SMALL BUSINESSOWNERS

talking to

during COVID-19

L A U R A P A T T O N     C L U | C E A | C P C A ® ® ®

DISCLAIMER: To appease my insurance people, I would like to remind you thatthe information provided in this e-book is for educational purposes only and notmeant to substitute for individualized professional advice. Thanks for reading! Please do not duplicate the contents of this workbook without prior permission.You can email laura@nickelsanddimes.ca for more information. Talking to Small Business Owners During COVID-19© 2020 Nickels and Dimes Money MentoringNickels and Dimes Money Mentoring is a division of Arula Inc.

I'm the treasurer of the Advocis WinnipegChapter and have been an Advocis member forover 10 years. I have 20 years of experienceworking in & with small businesses and haveover 15 years of accounting experience. Myfinancial planning designations include CLU®,CEA® and CPCA®. Nickels and Dimes Money Mentoring is mycompany and I primarily work with SmallBusiness Owners. I'm typically brought in to helpfix problems with profitability, and often end uphelping with succession and estate planning, too.

Hi, I'm Laura________________

Many times I act as a hub between business owners, their accountant, lawyer, investmentand insurance advisors. The funnest part of my business is presenting my Profitability Programme and ProfitableBookkeeping workshops, which have helped many small business owners acrossCanada finally understand how a business works and empowered them to take control of the profits in their businesses. Business owners I meet often don't have a clue if they're profitable, where they'reprofitable, or how to become profitable. In our new COVID-19 reality they need help morethan ever!

I was excited to hear about the Advocis Connect program and thought it would beuseful to put together a short guide to share some of the things I've learned fromworking with Small Business Owners over the years, particularly when it comes tocommunicating with them. Thank you so much for volunteering to help this important segment of our economy! Ifyou have any questions, feel free to reach out to me any time! My email address is:laura@nickelsanddimes.ca.

© 2020 NICKELS AND DIMES MONEY MENTORING WWW.NICKELSANDDIMES.CA

Stay healthy!

guide summary1. MINDSETMany business owners were already feeling overwhelmed by their business.Showing empathy in your conversations will be more important than ever now.

This is an area where your expertise will really shine! As you know, people areemotionally attached to their money. It's no different for small businessowners. It is much easier for an outside person to point out areas to cut costs.

© 2020 N

ICKELS AND

DIM

ES MO

NEY M

ENTO

RING

WW

W.N

ICKELSAND

DIM

ES.CA

2. TALKING TO SMALL BUSINESS OWNERSMost small business owners don't understand the financial language we useevery day. A key to success will be using language that's easy to understand.I've also included two printable pages of questions you can use to guide yourconversations.

3. BUST THE MYTH ABOUT EXPENSESA very basic income tax lesson to help small business owners understand that"writing off" expenses is not all they think it's cracked up to be.

4. THE HUNT FOR UNNECESSARY EXPENSES

A brief lesson in financial statements and how to read them. I've also included asample income statement with some ideas of where to start looking for savings.

5. UNDERSTANDING FINANCIAL STATEMENTS

There are many overhead costs that are not fully reflected on an incomestatement. For example, mortgage payments, where only the interest is shownon the Income Statement, and the balance of a payment reduces the loan, aliability.

6. INCOME STATEMENT: THE MISSING PIECES

A few websites you can check when looking for the latest informationregarding COVID-19.

7. INFORMATION RESOURCES

123

S omeone starting a business will spend months, even years planning everyaspect of their business. They finally start...and very quickly realize they learned howto start a business, but not how to run one! Small business owners suddenly have three (overwhelming!) full-time jobs:

mindset

Many feel like failures before they barely get started! Business owners often assume everyone else is doing great and they're the only oneswho don't 'get it' when, that's not true. That's especially not true right now, butbusiness owners will still be feeling like they're a failure, and that their business is introuble because of something they did or didn't do. Empathy in your conversations is really important! Help clients understand that no onecould've planned for this. It isn't their fault. They aren't the only ones in trouble. Here's a good statistic to use: Monday, March 30, Dan Kelly, CEO of the CanadianFederation of Independent Business announced on CBC News that in a survey of theirover 100,000 members, only 21% of companies were still operating at the samecapacity as before.

© 2020 NICKELS AND DIMES MONEY MENTORING

Sales and Marketing (you need PAYING customers!)

Accounting (so.much.paper!)

And in most cases, doing the actual work, too!

