Overview In this episode, Stephen Brown of Ledger Gurus goes through the common struggles business owners are going through during the COVID-19 Pandemic. Among other things, he talks about the types of business loans that are available for businesses and some strategies companies should consider. It takes a lot of grit to start a business. Now is the time for business owners and leaders to tap into the grit that has brought them to this point. If businesses are strategic during this pandemic, there are still opportunities to come out of this stronger.
Welcome to In Your Business with Michael Sayre production of CUI Wealth Management. In this episode, we interviewed Stephen Brown with Ledger Gurus. The discussion was based on how to keep businesses strong during the CODIV-19 Pandemic and, more specifically, some of the loan options as well as some of the potential opportunities during this time. Hope you enjoy. I hope you get something out of it, Stephen. Why don't you go ahead and introduce yourself?
Yeah. So, as you said, I'm the COO of Ledger Gurus. We do Client accounting services which is essentially outsourcing the accounting functions of businesses. And we work with a lot of smaller businesses in a range of about half a million to 10 million in revenue, and some that are smaller. We have some that are bigger, but that's the size of the client we work with.
Stephen. Do you mind telling us a little bit about your background?
Yes. So, my wife, and partner, is the accountant, and she had a vision too. She saw a need for… small businesses were being underserved. And with the introduction of so much cloud technology, she saw an opportunity [to serve] these clients without having to have an office and go on-site with them, and she created an efficient model. I helped on the sidelines. My background... I have a degree in engineering, I have an MBA degree, and spent most of my career before Ledger Gurus doing enterprise software with a focus on information security. I was helping Brittany on the side, the business was getting bigger than she could do on her own, so we decided to go all-in and 2016. I quit my job, with good benefits and salary. We just said, "We're gonna go for it". We've grown the business by almost 7X since that time. We're just trying to help and serve as many customers as possible.
Awesome! One thing that's always fascinated me about your business model is your 100% remote worker.
Yeah, we did it from day one. Brittany wanted a business that could integrate with life very fluidly and we just kept on that model. I thought about changing it when I got involved in it full-time. But after a few months, I realized, "why split ourselves, and have the office people and the remote people?" It's allowed us to tap into really great talent across the country. We're now operating in six states from an employee perspective. We can serve our customers anywhere. We're really well suited to work in an all-remote environment which has kind of become the mainstream for everybody with the COVID-19 crisis that we're experiencing.
Stephen, if you don't mind, can you tell us a little bit about Brittany's background and what got her started in the accounting side of things? And really, what got Ledger Gurus going?
Her story is that she became a single mom in her mid-twenties and didn't have a degree to fall back on. So she went back to school, ended up getting a bachelor's and master's of accounting from BYU, did an internship in public accounting, and realized that that just wasn't feasible with three young children. And so she ended up spending some time with the local Utah firm Squire in their advisory group, and then had an opportunity to go out and be a CFO for one of her customers- a part-time CFO. And there was kind of a confluence of opportunity shortly thereafter. She went to a conference and saw that, hey, there's this thing we can do, which is Virtual Accounting Service. Small businesses really need them. It's just been a really awesome growth path. I think it's one of the hottest areas of accounting. I like to call it the new third pillar. It's emerging as the third Pillar after, tax and audit. Virtual accounting service is coming into play as that third leg of the stool.
Tell us a little bit about what drives your passion for the business. What gets you guys up in the morning and ready to go?
You know, we have a kind of a twofold mission to our customers and our employees. For customers, we're very focused on smaller businesses and we just feel like behind every small business is an owner or set of owners that... this is their dream. This is their hopes, their goals just like Ledger Gurus is our dream. And there behind their dream is a lot of employees. We're just trying to make people's dreams and aspirations a reality and help businesses employ people and grow. Because small business doesn't hire offshore employees. They're always gonna be local. So when you're working with a small business, you're supporting your local community and so we get really passionate about that.
We also get passionate about our employees and our ability to have really great professionals who can work in a flexible environment. We make them the most successful that they can be. So with that twofold mission, you can't have one without the other. This is really what drives us, is helping small businesses grow and succeed and be profitable. Helping our employees have a rich career outside of a traditional office environment. And when we do both of those, it's very energizing.
Stephen, do you mind sharing with us some of the effects you're seeing with small businesses from the COVID-19 pandemic - being out on the front lines with businesses?
