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You're listening to Shorts and Suits conversations about business leadership, culture and families through the eyes of two entrepreneurs in the small business community with Ben Kaulfman and J.W. rayhans.

Okay, so here we go. We're talking about smart savings today. And that means a lot of different things to a lot of different people, I think. But for us today, I think that it's going to be mostly business focused savings. Right, is what we're talking about.

Yeah. You know, because it is. It's one of those things that, you know, maybe a lot of business owners don't talk about much, especially given the time right now. Right. And so some businesses have really struggled, some are doing really well, some have experienced growth, some have experienced change. And so, you know, now is probably one of those moments where not many business owners, if they do have some excess, if they do, if they are very stable financially and they've got that money sitting in savings or sitting in their business checking, they may be wondering, you know, what do we do with that?

Yeah, yeah. And I know my personal business, I'm always looking at, you know, ways of, well, I mean, maybe we should benchmark some of this stuff before we get too far into it. Like, what do you think is the right threshold a company should have for savings? You know, for me, I've always thought it's like three to six months of your operating costs is like, ideal to have in the bank. That's like a good foundation to be starting of where you should be. You could certainly go a lot more, and you should go a lot more. But that's to me, like the minimum you should have. What are your thoughts on that?

Yeah, this is a great question, Ben. And you know, of course, you know, right at the beginning, I'm gonna say, you know, the best thing that you can do is talk to the professionals that know you, right? Your, your, your CPAs, your financial advisors, your investment advisors. If you have those relationships, lean on those professionals because they're gonna know your specific situation. So anything that you and I talk about here this afternoon, it's gonna be a bit more general, right? It's gonna, it's not, it may not be specific directly to your company as a listener, but always lean on those professionals. And like we've said in any of our others, you can reach out to us too, you know, and we can help out, we provide direction. So. But to this question of, you know, one of the things that companies measure, and this is where I think small businesses can learn some things from the way that big Businesses do things is how many days cash on hand do you keep. And that's a key measurement for a lot of larger corporations is that days of cash on hand. And so like you mentioned, whether it's three to six months, some of that's going to depend a little bit on your business cycle and your flows that you're used to.

Right.

So what I would encourage business owners with is really get a good understanding of what those expenses look like, the flow and trends of their businesses. But like you mentioned, it's probably a good idea to have at least access to three to six months. But you'll notice that some businesses start to strive for even 9 to 12 months of cash on hand days. Cash on hand.

Well, and I think that's. You're right. I think that's all businesses should shoot for that. I kind of, I was just referring to like, what are your minimums you should have when you're starting out? It's like anything you can do to keep the lights on. Right? Yeah, that's where I was at least. And so now we're a little bit mature. I'm running into about 18 years. I think you're about 20 years. So we're seeing a different view, a different lens of that now. So we have a little bit more. Right. And we're probably going that direction.

I was going to say what a lot of, what a lot of small business owners run into is, you know, they, they make business decisions based on what, what's in the bank and, or what isn't right. If there's money in the bank, then they go, okay, let's get some equipment or let's hire some people. If there's not money in the bank, they go, okay, we're not going to do anything right now.

Right.

And, and as you mature in business, you start to view that differently. Right. You start to do some forecasting, you start to do some budgeting and you start to understand what your trends and cycles look like. And so that's where I think this comes into play is just because we say that it's good to have that cash on hand, it doesn't mean that needs to be sitting in account, not earning anything. It can be put to use where you still have access to it. And that's probably something to consider too, when we talk about smart savings is, you know, with interest rates as low as they are, what are you doing with that money where you can still have access to it, but maybe you don't need access to all of it on an immediate basis, or maybe there's some of it that can actually be earning something for you.

Yeah. So you're spot on and I'm lucky because you're my financial advisor for my businesses. So we're not going to have that talk right now, but we certainly will have that talk. And that's exactly where we are. You know, we come out at the end of this year and we find ourselves with more than we usually have. And that's just the way things happen to go for us, which is, you know, we're very blessed in that regard. But that's the first thing I'm going to ask you is like, what do you recommend? Because I want to be able to have something in place where I can have this, this extra grow, but have access to it because you never know when the next thing's going to happen. And you want to make sure you have access to something. You want to be locked into something that's like, oh, you can't touch that for, you know, the rest of your life. You retire. And so that's definitely not what you want. So.

