FINANCE
Since March 2020 , it ’ s been a bad time to operate a hair salon . Alfonso and Lorena Martinez , owners of The Colour Bar , which has locations in Midtown and East Sacramento , endured three shutdowns totaling six months between March 2020 and March 2021 . Early on , they had to lay off 19 of 22 staff .
But they focused on essentials : They kept their two marketing experts to stay in touch with clients and a bookkeeper to keep their finances in order . Customers bought gift certificates to show their support , and the company reminded them they could buy hair-care products through The Colour Bar ’ s website . At first , those online sales were mostly local . But as their virtual sales ticked up , they added a graphic designer and more marketing staff to boost traffic . The result is an attractive , high-end website that features frequent flash sales . Soon the company was selling statewide and then nationally . Now the web sales side of the business is as important as in-person salon services . The company is back up to 16 staff , says Alfonso Martinez .
It wasn ’ t a great time to be a startup , either . Mathew Magno is CEO at Davis-based Japa , which started in February 2017 and developed a smart parking app and related tools to identify open parking spots . Going into 2020 , the target customers were universities — until those shut down after COVID-19 hit . “ We had to say , are we just going to wait until things open up to get back to work , or do we pivot ourselves ?” Magno says . The company started marketing to hospitals and municipalities , landed new clients and last year turned its first profit .
As many businesses scrambled to keep themselves afloat last year , their owners had to puzzle through an equally tough question : how to manage their money at a time when the future looked mostly dire . Now , with the economy improving as more people get vaccinated , Capital Region business owners say they ’ ve learned more about how to keep their personal and business finances on track during an economic crisis . Here ’ s what they and local financial planning experts say helped businesses survive the past year .
“ In the new millennium , we ’ ve had the tech bubble burst , the financial crisis and the coronavirus ( crisis ). And every single time , not freaking out and instead sticking to a nice , disciplined approach , with a diversified strategy of stocks and bonds , has really done well .”
KEVIN THELEN Certified financial analyst , Prospero Wealth Advisors
Emergency reserves
For owners trying to stay solvent during the pandemic , there were several terrible moments , but maybe none worse than mid-to-late summer in 2020 , when government loans and rescue packages were rolling out . Businesses knew money was on the way , but the government had to depend on banks to get it that last mile . Managing these programs wasn ’ t terribly profitable for banks , and some small businesses were too small to get banks ’ attention , so they got ignored , says Grant
Bledsoe , a certified financial planner at Three Oaks Wealth in Sacramento : “ It was a brutal six- or eight-week period . There were a couple of months of total desperation for many businesses .”
It was another lesson in the importance of cash reserves for business owners . Bledsoe recommends reserving between six months and two years of personal living expenses and , depending on the business type , up to two years of business operating expenses too . Two years ’ worth of cash is a lot , but a substantial recession can stretch that long , he says . Almost none of his firm ’ s business clients had to close because , by and large , they took that advice , he says .
For Rachel Smith , owner of Sacramento public relations consulting firm WordSmith Communications , keeping 3-6 months of cash on hand was the central focus of her financial management . “ A contract can be canceled very easily , which is completely understandable in this market ,” she says . Her cash cushion let her retool to add virtual event planning as a line of business . She did a few pro bono events for clients and then found a thriving demand for the service .
Davis-based company Engage3 , which helps food retailers use data to develop pricing strategies , devised another solution to a cash crunch when last spring ’ s economic collapse made investors pull back on financing and upended the company ’ s budget . Company leaders had to decide whether to cut back , which would include laying off staff . Instead , they set up a voluntary savings program that in effect let employees lend the company money at an agreed interest rate . It drew enthusiastic participation , helped the com-
50 comstocksmag . com | June 2021