Photo by Edward Smith Neon tube bending is a small part of the business at Fresno Neon Sign Co. Employees there still practice what K.C. Rutiaga considers an art form, largely for collectors of old signs.
Written by Edward Smith
When K.C. Rutiaga planned her 2020 budget for Fresno Neon Sign Co, she was excited for what the year would bring. A number of large projects were slated to keep them busy for a while — one project in particular being almost equal in value to their yearly revenue. But as it did for everyone else, 2020 threw her for a loop.
“We were looking at this really great year coming forward with a lot of good stuff. When Covid hit, we were really quite shocked,” Rutiaga said.
Now that the sudden drastic shifts in the marketplace have become a little less of a surprise for business owners, the next challenge is planning for 2021.
With labor, supplies and consumers’ attitudes so variable, budgeting now could not be more important. But using this year as a model for the next may leave businesses reeling to respond to something nobody will be able to predict.
Fresno Neon Sign Co. has installed signs and marquis for schools, shopping centers and more for the past 90 years. But now, as Rutiaga drives around town, she sees big national brands with signs not working, showing no interest in repairs out of a desire to keep expenses down. When Covid first hit, jobs disappeared. One significant project kept them going, and without it, Rutiaga wonders if Fresno Neon would have survived.
“We’re almost a 90 year-old company,” she said. “That was a really scary thought for us.”
She sat down, looked at her budget and responded to the threat at hand.
“Budgeting should be the first and foremost thought in every business owner’s mind,” said Frank Hambalek, Jr., partner with Wiebe Hinton Hambalek, an accounting firm in Fresno.
This year more than others, “cash is king,” said Hambalek. Businesses should budget based on what they have and how much they can weather. Start with fixed costs because employee costs are more variable, he said.
Copying and pasting simply won’t work.
Rutiaga had to make difficult decisions. While she said most of her employees have been with her decades, she had to furlough most people a couple days a week.
One thing this year has demonstrated to business owners was how fast things could change.
Hambalek said to take the time to come up with scenarios based on overhead costs to see if there can be profit margin.
Running scenarios is what helped keep Fresno-based Betts Co. agile during the worst of the pandemic, said Bill Betts, president of the company, which manufactures truck parts.
On March 13, Betts created four scenarios based on forecasting models of where he would be and how he would react to those circumstances.
By March 20, he knew what he had to do.
“You’ve got to step back and separate yourself from the day-to-day and do some scenario planning so when that scenario happens, you recall that thought process you had earlier on,” Betts said.
He slashed marketing budgets, sold off a number of vehicles and did a number of layoffs and furloughs. It was tough, but it kept the company afloat.
For Betts, relying on an annual budget wasn’t enough. He started doing a “rolling budget” that incorporates data from the previous month into his quarterly budget.
“By doing this roll forward — add month, add month, add month — we get a better sense of what is really going on in a 12-week period, which is important, from our standpoint, in managing cash flow,” Betts said.
Part of the scenarios included non-payment.
When the pandemic and the response to it first hit back in March, memories of 2008 and 2009 came to Betts. He thought of the weak links in the payment chain where certain businesses more exposed to dramatic declines slowed down the process. This time, however, Betts said pandemic relief helped businesses with cash and kept the supply chains moving better than they could have been.
As for the future, business owners are still hesitant to claim they have any idea what to expect.
Business leveled off at Fresno Neon after Rutiaga had seen an uptick in sales. Doing a majority of business-to-business sales, Rutiaga has a thumb on the pulse of business and where their priorities lie. She still has a sense things are unpredictable.
“When businesses are closed and people aren’t working, they are not servicing their signs when they’re out,” Rutiaga said.
She does a lot of work for school districts, and projects for them are still going through, but what isn’t clear is what school districts’ purchasing appetites will be like when the new budgets begin.
Those scenarios are going to help with the future. Betts is still worried about a resurgence during flu season. International and domestic supply chains still haven’t caught up to lapses caused from shutdowns. He has scenarios built out for those occasions as well.
Planning for next year, some companies are dismissing 2020 altogether and using 2019 as a baseline, said Hambalek.
“If a business brought in $2 million in revenue, maybe take into account a realistic number, such as $1.5 million, $1.75 million,” said Hambalek. “Run those scenarios based on overhead costs, checking to see if there is profit margin.”
Rutiaga is meeting with her accountant soon to discuss next year, but for the most part, her budgeting philosophy has adapted to the times from growth to sustaining.
“I don’t feel a real sense of dread or anything like that,” Rutiaga said. “I just feel like we need to be really conservative right now.”