Why don't businesses have emergency funds?

[disneysteve]

Many businesses do have emergency funds. And, they are hanging by a thread right now and we still haven't opened. So, I do think they have funds. However, funds are not indefinite. I mean, our School District of 1500 kids has a 27M budget, but if revenue stopped coming in, the District could really only survive for a few months. There is a cycle of earning and spending and one can only conserve for so long without bringing anything in.

I was mainly thinking of private businesses. A public school district is a government entity so different situation. But being able to survive a few months is great. That's as it should be. It just seems like many businesses appeared to be in trouble within a week or two of the closures. It didn't sound like they had any sort of reserves.

[Snicks]

I was mainly thinking of private businesses. A public school district is a government entity so different situation. But being able to survive a few months is great. That's as it should be. It just seems like many businesses appeared to be in trouble within a week or two of the closures. It didn't sound like they had any sort of reserves.

Starting a business is very expensive. Far more to have those liabilities of equipment, a building, paying employees , etc versus being a W2 employee and simply paying for one's household. I mean, I understand your point. But, there are varying stages of owning a business. I would think newer businesses probably have far more liabilities just trying to get started. A local couple bought a local restaurant recently and literally only opened a month before this hit. They are still opening doing a bit of take out but I am sure this is devastating their finances. I haven't seen any announce they are going out of business yet, but I imagine some will.

[disneysteve]

Starting a business is very expensive. Far more to have those liabilities of equipment, a building, paying employees , etc versus being a W2 employee and simply paying for one's household. I mean, I understand your point. But, there are varying stages of owning a business. I would think newer businesses probably have far more liabilities just trying to get started. A local couple bought a local restaurant recently and literally only opened a month before this hit. They are still opening doing a bit of take out but I am sure this is devastating their finances. I haven't seen any announce they are going out of business yet, but I imagine some will.

I agree about the stage of ownership mattering. Folks like the couple you describe that was just getting started and having to close while burdened with all of the start up costs really got hammered.

[Snicks]

I mean, I have a small business. A 2 owner S Corp. And, we were both out of work from March until recently. We weathered that. We did get some Stimulus money for the business, but not what we normally earn. We survived because we are both frugal.

[disneysteve]

I mean, I have a small business. A 2 owner S Corp. And, we were both out of work from March until recently. We weathered that. We did get some Stimulus money for the business, but not what we normally earn. We survived because we are both frugal.

I'm glad that you were able to get some of the stimulus money to help weather the storm. And I'm sure being frugal paid off, as it always does. I hope your business is back to normal soon.

[Snicks]

I think there are low profit margins for a lot of businesses. My dad spent his career as an Industrial Engineer. He had a heart attack in his 50's when the company closed, then retired. He bought a local grocery store and ran that. He really loved doing that because I think the stress of that was a different kind of stress than on his engineering job. He enjoyed learning to run and manage a store. However, he really barely broke even. And eventually sold it at cost mostly. I have heard that grocery stores have thinner margains.

But, looking at other businesses, the furniture store was closed. And, he didn't have an online website. So, no doubt people bought from other online sellers. For other local stores, even if they are doing some curbside stuff, they do not have the website or inventory to make it accessible.

[disneysteve]

I think there are low profit margins for a lot of businesses.

That comment has come up a lot. It's interesting how many businesses really don't seem to be all that profitable. A quick search shows that supermarkets typically have a 1-2% profit margin. That's practically nothing. You need to do a huge volume of sales to support yourself like that and something as simple as a snowstorm could put you in the red for the month.

[~bs]

That comment has come up a lot. It's interesting how many businesses really don't seem to be all that profitable. A quick search shows that supermarkets typically have a 1-2% profit margin. That's practically nothing. You need to do a huge volume of sales to support yourself like that and something as simple as a snowstorm could put you in the red for the month.

Business model of supermarkets is different than other businesses. They have high labor cost, high utility costs, high rent (due to size), but do A LOT of sales.

But yeah, in a capitalistic society, competition between grocery stores, restaurants, etc etc will drive drown potential profits to a level where the lack of profits is barrier to entry for any newcomers.

[mumof2]

I think it depends on the business, many that have been shut down here in Australia have been subsidized by the govt and they also get a payment to give to their employees so that takes the pressure off them...many are opening now but there are still restrictions, I know that many places have had different experiences with having to pay the rent on their businesses some have and some haven't depending on what the owner of the building was able to set up with the banks...or some just chose not to help out...so there was a lot more help here but I think with the prices of everything rising over here and so many people online shopping it has really affected many stores...even some of the big department stores are going broke...they just can't compete with online prices