Jan 15, 2009

The Bottom Line For Entrepreneurs

If you're an entrepreneur you face some uncertainty from time to time. What is the biggest risk you run into as an entrepreneur?

Is it losing face, losing people, or losing money?

"Cash is King" is a Cliche that holds true.

Usually, the problem most entrepreneurs face is losing money. Your cash flow is the key to your business booming, and also the lifeblood BOTTOM LINE for the life of your company.

Q: How can you make sure you never run the risk of losing your business?

A: Always make sure the money coming in is higher than the money going out.

In a recession, many companies close offices that weren't profitable or achieving as high of profit margins as others. The question I would pose to those companies is "Why did you allow those offices to be open when it wasn't a recession?" Seriously, if it makes sense to close the office during a down economy, it probably makes sense to close it during an up economy, too.

Part of the problem with entrepreneurs is they rely heavily on the availability to cash lines. If the average length of time for you to close a sale extends two months to five months, and you only have three months cash in the back, you've got a problem.

So manage your business in such a way that your expenses do not outweigh your cash flow and your availability to money. If you're currently running at a negative, with no projection for positive cash flow, I'd have to say I hope you have enough money in the bank to justify such a cocky behavior. Jeff Bezos, CEO of Amazon, pulled it off. However, he also had a mountain of money. Most entrepreneurs won't be able to last beyond the money. So, why push your luck?

Instead of buying new computers, hold off and let new sales pay for the new equipment. I've taken that approach with my company. Every time I succeed with a new sale, I buy something on my list or add a new software tool to make me more effective. But I don't buy the product or software until I've proven I can support the revenue stream with a new client.

Try supporting your cash position with the philosophy that sales drives the business and you'll see your focus improve, too.

Protect your cash flow and you protect your bottom line.

What do you think? How have you implemented solutions in your company to improve cash flow?

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