Utah State

Section 1

Step 1. EMT - Emergency Management Tips 

Forget your "Grand Plan". Forget the dreams you had. Forget why you have the greatest product of service ever. Forget anything that does not have to do with CASH! Cash is King.

Everything we do in this course from here to the bitter end has to do with cash flow. We are talking about cash coming in minus cash going out. We don't care about profit or loss. We don't care about depreciation or taxes. We don't care about anything that does not have to do with cash flow.

If cash coming in is greater than cash going out we have a positive cash flow. If cash going out is greater than cash coming in, we have a negative cash flow. Your first duty is to "Stop the Bleeding." 

Assignment: Use the downloads in the righthand column to calculate the number of days you can keep your doors open.

 Now you know how many days you have until the patient dies unless there is some kind of drastic intervention. You may be able to stretch it a little further by starting CPR (Cash Paid by Relatives) or Life Support via credit cards but, eventually the patient will die and you will be left paying for that life support. Worse yet, someone else may pull the plug at anytime.

Now that we know where the cash is going, STOP IT! You have to stop paying cash unless that cash is directly used to bring in more cash but, you have to do it smart. 

Examples:

Pay cash to buy supplies to clean carpet for others for which you get paid. -- Good

Pay cash to clean your own carpet thinking it will increase sales. -- Bad

 Repair equipment vital in making product. -- Good

Repair delivery truck. -- Bad (Use your own car. I told you this would hurt.)

 Layoff employees based on seniority. -- Bad

Layoff employees by laying off the worst 1/3 in one division and transferring some good employees from another division and laying of the worst 1/4 of the employees there. -- Good.

 Layoffs hurt. They are hard and you may be talking about family. If you want to keep them around to save hurt feelings until you are driven to bankruptcy, fine. You are done with this course. If you want to save your business, let them go. They are going to be out of work one way or the other anyway.

Assignment: Use the download to the right. List all uses of cash and rank them.

 Assignment: Create an employee evaluation form. Interview and evaluate every employee as to desire, goals, skills, performance and adherence to company policy. It will guide you through the layoffs that are to come.

 If cash is King then Margin is Queen. You have to find the margin on your products or services. This will tell you what makes big money, what makes a little money and what makes nothing.

 Assignment: Use the download to the right. Calculate the margin on your product lines, services, custom work, etc.

 Now that you know the margin generating part of your business, unload everything else regardless of what it does to total sales. As that iron lung life support system is pumping away, you don't care about anything that does not deal with cash coming into the business. If it's not generating cash you shouldn't waste time with it.

 Assignment: Put everything on sale that does not contribute to margin and thus does not contribute to cash coming in.

 Benefit: This will bring in cash immediately.

You don't have to re-invent the wheel. Look at Wal-Mart. When they have product that isn't moving (not adding to margin or bringing in cash) it gets put on a rack in the middle of the isle. Each day the price drops a little until it's gone. If that toaster doesn't sell until it hits $1 then you know that you have a toaster the market values at $1. Don't carry them. If it never sells, give it away in a promo or to a good will store. You don't want it around.

 Assignment: Send all of the previous assignments to your counselor for analysis and suggestions and proceed to the next Step.