Cash flow is king
It’s said that money is the blood of a business. But it takes blood, sweat, and tears to start up, run and succeed. If you are the one who started the business then you are the one ultimately responsible for making sure that cash is flowing. Of course, we mean flowing in and out and in again. That whatever you call your business it must become a money making machine. That means you have planned how when you will get to a positive cash flow. However, what often happens is most entrepreneurs woefully underestimate the amount of funds needed to get to the profit side of the equation.
Whether you say you are ‘shoe stringing’ it or getting backing from a bank you will wind up short because you just can’t plan for everything…as in, you don’t know what you don’t know. So now you wind up not paying yourself, maybe you have to tell your investors you need more cash or worse tell your life partner you’re out of money. I’ve done all three over the years and pushing the limits of your relationships with your partner and family is by far the toughest situation which I hope you wont have to go through.
Spending money to make money is for most businesses the way it works. Some exceptions exist in the service business world but even then if you are to build your service business you will need to spend money for infrastructure and help at some point. So you must plan to make enough capital to include set backs and growth.
Here’s the deal, planning to make money works out better than hoping to make money. Does this mean business plans are a must? Not in every case however, having a business plan will help keep you focused in those rough times that will happen. Plans do and should change when they need to. Being flexible is important; knowing when and how much flexibility is called for however, is more of an art.
I recommend you plan to earn 2 to 3 times more than your overhead. Do you know what your true overhead costs are and will be in the near future? What kind of business you are in will make a huge difference in what your net should be. But as a rule, you need to be aggressive and reasonable at the same time. Remember this, it’s not how much money you make, it’s how much money you keep.
Keep on Keeping on…
