Discover the resilience and strategies of small businesses amid economic hurdles with our conversation featuring the insightful Ebony Sulivan, where we celebrate the tenacious spirit of entrepreneurs like those at Cassie Electric during Small Business Month. As we traverse the challenging terrain of 2024's economic landscape, we put the spotlight on the relentless grip of inflation, revealing how a 20% surge in expenses has tested the financial agility of small ventures. We reminisce over the lifelines of PPP and EIDL loans while peering into the crystal ball of the upcoming election season, mulling over the possible economic shifts that may await on the horizon.
In the throes of a supply chain maelstrom, we uncover tales of innovation and strategic foresight from businesses combatting staggering 52-week lead times for materials. The conversation turns to the wisdom of early engagements and the significance of robust supplier relationships in a world where agility spells survival. This segment wouldn't be complete without dissecting the implications of soaring interest rates, which have seen the prime rate leap from 3% to a daunting 8.5%, reshaping the financial landscape for small business borrowing and operating expenses alike.
Wrapping up with a deep dive into the delicate balancing act of business debt management and profit margin preservation, we discuss the lifelines that Small Business Administration loans could offer while weighing the merits and challenges of providing employee healthcare. Ebony Sulivan illuminates the complexities of financial stewardship and the pivotal role health benefits play in fortifying a company's backbone—its workforce. Join us on the Veronica Edwards Show as we arm you with the expertise and encouragement to navigate these tumultuous business seas.
Discover the resilience and strategies of small businesses amid economic hurdles with our conversation featuring the insightful Ebony Sulivan, where we celebrate the tenacious spirit of entrepreneurs like those at Cassie Electric during Small Business Month. As we traverse the challenging terrain of 2024's economic landscape, we put the spotlight on the relentless grip of inflation, revealing how a 20% surge in expenses has tested the financial agility of small ventures. We reminisce over the lifelines of PPP and EIDL loans while peering into the crystal ball of the upcoming election season, mulling over the possible economic shifts that may await on the horizon.
In the throes of a supply chain maelstrom, we uncover tales of innovation and strategic foresight from businesses combatting staggering 52-week lead times for materials. The conversation turns to the wisdom of early engagements and the significance of robust supplier relationships in a world where agility spells survival. This segment wouldn't be complete without dissecting the implications of soaring interest rates, which have seen the prime rate leap from 3% to a daunting 8.5%, reshaping the financial landscape for small business borrowing and operating expenses alike.
Wrapping up with a deep dive into the delicate balancing act of business debt management and profit margin preservation, we discuss the lifelines that Small Business Administration loans could offer while weighing the merits and challenges of providing employee healthcare. Ebony Sulivan illuminates the complexities of financial stewardship and the pivotal role health benefits play in fortifying a company's backbone—its workforce. Join us on the Veronica Edwards Show as we arm you with the expertise and encouragement to navigate these tumultuous business seas.
Be sure to visit BizRadio.US to discover hundreds more engaging conversations, local events and more.
Veronica:
Welcome to the Veronica Edwards show where we have fun financial conversations that everyone listening can apply to their personal and professional life. I'm your host, veronica Edwards, so excited to be back here in May my birth month month, season three here on bizradious. Always want to thank the V Team. You guys have been downloading so much. I so appreciate you guys as we wind down season three in preparation of season four. But today we have our quarterly segment, small Biz Hot Topics, with our co-host and friend to the show, coo of Cassie Electric, the only minority female owned electrical business in the state of South Carolina. And also Cassie Electric is the 2023 Small Business of the Year recipient by Greenville Chamber of Commerce. So welcome back, ms Sullivan. Ebony, welcome back.
Ebony:
Thank you, thank you, thank you. Thanks for having me.
Veronica:
Girl, you've been busy. Yes, Congratulations on all the accolades you guys have gotten Small Business of the Year You've been Small Business of the Month multiple times. You know I'm your accountant so I know we're really trying to hit some big objectives this year in 2024. So buckle up.
Ebony:
Yeah, you know the saying when you know better, you do better. So we know better now and we got to do a lot more work, so I'm excited.