Yeah. Initially, it was the transition to working at home and the disruptions that come with that, but it quickly changed, to an income and capital crisis. We've seen a lot of businesses, ourselves included, we've seen a drop in income, sometimes a significant drop. I'll give you an example. We have a customer who does sporting goods. They have some affiliations with a professional sporting league. When sports got shut down and everybody was at home, their sales plummeted 90%. This is a multi-million dollar business, totally viable, but just in a product category, where there's just no activity going on, right [now].
The shift has gone from, "Hey, how do we work in the kind of a remote environment" to, "How do we keep businesses alive?... How do we keep people on the payrolls to make it through this transition period so that they can live to fight another day?" The challenge you find is a lot of small businesses don't have a lot of reserves. They don't have a lot on their balance sheet or their bank accounts to translate to the balance sheet. They can't last very long without an income. And so we've really been focusing on the loan programs that are coming out from the federal governments and the state governments. The biggest one is the Paycheck Protection Program (PPP). I'd say, the last week or two have just been the PPP nonstop. How do we get people that money? How do we help them qualify and calculate with numbers?
Let's switch gears for a second. I know you guys have put together a lot of resources for the COVID-19 pandemic. So do you mind telling us a little bit about some of these resources?
Yes. So the page if you just go to [https://ledgergurus.com/covid-19-important-business-resources/]. [We] started out, kind of just putting resources on a page, it was remote work resources and tools. And then we started getting really deep into the lending programs and any sort of financial tools that could help people. Now we're focused on three main loans, which [are] the Paycheck Protection Program, the Economic Injury Disaster Loan and the SBA Express Bridge Loan. So those other resources are still there, but we're just throwing so much information, and now we really narrowed that focus. Not to say that those other resources aren't valid, but now our focus is narrowed on how do we get capital to customers? Those three federal loan programs are the ones of the highest value, with the PPP being the most urgent one right now.
Stephen, I agree. I think you hit the nail on the head on that. I think a lot of it comes down to the capital. So do you mind telling us a little bit about some of the loans out there that are available, how they're different, and how they may apply to some of the businesses out there?
There's a number of state and local loans. They tend to be smaller. They tend to be emergency loans. And that's sometimes where you get a start, especially if you're a really small business- $10,000 can go a really long way. Those were the programs that got rolled out first. We'd still say, "Hey, look at those programs." But a lot of the money coming out of those programs don't go far enough, so you start there. Then you look at the SBA’s programs. [There is] the Express Bridge loan, which is a bigger loan program. [This] is more of a traditional loan where you're gonna have to look at collateral qualifications. It's a more rigorous process, but it's a good place if you don't have a good line of capital.
The other one is the EIDL (Economic Injury Disaster Loan Program). This was designed for, you know, for post-natural-disasters like hurricanes, and it was required that you were in a disaster zone. Well, the entire United States has declared a disaster, so anywhere you live, you can qualify for EIDL. That's designed to get up to $25,000 with a quick $10,000 advance, so it's something to keep you alive. But the one that we're putting all of our focus on right now is the Paycheck Protection Program.
This came out of The Cares Act, which was passed last week, the very beginning of April, and that act had over $2 trillion worth of programs. The big one was the PPP, at least the big one for small businesses. The thing that's cool about this is you can get a loan up to 2.5 times your average payroll. If you apply it towards, primarily payroll, as well as rent or mortgage interest, or utilities you can get a big chunk of that money essentially forgiven over as much as you spend that over an eight week period. And so, for a lot of businesses, this becomes more of a grant, then anything that's leftover is a very low cost, two-year, 1% interest loan.
The thing that's exciting about the PPP is it means people are gonna stay on payroll. They're gonna be able to stay employed, continue to receive benefits. It means that business is, if we can come out of this at a reasonable time frame, they can ramp back up very quickly because they'll still have their staff. People still have their jobs, so it's a really great program, and hopefully, as we get to the end of this eight week period, businesses will be able to do more business, and the buffer that this program provides will make it easier for everybody.
So right now, if someone wants to get a PPP loan is that available?
It's been a struggle. The program launched on April 3rd, last Friday, and it's been really rough. We've seen a lot of lenders that have not come online. We've seen other lenders that opened up and shut down really quickly. Some of the bigger banks... there's been a lot of frustration. It feels like they're playing favorites and just picking their favorite clients instead of opening it up broadly. So we're still in the early days of this, and it's been frustrating. The challenge is, there's a lot of businesses that need money so desperately they just cannot sell product right now. They need money to stay afloat, you know, stay viable. This has been the struggle, is finding a lender that's willing to move and give [the needed] funds
So... it sounds like the PPP is made for midsize companies that have payroll and need to be taken care of. Is that accurate?