No, especially from a business standpoint, that's not what you want.

Yeah.

You know, this is probably another good, I guess, little nugget that we can give to anybody listening is small business owners tend to say, well, I'm, I'm reinvesting everything I have back into my company.

Wrong.

Right. And so we say that, and that's good. You want to reinvest back into your company and you want to reinvest for growth. And we've got all kinds of sayings around that you got to spend money to make money. And however else we want to word that. Right. But like with anything else, it's good to be balanced. Right. It's good to, yes, you do want to use some capital to reinvest in your business, but you probably shouldn't be using all your capital to reinvest in your business. And so again, when we talk about smart savings, it's how can we think differently, how can we view things differently to where we do have a solid foundation? And then you start hearing words like sustainability and then what does your business look like for the long term? So that's probably another point just to make is have a balanced approach. Have some that you reinvest in your business, have some that you keep accessible, and have some that's earning something for you.

Okay, good. So maybe I'll put you on the spot a little bit here. I know we gotta have all these disclaimers with these financial People. But you know, are there anything, are there any mediums you could recommend that people should consider looking into that are good places to put that type of money that's got a little bit of liquidity to it, but yet at the same time has a growth opportunities. I remember back in the day, savings accounts used to be a great thing because they had maybe a 3 to 5% return. Now they're like a 0.00 something return. And so it's like, yeah, I don't really think I should put my money there.

Right.

But you know, I don't know if those things exist today in the current environment. But I don't know anything you can share on that.

Yeah. So again, let's, let's talk in generalities of just various options that are out there and that again, it's good to lean on professionals for this one that they know that they know your situation. So as far as options go, you mentioned savings accounts. Those are an option. Low interest rate environment means you're probably not going to earn a whole lot on that. So does it make it worth it sitting in a savings account or not versus the checking up to determine you hear people even and whether it's business or personal. Talk about CDs similar low interest rate environment, probably not going to earn a whole lot and the money's tied up for a certain period of time. Now from a business standpoint, what some business owners don't normally think of is the fact that they can utilize a conservative set of mutual funds, or they can utilize a conservative set of ETFs, or they can utilize a conservative way of earning some interest. But they also have to realize that that means that there's going to be a little bit of fluctuation in the account value. So in any options that we explore, and then of course there's options like okay, well do we invest some portion of that in real estate? Right now you lose some access, but is it a good investment? And so again, there's no perfect investment that's going to cover everything you want to do, especially when we're talking about money that potentially would be needed for business operations at some point in the future. And so when you're thinking about any option, whether it's an investment Account, savings account, CDs, real estate, BE thinking about what are the most important things you need to accomplish with that money for your business. So you have to have, still have a good understanding of your business goals, but you also have to have a great understanding of when and how you might need to utilize this money because you're not going to have the perfect investment that's going to give you all the access and still give you a really, really strong return. Right. That's probably not going to be in the same investment. It might be in the right mix of investments, but probably not one by itself. You may not have one that's going to give you, you know, this great potential return, but you're probably going to have to give up a little access, maybe. And so, again, these things in combination can work really well, but you're not probably not going to find one that will do it all.

Yeah. And that makes sense. Without any risk, you usually don't get much reward, but that risk obviously means you have less access to some of those things.

Yep.

And of course, the risk implies that it could go away, too, right?

That's right.

So you have to think about that. I think that's normal. Okay, fair. I'm curious now, and this is kind of the same vein as far as savings goes, but what are the common things you hear business owners talk to you about as an advisor in the financial world that you think are, like, things that people should know or should have a common understanding of that maybe you're repeating yourself. Like, you could create an FAQ on this because you say this all the time. Are there certain things that you find business owners wanting to know or needing to know that you think are helpful? That would be a good, appropriate thing to share here today.