Veronica:
Yes, and we were just chatting before the show that May, when this show will air, is small business month. Per the US Chamber of Commerce, in 2023, ebony almost half of America's private sector workforce was small businesses.
Ebony:
Yeah, that doesn't surprise me at all. Here's another really interesting fact for you too. You know that only 3% of women-owned businesses make over a million dollars. Yes, Crazy.
Veronica:
And I'm just going to say cassie electric has made over a million dollars.
Ebony:
We might not have the money in the bank we're the three pretenders, but that doesn't mean jack, does it?
Veronica:
it sure does it like now with which we're going to be talking about today, with um, the state of the economy which we'll be talking about today, this inflation has a million dollars feeling like a hundred thousand dollars a few years ago, for sure for sure.
Ebony:
It's definitely tight times right now, and so having the awareness of what's going on in the economy is important. This is why I'm really excited to talk about the topics, because these are directly impacting our business now, and I'm excited to share the ways that we've tried to navigate these things.
Veronica:
Yeah, let's jump into it. So today we're going to talk about the five biggest challenges facing small business owners, and most of our stats are coming from the first quarter of 2024 US Chamber of Commerce Small Business Index. So those five challenges, of course we know number one is inflation, costs, revenue and cash flows. Number two, and no particular order, number three is supply chain issues. Number four is increasing interest rates and, lastly, affordable employee benefits and healthcare. So, ebony, I would love for you to kick us off with inflation, this being a really big challenge for all of us small business owners.
Ebony:
Yeah, inflation is a big challenge. I'm going to just talk through some nerdy stats but then we'll have a little bit more of a robust conversation around it. But this quarter, small businesses remain most likely to report inflation as their biggest challenge, a finding which has remained consistent for the past two years. In fact, it is the seventh consecutive quarter that over 52 percent of small businesses cite inflation as their main issue. Additionally, small businesses report inflation costs as their top issue, regardless of business size, sector and region top issue, regardless of business size, sector and region. This affects cash flow, hiring, staff profit and most small businesses have seen costs increase by 20% or more and Cassie Electric can allude to that 100% that inflation has directly impacted our business and it was a slow trickle effect, so it isn't something that was like boom, oh.
Ebony:
This month things were bad. We have seen over the last three years, really since the end of COVID, that we were going to start to see at least a 10% increase from our vendors across the board, so that increase has a trickle down effect. In order for us to maintain profitability or meet our margins, we got to pass that down to our customer. So immediately our cost of doing business increased and that has really put us in a really tight position where we're watching our cash flow because, as our spending has increased, we're still waiting on people to pay us and that definitely impacts how we have cash in the bank currently. So inflation costs have significantly impacted our business over the last three years. In particular, we're seeing the biggest of that this year.
Veronica:
Yeah, you know, as Cassie Electrics, a fractional CFO, balanced virtually we were just talking about this in one of our weekly meetings is like whoa, like, yeah, we can get this 20% increase that hits us and then we can go ahead and turn it around to the customer, but we're project-based. We still aren't getting that money every week, every month, when we're paying out these expenses, and with inflation, it's just added even more to it. So, where everybody's having to tighten their belt buckles a little bit, because there's really no wiggle room, and I think we were flying high in 2020 and 2021 with PPP loans and EIDL loans. All that money was flowing into the economy. But we're going to be talking about a little later about these interest rates. It just keeps going up. It seems like four years ago was a long time ago, when it just seemed like it was raining money.
Ebony:
Yeah, it really did, and I think that what I'm hearing from my counterparts in the industry is that everybody is really waiting on election season. Traditionally, we've seen more forgiving and business friendly economy when we have a Republican in office than we do Democrat, and I don't think that has no bearings on which flag I wave. It's just economists giving us information that traditionally, when we have had, like when we had President Donald Trump in office, while many of us did not agree with a lot of the tactics and things that he was doing, we saw, like you said, a rain of money coming through the economy where we were really trying to accelerate business, through the economy where we were really trying to accelerate business, in particular, small business growth, and a lot of small businesses were able to stay, keep their doors open and maintain even through uncertain times. So inflation now to balance that budget and try to figure all things out. A lot of businesses are really struggling to keep up.
