By Janice Barlow
A SHORT LESSON IN MONEY MANAGEMENT
IT’S BEEN ABOUT EIGHTEEN MONTHS since the toilet paper panic started. Shopping carts were loaded with the necessary rolls, as more people hurried to big box stores and grocery stores to nab what they could. Some places put limits on how much you could buy. We probably bought two or three extra packages just in case, but we realized we were simply fueling the problem.
There was no toilet paper shortage. Not then. People had the mistaken idea that the product was made in China. It’s not. It’s made right here in the good old USA. The biggest manufacturers work under Georgia Pacific, a massive conglomerate that was more than thrilled to see its products vanishing off shelves everywhere.
The stock prices of paper goods, including takeout container companies, soared. Then, as the coronavirus seemed to taper off last year in the summer, the products slowly filled in the shelves at stores everywhere, albeit at a higher price. ‘Why not?’ thought the manufacturers. People will buy it anyway.
Shortages were real in products like Lysol wipes and hand sanitizers. I remember seeing hand sanitizer bottles in the grocery store for $14.99. The same ones are now $5.99 but pre-COVID they were under three bucks.
The pandemic has been viewed as a Democrat hoax but huge companies took advantage of our pocketbooks when they saw how quickly they could increase profit margins by raising prices on popular items that were not really out of stock. These aren’t Democrats. They may not be conservatives either, but they are opportunistic to say the least. And we blame them, but yet, we don’t boycott them.
This all happened at the expense of the small business owner who could not keep up and keep stocked, since he or she was way down on the list of who would get supplies in first. Some went under. Others found innovative ways to stay afloat. The small businesses with websites, especially those who allow people to order online, were the ones that tended to survive the last year or more. But the ones who did not prepare went belly up.
Some of those ill-prepared businesses had been around a long time. But they faced two key issues that we need to learn from, especially if we run or work for a small business, or plan to go into business for ourselves:
First: Never start a business without a capital reserve. If you borrow everything you need to get started and go in debt more to keep inventory up while you are making initial sales, you will not survive a lean market, let alone a pandemic. People get super excited about going into business, and we’ve all heard these success stories of someone starting from scratch with a great idea, and now they are multimillionaires — like the woman who invented Spanx, Sara Blakely.
That is a very rare scenario. She also had the ambition to keep fighting to get her product distributed by big chains. She wouldn’t take no for an answer. She overcame the most difficult obstacles and went through times of extreme debt. Are you prepared to do that? Most are not, and many other do not set aside a decent reserve fund, just in case.
For instance, real estate agents only get paid when the next property closes. So they are often budgeting way out, as they wait for that paycheck. They understand that the money they have has to last until then. Smart agents have a reserve fund, in case of a lean housing market. They don’t take a windfall and buy a sailboat or purchase a new home that they normally couldn’t afford. People who flash wads of cash at you when they are buying an item are usually broke-at-the-bank. (I know, because I used to work with people like that years ago).
Second: Always have a great marketing plan. Be ready to be different than your competition. You need a website, the ability for online ordering, if possible, and plans to leave a brick and mortar set-up and go purely online if you are losing money making sales in the actual store. Many people love to go shopping and also like to support small businesses. But due to this virus, they have shifted to ordering from home.
Is your business, or business plan online? If not, you are way behind. There is a store in my town that sells homemade soaps, essential oils, teas, and other stuff. I loved going in there because it always smelled so good, and I am addicted to homemade soap. But now, they simply have a window open to the street, like a small ice cream stand. I can’t go in and smell stuff. It’s a large store. They are not online. The writing is on the wall. Either open up and get integrated on the internet, or this store will fail —- unless the owner has a decent cash reserve.
So, we started with the toilet paper (and other products) shortage. Speed up to now. Shortages are again occurring, but for a different reason. They are real shortages. Trucking companies can’t hire enough drivers to distribute the products. Many manufacturing employees have quit or taken early retirement because of the virus in one way or another. Jobs abound everywhere, but aren’t being filled. There are jobs in my town paying $20 an hour for untrained labor. And they will train people. But people either are not going back to work, or they moved on to work somewhere else.
As consumers, we feel the brunt of this in rising prices, shortages of goods, and longer lines at places we frequent. Many restaurants and stores have shorter hours due to the lack of staff.
What is the solution for the consumer? Buy as cheap as you can, and as much as you can. Because it’s going to be a long time before things return to an acceptable norm. In the meantime, it truly is time to go back to work if someone can’t pay their bills and are able to work. Stop hurting landlords and banks by not paying your monthly rent or mortgage. If you can’t, then pay them part of it. Throw away your credit cards and start living within your means.
And for business owners, don’t bite off more than you can chew. It’s a lesson that’s not taught in school anymore, but teach your kids how to balance a checkbook. Money won’t come out of nowhere, and not everyone is cut out to run a business. Greater risk does not mean greater reward when something like COVID comes creeping across the sea.
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