Archive for Financial Responsibility
As Curly says in City Slickers “you just need to know one thing..”
Posted by: | CommentsIf you are in business or looking to start a small business there are a million details, some important and some not so important. In my dealings with over 1,000 small business owners I have determined that there is a “1 Thing!”.
The sad part is that more than 95% of the small business owners I work with have never looked very closely at the “1 Thing!” . Not only have they not looked at it closely, they have no idea how to put together the information so they can look at it.
What’s the leading cause of business failure? Not low sales, not low prices, not bad employees, not taxes, not regulations. The leading cause of business failure? The business owner runs out of money before they have a chance to succeed.
What’s the 1 Thing……….Cash Flow.
Very few small business owners even know the difference between cash flow and profit. There is a huge difference. Many, many profitable businesses go bankrupt every year because they run out of cash. They ran out of cash, they didn’t run out of profits!
I talk to many small business owners who are shutting down their business because they ran out of money. I asked them the obvious question.. “when you went into business you had a plan, what went wrong with the plan?”
The most frequent answer, “I spent all of my time figuring out what the right product/service was and not much time figuring out what I needed to get that to market.”
Cash flow is easy to summarize. What cash comes in when?…What cash goes out when? If $10,000 in cash goes out on February 1 and you get $12,000 cash in on March 15th you have NEGATIVE cash flow of $10,000 for 45 days even though you have a $2,000 profit ($12,000 in – $10,000 out).
Know your cash flow! I can assure you that if you take care of your cash flow the profits will likely take care of themselves.
Excess government spending will harm small business
Posted by: | CommentsThis not a rant about any political party. Bush and the Republicans spent like drunken soldiers also. The Obama administration had a lot to deal with in a short time but they have gone way beyond what’s needed to fix the economy and have ended up in the deep end of the pool….where deficits harm everyone.
Small businesses need to be prepared. If government deficit spending isn’t curtailed we will face years, maybe decades of slow or no growth and high inflation.
What should a small business do now? Conserve cash…even if it means not paying down debt. Cash is your only protection from catastrophic events, either economic or political.
Don’t be fooled by the recent stock market performance, it’s based on hopes and dreams… not any reasonable expectation of low inflation and growth.
Conserving cash means passing up opportunities with risk to conserve cash and have more protection on the downside. Conserving cash also helps slow growth but growth is a macro issue and your financial well being is a micro issue.
Protect yourself first. You’ll sleep better.