for a month. Only a quarter have two months’ worth of cash buffer.

So, the name of the game now is conserving cash. "You need to hold on to whatever you have," says Andy Fried, a counselor at the Small Business Development Center in Kennesaw, Ga. "Most expenses are variableyou can control them. Some are fixed and uncontrollable, like rent. You really need to focus on the uncontrollable expenses.”