I have used words to explain cash, cash flow, why cash is king and deal somewhat with ethics. Yet, some would argue that until you actually have to live it daily it is a concept difficult to understand. What I have opted to do in this post is show videos and I am hoping people will see and understand the analogies implied
Ok, so how many from this understand what a healthy cash flow should look like ergo a healthy economy?
How many of you also can see the correlation between our need and dependence on small business and their having healthy cash flow not forgetting that while we do need the larger(as represented by dams) focusing solely on them without the other (which ironically supply them) can lead to problems?
If you are not making money you are not in business
If you do not have clients willing to pay you are not in business
The purpose of business is to make money and a business is literally nothing more from a legal standpoint than a virtual person. So I guess you could argue that a business owner has a split personality and it is even a socially acceptable one not needing medication (smile!) I am sorry just needed to inject some humor – I know sort of dry but back to topic – the person of business if the make money – that is non negotiable and is a fact.
What is up for discussion is how you make money?
Lets focus on how you make money – regardless of the type of business you are in (goods or services) you can either make money one of two ways – earn it or steal I, worded less offensively – you can either provide a benefit for someone so that they are willing to compensate you in an equitable fashion for that solution or you can seek ways to take advantage of people and prey on their weaknesses exploiting them to only your own benefit. Here is the caught – the first is sustainable the latter is not and yet many choose strangely enough the latter and are shocked when their efforts implode.
There is an old saying “people do not care how much you know until they know how much you care” – so as a business owner you should seek to make sure you are putting the needs of your client first – by taking car of them you have the opportunity to create a positive cash flow and generate good will which in turn leads to more business. If you at some point want to grow your business you have to expand it by growing past the point of trading time for money. So long as you are in the day to day operation of your business you are your business and you are not really a business owners. Because we by nature like to keep our hands in everything this is the hardest thing for a business owner to learn – to let go and trust because lets face it many of us started our businesses to regain a sense of control or because we do not trust other people to have our best interest at heart. Often we started off as corporate employees with ambitions to climb the ladder and then we found out the price and in some cases it involved violating out ethics or selling our soul – not something we were willing to do. Something to be careful of and a group I am not really going to address are those that consistently self sabotage – not much I can say about them or to them except get professionally help.
As a business owner to make money providing solutions there are many things you must learn, the least of which is who you are. Your nature as a person already gives you a disposition regarding the type of business owner you will be – exploitive selfish people tend to run those sort of ventures, but as giving people tend to run service and solution oriented ventures. The key here is knowing yourself and then making a decision as to who you are and what type of business owner you are or want to be and whether you want a sustainable business.
So, the questions are:
Do you have a sustainable model?
How much good will do you as a business owner engender?
Are you the type of business someone would be willing to take a risk hiring due to your character?
All of these factors need to be taken into account in what you do and how you do it.
So tell me what kind of business owner are you
Does your business have substance or are you selling an illusion?
How do you plan going about making money – earning or stealing it?
Often as a business owner people assume we have more money than have. People often think we are rich when in fact so often our employees or suppliers make more than we do. Unlike the people we provide for our incomes are not steady and in fact our revenue is based not on the work we do as much as the solutions (be they good or services) we supply. Our true money is made because of our brains as such keeping a clear head is important.
This global economy has affected me and yet I am working to position myself such that to survive. Focusing on things that generate revenue and people committed to helping me and cutting loose of those things and people who are not. Reducing and eliminating expenses and working on generating more revenue.
Cash flow is important ant and mastering how it works for any business is important. For money to flow (like a river) there must be streams feeding it and it is important to create enough streams such that barring a catastrophic event your reviver is always supplied with fresh water (cash). Further the discharge should not be drained faster than the inflow or the river will eventually dry up.
On a personal note my goals are to erase my debts by the end of the 3rd qtr 2009 and by 4th quarter 2010 have 6 months of cash reserve.
A revenue or expense stream that changes a cash account over a given period. Cash inflows usually arise from one of three activities - financing, operations or investing - although this also occurs as a result of donations or gifts in the case of personal finance. Cash outflows result from expenses or investments. This holds true for both business and personal finance.
An accounting statement called the "statement of cash flows", which shows the amount of cash generated and used by a company in a given period. It is calculated by adding non cash charges (such as depreciation) to net income after taxes. Cash flow can be attributed to a specific project, or to a business as a whole. Cash flow can be used as an indication of a company's financial strength.
Investopedia explains Cash Flow
In business as in personal finance, cash flows are essential to solvency. They can be presented as a record of something that has happened in the past, such as the sale of a particular product, or forecasted into the future, representing what a business or a person expects to take in and to spend. Cash flow is crucial to an entity's survival. Having ample cash on hand will ensure that creditors, employees and others can be paid on time. If a business or person does not have enough cash to support its operations, it is said to be insolvent, and a likely candidate for bankruptcy should the insolvency continue.
The statement of a business's cash flows is often used by analysts to gauge financial performance. Companies with ample cash on hand are able to invest the cash back into the business in order to generate more cash and profit.
Definition - A measure of a company's financial health. Equals cash receipts minus cash payments over a given period of time; or equivalently, net profit plus amounts charged off for depreciation, depletion, and amortization.
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