Well, that's how it's being executed by some of the bigger banks. But that wasn't the design. The Paycheck Protection Program was designed for any small business of 500 employees or less, including self-employed individuals and independent contractors. It was really designed to allow anybody to participate. But what the banks have ended up doing is kind of playing favorites and a lot of cases. The banks that we're hearing the most success from are the smaller banks there. They've been a little bit more willing to work with smaller companies and try and move quickly. I'm hopeful that this will get resolved over the next few days to a week because time is of the essence. But right out the gate, it's been frustrating because we're not seeing what the program was intended for.
Got it. What about those businesses that just started up? Say, like at the beginning of the year, I know a couple of businesses that just got started, you know, January or February timeframe. So what about those types of businesses?
So the PPP is for a business that started before February 15, 2020, you can still qualify. The big question for brand new businesses is did you have enough payroll that you can get a decent loan? And then are you going to use that loan towards payroll because it's really, per the name of the program, it's for paychecks, it to keep your staff employed. If you're a smaller business and don't have a lot of payroll or your brand new and don't have a lot of business in a lot of payroll, it may not be the best program. The Economic Impact Disaster Loan could be a good loan. In that situation, the SBA Express Bridge Loan could be a good option. The challenge is there, especially the excess Be Express bridge loan, is there's more rigor around those other two programs so it could take a little bit more time to get it up and running.
Got it. What are your thoughts about companies that when everything kind of hit, they had to make some big, drastic decisions and they may have done a whole bunch of, you know, layoffs or things like that? I mean, any thoughts on that... businesses in those types of situations?
So the paycheck protection program actually allows and encourages and even requires you to bring people back on the payroll if you want to get that loan forgiven. So, if you had to lay off a lot of staff, that is the program that will allow you to bring them back. The question that you have to take from there is like, "Okay, you have eight weeks of a forgivable loan" and I've had some customers say, "So what are we supposed to do with these people?" you know, in some cases, they have had no work, and my thoughts are, "Hey, you've got an opportunity to pay your team, who knows your business really well. Let's figure out how to reinvent ourselves. Let's find new revenue opportunities. Let's come up with some new approaches to doing our business."
... I think that's pretty exciting, because how often do you have two months where you're not slogging away, trying to service your customers? If you really have no income, but you have the ability to keep your staff employed, it's a great opportunity to try and reinvent yourself, and hopefully, some great things will come out of that. You gotta be thoughtful. Don't just grab the loan and say, "Here you go. Here's your paycheck. Have fun at home." This is an opportunity to be strategic. This is an opportunity to be really focused on doing something new, creating revenue streams and trying to adapt and change to the new climate. And hopefully what you create will be useful as we come out of this.
Yeah, I like that a lot. I think, just like any struggle. I feel like businesses and individuals can really come out of this a lot stronger. And just like any other struggle, right, you can have a lot of growth if you have the right tools and you think about things. Now, obviously, some things are out of our control, and obviously, this is not a good thing, right, that's coming across the nation. But I think that's a great way to look at it. The opportunities to make some changes that could impact the business for the better in the long run.
Yeah, I mean, I'll give you a good example. We have a customer who has a gym, a brand new gym. And obviously, they can't have people coming into the gym because of the social restrictions. And so they're thinking, "Well, hey, maybe we can have our trainers come up with some virtual training options", which I think is fantastic, right? Because we're all sitting around at home on zoom meetings and calls and heaven knows we need more exercise. So if they could come up with a way that could help us at home, stay in better shape and do it in a way that we can do it without... where we don't have the gym, that's a great example of a way to adapt. And after they come out of social distancing, who knows? That could be a completely separate revenue stream for them in addition to having people come into the gym.
That's a good example of how they may come out stronger. And that's the thing is we got to give businesses the chance to survive, to adapt, and hopefully we'll all be stronger because of it. But there's gonna be a lot of hardship along this journey, even with some of these programs.
Yeah, I agree. You know this is one of those things that even if things turn a corner real quick, it may take a little bit of time for people to adapt and get back to a normal pace. So what are some of the other big opportunities that you can see for businesses in this type of situation? What are some of the things that you think are good for them to consider and to think about?