Yeah. You know, taxes always come up as a common question. And the thing to remember is almost similar to how we just talked about with your investments. You're probably not going to have one professional that can cover everything. Right. And so it's good to have a mix of trusted professionals that you use for these different financial topics. So if it's taxes, make sure you've got a great tax professional. If it's investment, make sure you got a great investment professional. If it's kind of the overall finances of the business, make sure it's a great kind of CFO or somebody that understands record keeping and bookkeeping or just overall forecasting. So taxes is one that comes up. But here's what it comes down to, Ben, is a lot of times it's about digging deeper into what are the business owners really asking. In other words, even when a business owner comes to us and asks about the finances of their company, there's usually a greater meaning to why they're asking. And so we tend to ask, why is that important? Why is it important to have Six months in reserves for your company. And usually what we'll find is it's a much more broader conversation about where they want their company to go or what type of exit they potentially want in the future. Because not all business owners want to be doing what they're doing forever. Usually there's something that they want to work towards. So I would say that's another common topic we get is what are my options for exiting my company at some point? And so that gets into things. You know, we use these great phrases called succession planning and risk planning. And, you know, those are probably topics that isn't common language, but essentially that's what they're asking, what are the risks? What are the taxes, where the potential exits? What are the goals for where I want to be in the future?

Yeah, that's good advice. I appreciate that. And I think I've run into those myself with my business. I'm, you know, I always proclaim myself not to be the best numbers guy. I'm a graphic designer, by God's sake. So, you know.

But you're a visual guy.

But I'm a visual guy. So, yeah, yeah. When you show me the lovely little charts and graphs.

That's right. The graphs and charts and colors, and I always make sure there's some level of rocket media green in it. You know, green is winning, that's for sure.

All right, well, that makes sense and I appreciate that. So going back then to the planning side and talking more about, like, investments and things like that, it seems like there's really lots of options, of course, but when it comes to business, have you had many people go into that real estate mindset and kind of go down that path? And, you know, I'm curious if you've got any advice on that, because certainly that seems like a much larger endeavor when you go into real estate, where you're probably not going to be able to have access to that. You sell those assets, right?

Yeah. And this, this is an interesting topic, too, because this comes up especially for business own is do I rent my space or do I buy some space? Again, yes, that goes back to what are some of the overall goals of your company? But I'll share an interesting concept with you. And I know this is going to probably draw us to a close as we just think about these different ways of smart money or smart savings when it comes to your company. But here's a concept that tends to happen with larger companies. With small companies, we're thinking, should we rent or own what we usually don't Think about is what does that make our balance sheet look like? You know, what does that make our overall assets look like versus our, say, our income or our expenses or our liabilities. Larger companies, interestingly enough, sometimes they will either buy or construct a building, only then to sell and lease it back because of maybe they need to free up some cash flow then at that point, or maybe they don't want that asset sitting on their balance sheet anymore. And so again, these are things that as small business owners, we don't necessarily think about the big picture. We just sometimes will look at the rent we're paying and think, oh my goodness, why am I paying this much in rent when I could buy a building that's worth something now? It doesn't mean that buying a building is not a good thing because sometimes buying a building is exactly what you should do. And so again, it's just thinking about what are the different options that we have at our disposal and then seeing how does it fit into my overall game plan for my business.

Yep, that's great. You know, we don't do this very often where we talk more in depth on the areas of our expertise, but I think this is very appropriate for this day and age and the time that we're in. I think people need a resource. They need a trusted resource that they can use. You certainly have been that for me and I appreciate that about you and your business. So I thank you for that. I think it's important for us to at least list your website for people that are interested. So rayhansfinancial.com is where you would go to get a hold of you and your business. If you guys need help out there, by all means give him a call. He can help you guys out with that. Regards. And so good conversation.

The website also has all of the compliance disclosures that we need to make sure that we mention too. And so you'll notice when you go to the website, again, it relates back to make sure you got a trusted professional that really knows you, really knows your story, really knows your company, and that can lead you to some great smart savings advice.

Awesome. Well, this was good, jw. Thank you for the advice and for the information and hopefully it helps some people out. Helped me out for sure.

Absolutely. Happy to do it. Always fun to get together with you and do these. So again, to any of you that are listening, you know, feel welcome to continue to reach out to us. If there's topics you'd like us to visit about, let us know and we'll keep doing it because it's fun.

All right, catch you later.

See you.

Thank you for listening to Shorts and Suits. Your hosts are Ben Kaulfman of Rocket Media, a digital marketing agency, and J.W. rayhans of Rayhans Financial, a financial investment advisory firm. For more information, go to shortsandsuits.com if you find this podcast helpful, please help us by telling a friend and rating us on itunes. Subscribe to our tribe and learn more@shortsandsuits.com.