Veronica:
Absolutely, and you hit that right on the head. I think everybody's kind of just holding their breath waiting to see what happens in November, and then we know it's going to take a couple of months after that to really feel the effects of whoever is at the helm of everything that's going on. So I also want to talk about revenue cashflow. This is also a very big challenge for small business owners and it's an interesting stat. They said women-owned businesses, a lot of baby boomers, older folks, really have a concern about this. And Ebony, I don't know about you, but you know we have parents and grandparents where they're old school. They're still going to have some cash on them. You know my aunt's always like girl, you don't got at least $100 on you. I'm like no, and so they're feeling it like the cash is dwindling. So that's always kind of like, kind of where I go to, kind of feel like, ok, how are some of these more conservative people dealing with the revenue? Are some of these more conservative people dealing with the revenue and some things that you can do?
Veronica:
Small business owners, listening, if you're starting to have concerns about your cashflow, you need to understand what it takes for you to break even. A lot of times, I will admit, when I first started my business, you're just backing into how you need to pay your bills, but really you need to be figuring out what's the cost of my product. How much do I then need to sell it for to break even? But oh, by the way, I need to pay myself, I need to pay others, I need to have a profit. So, ebony, is that something with Cassie Electric? Was that a challenge for you in the beginning? I know it keeps changing. How do you stay on top of knowing that profitability and when cash is going to be coming in?
Ebony:
I'm sitting here nodding my head, like everybody can see me as you're talking, because you're just, you're speaking my nerdy language and I love it so much because it is so imperative that we really get a relationship with our finances. And a lot of people are afraid of it because it's a new language. Right, like, finance is different than accounting, accounting is different than bookkeeping, and when you start trying to mix all of this language together and you just got a basic sense of cash in, cash out, it becomes daunting. But it is so important to know this because in the beginning we call, we laugh.
Ebony:
I'm an honorary accountant, but I had a little bit of knowledge of accounting that helped us get us through where we were. But right now I'm a student all over again. Right, like, I'm learning a whole new way of reading these financials so that we can understand okay, where can we actually squeeze a little tighter? Where are we really spending the bulk of our money? We knew high level what was happening, but now we're really drilling down into it and really getting a better working understanding of how to manipulate these numbers to do what we want them to do. But in order to do that, you first got to have a really good understanding of it.
Veronica:
Yeah, we were just. We were just talking about with cash. Like you know, if you need your money coming in every month, then you need to have payment terms of 15 days, so then you can give enough time another 15 days to get the money. I've seen, ebony, you've already implemented with Cassie Electric scheduling your payments. No longer are we looking at, oh, let's just go ahead and pay everything now. No, let's go ahead and put that on a credit card. If they're going to extend us terms for 30 days or 60 days, let's wait to pay that and let's hang on to our cash.
Veronica:
So that's something, small business owners, if you're listening, that hold on to your money as long as possible, but also the flip side of that is get people to pay you as quickly as possible. That's the game that we're playing now. And another thing small business owners should not wait until the last minute to secure credit. And, ebony, I know you've gone through that a few times. You know we've all utilized lines of credits and credit cards, but because over the years the banks have tightened up, you know the rules and regulations for securing credit. You need to jump on that months before that. You know you thinking that you need that. I would love, ebony, if you can share just some of your positive experiences that you had with trying to secure credit.
Ebony:
And what were some of the flags for you to say, okay, now it's time I might need to increase my line. Oh yeah, so we are growing, we want to grow. We were very, very much strategically looking at what did that look like for us in growth and how much money we needed in order to do that. And so, before we really started marching to that, to the beat of that drum, we engaged with our banker. We were like, hey, this is what we're trying to do. Veronica meets with me, her business and my banker and our tax accountant. We have a twice a year meeting and in those meetings I was saying this is what we want to do, this is what we want to do. And they laughed at me most of the time Like, girl, that's real outrageous. But this is what we wanted to do. Now tell me how to. How can I do that? You know, how can I get the money to do that? And so once I got the information on how to do it, we started really working our way towards it.