WWW.NICKELSANDDIMES.CA

B usiness owners and business people are not the same thing. Many business owners do not have a business background, and often, don'tunderstand business basics those of us in the financial world take for granted. Those business owners are usually very intimidated by people like us. They alreadylack confidence in their abilities and they're afraid of having a conversation that theywon't understand. When I first started doing workshops with small business owners, no one talked to mebeforehand. People would either sit in their chair quietly or talk to a neighbour. Ittook a while for them to warm up to me and realize I was different. I used plainlanguage and I was teaching important things in a way that was easy to understand. Before long, I swapped the dress pants for jeans, started handing out candy at thebeginning of my workshops and got pink highlights in my hair. Everything changed. Iknew half the room before the day even started and they were very open with me. Now, you don't need to do all that, but I would suggest doing a lot of listening, andwhen you do talk, use language everyone understands. If you, like me, work better with structured conversations, I have included a list ofquestions on the next two pages, to help you get the information you need. Your most important question:

© 2020 NICKELS AND DIMES MONEY MENTORING WWW.NICKELSANDDIMES.CA

talking to Small Business Owners

What can I help you with right now?

© 2020 NICKELS AND DIMES MONEY MENTORING WWW.NICKELSANDDIMES.CA

guided conversationsClient(s) Name(s): Company Name:

Industry: Number of Years in the Industry:

Business Structure:(Sole Proprietor/Partnership/Corporation) Number of Years in Business:

Full-Time Employees:(Current) (Pre-COVID-19)

Part-Time Employees:(Current) (Pre-COVID-19)

What is your biggest concern at the moment?

What can I help you with right now?

In what, if any, capacity are you currently operating?

© 2020 NICKELS AND DIMES MONEY MENTORING WWW.NICKELSANDDIMES.CA

additional questions

Do you use accounting software? If yes, which one?

Do you have customers who owe you money? How much and can they pay? When?

Do you have suppliers that need to be paid? How much and can you pay?

What additional supports would you like to see from the government?

Do you have a bookkeeper/accountant? Are your books and taxes up-to-date?

What is the last month you have completed? Can someone at home help you catch up?

Have you used any government programs yet? If yes, which one(s)?

For the above question, government and associations who are speaking to government onbehalf of small business owners (such as the Canadian Federation of Independent Business),are actively looking for ideas and suggestions. If you have connections, you can pass on theinformation, or perhaps you can guide business owners to show them how to make their needsknown.

I ncome tax. The things people think they can do to avoid or save money ontheir taxes are nothing short of hilarious. Some business owners are so scared ofowing any income tax, they try to spend all their money to avoid paying it. Businesses that are closed completely will quickly eliminate as many expenses asthey can. For businesses that are still operating at some capacity, this will be harder,because they won't have the same urgency, but no less important. I find reviewing expenses with small business owners is much easier, once they have avery basic income tax lesson. The main lesson:

© 2020 NICKELS AND DIMES MONEY MENTORING WWW.NICKELSANDDIMES.CA

bust the myth About Expenses

"But I can write it off!!"

Canadians do not pay 100% income tax. If you make a profit, the government is NOT going to take all your money!

This information is very general. Please ensure clients discuss their situation with their tax professional.

Sole ProprietorMarginal tax rates rangefrom 25-58% depending onincome and province. Generally, sole proprietorswith income > $100,000should incorporate. $100 expense = $25-58 taxsaved and $42-75 of owner'sown money being spent.

Small Business CorpAnnual profit <$500,000

Tax rates range by provincefrom 9-13%. $100 expense = only $9-13tax saved and $87-91 ofcompany money beingspent.

Canadian ControlledPrivate CorporationAnnual profit >$500,000

Tax rates range by provincefrom 26-31%. $100 expense = $26-31 taxsaved and $69-74 ofcompany money beingspent.

I am always amazed at how quickly expenses add up. Our family has beenfortunate so far because my husband is able to work from home, and I alreadyworked from home with much of my business done remotely. In mid-March, whenthings started to get real, we looked at our monthly expenses and my monthlybusiness expenses to identify anything we were paying for that we wouldn't need inthe foreseeable future that could easily be cancelled. In less than an hour we foundover $1,200 a month in savings!! Every small business owner, for sure has expenses that qualify as 'nice to have' inaddition to the ones they 'need to have.' Many vendors and lenders are working withaffected business owners, too, they just might need to be given permission to ask. A lot of small business owners only do their books to do their taxes, so reviewing anincome statement or balance sheet isn't necessarily going to give you goodinformation right now. The best place to quickly look for expenses to cut, will be theirFebruary and March bank and credit card statements. People are funny when it comes to money. All of us. It is so much easier for someoneelse to identify areas to cut expenses, than it is for us to do it ourselves. Always.Having someone not emotionally attached to their business, not judging them, andhelping guide decisions is a huge gift for a small business owner that is feelingoverwhelmed and scared right now. Be gentle but persistent when questioning expenses. Sometimes you've been payingfor something so long you can't imagine not having it. 'Can you function without it?' ~is the question that needs to be answered right now.

