What PPP Should Mean

lightbulb laying on chalkboard with mind map like circles around it

By Sherry Lutz Herrington

It used to be when you heard the acronym PPP you thought of piss-poor-planning.  Lately, it’s come to stand for the Paycheck Protection Program that the SBA has established under the recent CARES Act as part of the COVID-19 recovery plan.

I think we should now use PPP to stand for PREDICT-PREPARE-PIVOT.

Although there are lots of lessons to be learned from the recent pandemic and subsequent stay at home order, what I’d like to address is the massive economic impact it’s had on small businesses.

When I meet a potential new client for the first time, two of the questions I ask are “do you have a budget?” and “do you have a succession plan?”  I’m going to add another one.  Do you have an emergency plan?

Although I’ve seen this question come up in the last few years, it’s always been in relation to data security.  Having adequate data security is essential for any small business that uses computers for anything – even just email.  And, I fully support business owners in addressing this component, but what I’ve realized with this massive shut down of small businesses is that we need a lot more than that.

We need to address a broader arena of possible problems and learn how to prepare for them.  

As business owners, we need to learn to prepare for the worst case scenario.  Too many small businesses fail to adequately track their finances, assess what is really going on, and to set aside enough savings to tide them over in an emergency.  

Time and again I am called in when business owners have failed to set up their books correctly or to keep their accounting clean and up to date.  I always say, the accounting is the backbone of any business.  No matter how small or how large a company you are running or plan to build. If you don’t have accurate accounting, you have no way of steering your company knowledgeably. 


First you must have strong accounting that is clean and up to date, this gives you a treasure trove of information to use in guiding your company wherever you want it to go.  

Start with your goals and build your budget from there.  Using previous period (hopefully a years’ worth) data, you can set up a budget for the upcoming period.  

Your goals help you determine what you need to do, and your budget puts it all into numbers and functions as your road map.

For example, if you are in a high growth phase, then you will set increasing income goals and work with your marketing team to determine how to reach those numbers.

If you know that you are starting a new product line and will need to invest heavily in additional development, then you can build that extra expense into your budget and know ahead of time where the money will come from.  Spending willy-nilly will lead to cash flow problems and hinder your growth.

Once you have decided on your goals and established your budget, you have predicted where you are going.  Not that anyone could have predicted where we are now, but you will be more prepared to pivot if you have made a plan and know where you are at all times.


Next, you need to decide how to prepare for the future, even if you don’t know what the future looks like.

Most businesses run day to day with very little money set aside for large expenses or long-term investments, much less for emergencies.  

I know it’s tough to make a living as an entrepreneur or an owner of any sized business, but it is paramount to your survival to get ahead of the eight ball.  You cannot expect to survive an emergency if you do not have any back-up. And although we tend to put off saving because it doesn’t seem important, we have all learned that emergencies happen.

The general rule is to have 6-12 months operating costs in reserve.  This is a very hard number to obtain, so I advise you start with working toward 3 months and build from there.  When you make your budget, it is paramount that you factor in money to go to savings.  Even if it’s not a huge amount at first, always start with something being set aside.  Once it becomes a habit, you will want to make it happen.  It will seem essential and feel good to watch your savings grow.

If you need to count available credit toward the total emergency cushion, you can, just remember that if you use it, you will have to pay it back.  It’s still better to have it available then to depend on savings that you are still trying to build.

I always advise my clients to establish a line of credit for their business as soon as they can.  I don’t encourage them to use it, just to have it.  If you do need to use it, make it a short-term loan to bridge a temporary gap and make sure you pay it right back.  It should not be used to fund the operations over a long period of time.  If you need to borrow money to keep the doors open for any length of time, then you need to reassess your operations overall and make significant changes.

You could potentially have credit cards with available credit as part of your emergency plan, but again, they should not be used to fund operations or carry a balance.  They should be there as a backup in case of an emergency.  Again, remember that you will need to pay them off.

Best case, of course, is to have enough money in savings to carry you for a length of time should you face an unexpected disruption to business.  


One of the things I’ve seen some fantastic examples of during this recent crisis is the pivot.

Every business faces challenges from time to time and being adept at pivoting can mean the difference between survival or demise.  Usually, a relatively minor pivot is enough to keep things on track.  For example, if you lose your biggest client, you may need to scale back on your production and associated costs until you can build up new income to replace the loss.

However, during this sudden shut down, I have seen businesses make large drastic pivots that may turn out to be what saves them.  The most obvious one is restaurants shifting from dine in to take out.  Likely, they are not seeing near the amount of sales as they saw before, however, it may be the difference that helps them survive.

My favorite example is the spirits industry where many have shifted, literally overnight, to making hand sanitizer.  They likely will survive because they realized they needed to make a quick drastic move if they were going to stay open and they did it.  They will likely make the shift back as soon as feasible but even if they weren’t completely prepared, they learned to pivot and saved their businesses in doing so.

Most small businesses run operations on a day-to-day basis, scraping together enough cash to survive but not having a long-term strategic plan.  Shifting from a survival mindset to a PPP strategy could make a significant difference in the overall survival rate of small businesses.  

If business owners learn to follow a simple formula of Prepare-Predict-Pivot, we could see the success rate for businesses drastically improve throughout the country, even when faced with unexpected emergencies.

Sherry Lutz Herrington is the owner of Sherrington Financial Fitness, a business consulting and accounting firm specializing in strategic business planning and solid financial accounting for businesses. She is also the author of Strong Women Thriving (https://strongwomenthriving.com/), a blog which focuses on empowering women to be financially savvy, particularly after experiencing financial abuse. Sherry is currently writing a new book that both shares her personal story and addresses financial abuse. She can be reached at hello@strongwomenthriving.com.

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