I’ve harped on about this one before and no doubt I’ll be at it again in another six months. The life blood of your business is cash flow. It’s the problem to solve. The contingency that you have to be prepared to meet. Ultimately, cash flow is how you keep the lights on.
Profitable Business versus Cash Flow in your Business
Don’t mix up being a profitable business with having cash flow in your business. It’s ideal to be profitable, sure. But it’s almost instant certain death to your business not to have the money to pay your bills as they fall due. Short-and-long-term finance can take you so far but without the cold hard cash coming into your door there is no business. And that is true regardless of overall profitability.
It’s a simple thing to get your head around. I wouldn’t sweat it. Just start chasing the next dollar a little more vigorously rather than sitting back with a chart that says you can make X profit from Y inputs at point-of-time Z.
Cash flow is how you get from this point to there… point-of-time Z.
Working out Ways to Keep Cash Flow in a New Business
Two-and-a-half years of product development has put me in a position where I now have what I would consider a viable artisan product with an identified market worth pursuing. I have a business plan and an MBA. With a bit of luck and early third party investment I may be able to launch a profitable business with money coming in the door from sales in about a year.
But I’m focused at the moment on cash flow between now and 2014-15. That simple, often overlooked, cold tap of staying in business. It reminds me of an old joke among convicts about unfaithful girlfriends. Someone would always shrug and say “Well it’s too high off the ground to eat grass.” Yeah, I know how bad that joke is but it’s true about business – it’s too high off the ground to eat grass.
So right now and for the next few years I could use a low paying regular real job that can take my own business idea from point A to point B. And if you’ve got such a job in Hobart, Tasmania I would surely be appreciative. And, hey, if it’s at a winery or distillery all the better. But in the current economic climate that’s a big ask. There are no jobs to be had and the local economy is sliding backwards.
The important thing to take away is that cash flow is critically important. Don’t be seduced by romantic numbers on a page talking about profitability per volume of product and offering up an attractive break-even point. Your business is too high off the ground to eat grass in the interim. What you need is cash.