Mar 23, 2020

Food Finance Institute Huddle Notes – From 03.23.20

Reprinted with Permission

We are in an unprecedented time in terms of what is going on in the food industry and there are enormous ramifications for all of us. Within this there is still opportunity for those able to bring products to brick and mortar or online markets.

  • This is a marathon, not a sprint. This degree of disruption is precipitous. In the previous recession business went from 100% to 70% or 50% of sales, we did not have businesses that went to zero. Today we have businesses who have gone to 25% or 0% of sales.
  • This is still about cash. This is not the time to talk about raising equity or loans. The main focus should be keeping the business alive. How do you do this? Through
    managing cash.

    • Create a 13-week rolling cash forecast. If you are business, put aside your big long proforma – this cash forecast is what you need most immediately. If you are a consultant, get in touch with your clients and make sure they do this. FFI Weekly Cash Flow template
    • Manage your Income Statement. Businesses need to hoard cash and pay as few people as possible. Let’s take a journey down your P & L:
      • COGS – Are a big chunk of your expenses. If you are not making or selling product, COGS will take care of itself, however you might have bought stuff and put it in inventory. You will then need to have a plan to pay for it.
      • Rent – Get relief from landlord ASAP and request deferred payments.
      • Debt Service – Talk to banks and lenders and say you can’t make debt service payments, defer all, or reduce to interest only.
      • Labor – there is a big adjustment in the food industry right now… Share of Stomach is 54% of food consumed before corona virus hit was consumed in food service, so 54% of food purchases have to go somewhere else. The only place they can go to is brick and mortar or online. Every food business is on either side of that – no business or too
        much business. Can you share employees? Retail stores hiring restaurant workers temporarily would be an example.
      • Insurance – pull out insurance policies and talk to your agents. Read about invoking force majeure in this crazy time.
      • Credit Lines for Working Capital – if you have access to one, draw on it now and put the cash in your checking account. Banks might remove the access if those lines are not being used.

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