Ebony:
And we started small. We had a really small line maybe I think it was 75,000. And then we wanted to grow some more. So we changed banks. We had to go where they were going to give us money.
Ebony:
And so, while we had a great relationship with the first bank, the second bank was going to give us more money. So we politely packed our bag up and we went to the bank that was going to give us what we needed to help us grow. And so now you know we're in a line of credit, but we also have gone through loan applications to get long term financing, and even in all of those things, you have to stay on top of your books. If you're not paying a CPA, or if you're not paying for a fractional CFO, or if you don't have someone in-house to do that for you, that is one of the top investments that you need to make in your business is to have somebody who can be a part of the business that speaks that language, that can help you understand how to navigate this, so that you can get the money you need in order to grow your business.
Veronica:
Amen, I agree 100%, and that is an investment that you definitely get a return on your investment. It's not just a sunk cost that you have to pay rent or you have to pay utilities. You need an accountability partner in your business and a lot of times you don't. It doesn't make sense to have a full-time accountant or bookkeeper or some have different skill sets, but you definitely need somebody that has enough business savvy to point out things in enough time for you to make a difference. So, speaking of that, ebony, the next challenge that we're seeing is supply chain issues. And when we say supply chain, that chain, that is the network, the distribution, the process of getting things out the door in your business and, being that you're in service and construction, I know that can make or break a project. Making sure that everything is efficiently running, you know in your supply chain. So can you tell us about that? You know what are some things that can offset your supply chain. You know what are things you could do so you don't have those interruptions.
Ebony:
Planning, planning, planning, planning, planning. The sooner, as quick as you know, the better off you are in ordering things that you need. We're working with a vendor now who would like to get their project started May 1 and have a deadline completion of December 31. And the material that they need has a 52-week lead time. That's a year. That's a year. So that automatically crushes your deadline because that's impossible.
Ebony:
So what we've done to creatively offset that is, we went back to the engineer. We said, hey, can we look at this differently? Can we look at maybe using smaller capacity panels instead of a gear? You know, we really put our thinking caps on and really got creative to help our customer figure out a solution that would allow them to still meet their deadline. And I'm telling you, that's an art and a talent and every construction trade doesn't do that for you. Some folks are like this is what it is. Oops, you're bad.
Ebony:
But I would say to a customer if you are planning a project, you should engage with your tradespeople about lead times as soon as you're pretty certain that you're going to pull the trigger on this project. I would even venture to say communicate with them when it's conceptual, so that you have some general idea of what you are up against, because a lot of the challenges that we're facing around supply chain, our hands are tied as well. You've got the true issue of supply and demand happening, where right now, prices have gone up, materials are fewer, sometimes they're coming off the production line and they're not 100% installed correctly because of labor shortages, so you just have so many trickle down effects that's going on impacting the supply chain. I would completely recommend that, as soon as you know, you start engaging with people who buy these materials and get that stuff ordered as soon as possible.
Veronica:
So it definitely sounds like it's still a misconception if people feel like, oh, the pandemic was four years ago, all those outrageous delays, that's still here. You know, I know people say, oh well, it's gotten better, but it's still not where it needs to be.
Ebony:
It's gotten better, but it is by far nowhere near what we used to could walk in the store and get some of this stuff off the shelf, you know, and now some of these things have two and three week lead time on things that were turnkey offerings at your Home Depot, right, and so now you just got to be a better planner. You can't, we can't live at the mercy and the fingertips of just being having things easily readily accessible to us anymore. We really have to think through things a little bit more thoroughly.