© 2020 NICKELS AND DIMES MONEY MENTORING WWW.NICKELSANDDIMES.CA

The Hunt For unnecessary expenses

This is where you can REALLY help!

I f you're lucky enough to work with a small business owner that has up-to-datefinancial statements, you may find they have a hard time understanding how to readthem. The main financial statements you'll want to take a look at are the BalanceSheet and obviously the Income Statement. Here's a brief lesson on how to readthem and what to look for.

© 2020 NICKELS AND DIMES MONEY MENTORING WWW.NICKELSANDDIMES.CA

understandingFinancial Statements

Balance SheetBalance Sheets are often not up-to-date. If it is, the most important numbers are: ASSETSBank Balance - how much cash do they have?Accounts Receivable - who owes them money and if/when they think they will collect? LIABILITIESAccounts Payable - how much do they owe and when do they have to pay?Loans/credit cards - what are their monthly payments and is there anything they cando to defer them right now?

Income StatementThe Income Statement is pretty straight forward to read. There's income, cost ofgoods sold (the cost of making the income) and operating expenses (overhead). If theclient is still operating, you can compare February and March to see how much saleshave dropped. If they're not operating at all, but have some cash to tide them over, it'sworth taking a deep dive into the expenses to see what expenses they can eliminate orlower to survive the next few weeks/months. I've attached a sample Income Statement and marked the areas I'd start with.

© 2020 NICKELS AND DIMES MONEY MENTORING WWW.NICKELSANDDIMES.CA

S mall Business Owners are often confused by the net income showing on theIncome Statement because many times it's quite a bit more money than what's intheir bank account. First, ask the owner(s) how they personally get paid. Oftentimes owners are not paida salary, but take a draw throughout the year that is cleared as Dividends at yearend. Another option may be that the owner has a significant financial investment inthe business and they are taking their pay as repayment of a Shareholder Loan. There are usually a number of overhead costs that don't show up in their full form onan Income Statement that can affect things. One common example, would be capital expenses during the year. These aretypically items that cost more than $500 and have a useful life of more than oneyear. These purchases can't be expensed in the year they are purchased, but must bedepreciated over time. Examples would be equipment, machinery and officefurniture. A second example, would be payments on mortgages and loans. In this case, only theinterest paid would show up on the Income Statement. To show you what I mean, I've included the Income Statement from the previouspage and added some additional expenses that you don't see there to give you anidea of what a company's true overhead cost might look like.

© 2020 NICKELS AND DIMES MONEY MENTORING WWW.NICKELSANDDIMES.CA

Income Statementthe missing pieces

A s sad as it is, there are going to be small businesses that aren't going tomake it. Probably more than we'd like to admit, so odds are good you're going tohave some tough conversations. The proposed 75% wage subsidy, is so far the only program announced by theCanadian government that is not a loan or a deferral. All other available helpinvolves future repayment. Small Business Owners need to think long and hard about whether or not they willhave the ability to pay those in the future. We don't know how long things will be shutdown. Businesses that weren't very (or at all) profitable before COVID-19, may havean even harder time being profitable after. Additionally, Small Business Owners may be tempted to throw a lot of their ownpersonal money into the business right now. If they're not independently wealthy, thismay be a time to have a hard conversation with them. Tough conversations are no fun. I hate having them. Just remember: you're not doingthem any favours by not telling them what you see. Depending on your relationship with the client, the extent of your tough conversationmay just be that they need help from their accountant. If they don't have an accountant, if you'd like a second opinion or need help with thetough conversation, feel free to contact me anytime.

© 2020 NICKELS AND DIMES MONEY MENTORING WWW.NICKELSANDDIMES.CA

tough conversations

information resources

© 2020 NICKELS AND DIMES MONEY MENTORING WWW.NICKELSANDDIMES.CA

PLACES TO START LOOKING FOR INFORMATION

Advocis COVID-19 Member Resource Centrehttps://myadvocis.ca/covid-19-member-resource-centre/

Canada's COVID-19 Economic Response Planhttps://www.canada.ca/en/department-finance/economic-response-plan.html

CFIB COVID-19 Small Business Help Centrehttps://www.cfib-fcei.ca/en/small-business-resources-dealing-covid-19

CLICK HERE

CLICK HERE

CLICK HERE

You can also email me anytime: laura@nickelsanddimes.ca