You know, one of the things that we're talking to our customers is the importance of really understanding your business from a financial perspective. We've always preached that, but now it's like we're kind of like, "Yeah, you know what we've said? This is really critical. So really understanding of your business model understanding of the financial dynamics that you have, and making sure that you dial that in. The challenge is we went from a complete growth market and the switch flipped to one of the [ugliest] markets and ugly experiences we've ever seen- at least in our lifetimes. And so you've had to change from kind of a growth mindset to, best case, a sustainable mindset, and sometimes a survival mindset.
There are some businesses, there that are also capitalizing. You know, there's a lot of online sellers who we work with. If they're selling the right product category, they're doing phenomenal. But I'd say a lot of people are struggling a little bit and some a lot of bit. I think some industries, you look at restaurants, you look at like travel and tourism, they're getting destroyed, and those are tough ones. Those are the ones that really just make you cry because you got people that have got their hearts into these businesses and it's a real struggle to adapt.
But yeah, if your business isn't in total survival mode, maybe you're down 10, 20, 30% in income, you gotta get dialed, you know, time to be operational and really financially focused. That's something that a lot of founders and small business owners don't really do. They shoot from the gut, but [it's] time to get disciplined and learn to really understand how your business works and dial it in.
So Stephen, tell me about your thoughts regarding business moving forward.
Yeah. So I think this crisis is coming in waves and phases. The first wave was, "How do we work remotely?" The second wave is, "How do we get capital to survive?" The third wave is gonna be, "How do we use that capital wisely?" And then there's probably gonna be another fourth or fifth wave, depending on how long and how deep this impact is. But I don't think we're gonna flip a switch and go back to normal.
If you listen to the experts if social distancing, we'll probably ease up. But it doesn't sound like we're gonna go back to everything as normal for a while until we can get a good vaccine for the Coronavirus- COVID-19. As you look at moving beyond, "How do we survive this really intense period?" you're gonna probably have a period of slower economic growth and recovery, right? We're gonna be going through a recovery phase, so you've got to kind of shift those gears and say, "OK, we'll get out of social distancing, but are we gonna be guns blazing?"
There are different opinions, but everything I read and see is it's gonna take some time to recover. And so, you gotta go have that mindset of what does this mean? If we still have some district restrictions, you know what happens if you know we can go out but were restricted to smaller gatherings? What happens if there [are] quarantines that still get put into place periodically? And what happens if we have segments of the broader economy that are still shut down? Because I still think about, like, travel and tourism, those are gonna be, probably the slowest to come online. And as long as we have a segment that's really shut down, it's still gonna impact us all. So we've got to assume that the recovery isn't going to be as quick as the restrictions were. That it's probably gonna be a gradual recovery. And how do we adapt and adjust alongside that?
Well, another thing that ah I was thinking about the other day or two is, say we have ah recovery, and it's kind of like, you know, we have the flu season that comes around. What if we have kind of another wave? And even if we have a vaccine and all of that, it's plausible to think that we could be impacted again. Probably not as hard because we had we've been through this. We'll hopefully have other tools to help us out at that point. But it is possible that we could have another hit like this. And I don't know, I'm not trying to be doomsday or anything, but, it's something to consider as well in the long term.
Yeah. I mean, you hear some experts say this could be seasonal, right? So it could go away in the summer, possibly, we hope. But maybe it'll come back in the fall or in the winter. And so if we do get a breather, don't throw away the learning and the operating efficiency that you've developed during this difficult time frame. Be prepared to use that strategy again if things go bad again. And to your point hopefully, we'll have better tools and options so we don't have to lock down society so hard. But even with any limited locked down, it's gonna impair our economy.
One thing that really has drawn me to work with businesses personally is I love the grittiness that people have to build something even with all these obstacles are going about. And I think this is really a good time for businesses to hunker down and really bring on that grit that brought them to where they're at right now.
Yeah, I totally agree with that. It's kind of like we're all starting over again. A lot of us that are founders or business owners, we had to start at some point. It's just kind of a new start. It's harder because we've got a lot more obligations. We have a lot more spending commitments than we did at the very beginning of our businesses. But, you know, if it's been a while, just go back [to] that place in your head where you were when you started, "I gotta get in that mindset again. I got to get scrappy, got to get smart, and just hustle again."
Stephen, Any closing remarks you want to add to this conversation before we close things up.
Just be strong. This is a tough time and people are struggling. And if you're a business owner, it's a time to be strong, to be honest, but strong for your people. Just do the best to support them as they're struggling and pray that we get through this quickly.
Steven, thanks again for joining us. I appreciate all your comments. Hopefully, we can have you on this podcast again In the future.