Veronica:
Absolutely so. I want to move on to rising interest rates and that kind of goes back to what we were initially talking about with inflation costs and again highlighting some of the things I won't say things challenges and opportunities that Cassie Electric has. We've been talking about interest rates quite a bit and right now I was looking up that the prime rate is 8.5%. And to break that down for people like well, what's a prime rate? What's that? A prime rate is a lending rate that banks use, based on the federal reserve rate, and then they add, usually about 3% on top. So right now, the federal reserve rate is around five, five and a half percent. So when you add that 3% to it, that's how the banks are saying, okay, we're around 8.5%. But the crazy thing, ebony and those listening, is that four years ago the federal reserve rate was zero and the prime rate was 3%. I was able to buy my house in the summer of 2020 for less than 3% on a house where, if now, if I had a 5% increase, oh my goodness, my mortgage would be like five $600 a month. So that's huge.
Veronica:
And so there's definitely still concerns for small business owners about interest rates. You know like this is still affecting everybody. Business debt is more expensive, you know. So that means you're having to use more cash to cover interest costs. You know, depending on your business's overall financial health, that can affect your profit margins. It's just it doesn't give you any wiggle room. So again, small business owner of the year, how have you dealt with this personally and professionally? Cause this is crazy how high the rates are right now.
Ebony:
It's high. It's definitely at um. It's not as high as it was a year ago. You know, a year ago it was even higher, I think we were seeing rates, almost 12% and so we see that it is making some traction and moving downward. I don't think we'll ever see a zero again, but or at least not in our lifetime. But it will definitely level out and get to a place where it's more manageable for us.
Ebony:
But right now we're just not borrowing. We're trying to use what we have to repay our credit and keep recycling that until we start to see some change. But as the interest rates do come down, we are closely watching SBA lending because they are very small business friendly and so, while they do have a higher interest rate, because they're usually prime plus plus, which means if prime is eight, then it's 10. That means it will change when prime changes. So if prime goes down to five, you're now at an eight excuse me, a seven if it's a plus plus, so your rate could change with that SBA lending. So I do look at that as an opportunity for small businesses to really look at it as a way to help grow their business. But essentially, right now, just hold on to your money, absolutely, and one of the last things we got about a minute or two left.
Veronica:
Ebony is so much good stuff is affordable employee benefits and healthcare, and we all struggle with that. This year, in 2024, I'm a hundred percent in my business balance virtually. I am paying a thousand dollars a month for medical insurance and that's a hundred percent coming out of my pocket. And I wanted to do that because if I do bring on employees, I want that to be an option, even though I'm a small business owner. So you know, ebony, you have way more employees in this million dollar business. How has offering health insurance? Because when you first started in the business four years ago you didn't have that. How is that helping with retaining employees and boosting morale, but also trying to balance how expensive it is?
Ebony:
It's very expensive. And it's not even just that. You also have to take into consideration the health of your employees. This is something that I had to learn the hard way. You know that you offer these benefits and you get rated based off of your health, and if you have unhealthy employees working for you, your rate goes up year after year. If they go into the emergency room, if they're using untraditional methods of getting health care options or providers or medicine, it impacts your business. So not only is it a great retainage opportunity for employees, but you also have to really work towards ensuring that you have a healthy team, so you want them to be walking and exercising and eating healthy, because it helps your bottom line in your business.
Veronica:
Absolutely. Now it makes sense. When I was in the corporate world where it was like required for us to have a physical exam, you know, once a year and you know they wanted to keep up with your steps and all of that.
Veronica:
I'm like why are they just so intrusive? But I get it, it's all about the business. So, Ebony, so many more things that we can jump into. I definitely see us having a more broader conversation when it comes to inflation and interest and even when it comes to employee retention, because we know how hard it is. You know, the Bureau of Labor Statistics says one in three dollars spent in total in your business is for compensation.
Veronica:
Yep, so we want to make sure, like you said, that our folks are healthy and that they're mentally, physically, doing all the things that they need to be healthy. But then that also is going to help in your business. So again, Ms Sullivan, I want to thank you for taking time out of your very busy day growing your family-owned business. So thank you for providing feedback and being transparent, because that's what the show is all about is to help the listeners to make better decisions within their business. And I want to thank the listeners for tuning in to bizradious for the Veronica Edwards show, which airs on Wednesdays across all platforms, and if you missed the live airing, you can listen to all prior shows at veronicaedwardsbuzzsproutcom.
