Solopreneurs: Cashflow Trumps Profits for Start Up.

Businesses can last for years without making a profit but die very quickly with negative cashflow.

My first business is proof. The business started in 1989, less than a year before the economy slipped into a recession. We took a loss on the first year. No surprise. And the second year. Yikes. In fact, it was not until year five, that the company both paid my partner and me a decent salary and made a small profit. We survived for five years on cashflow alone.

And, three years after that, the company was sold. That was when the real profit was made. So, let’s look at cashflow.

Some important concepts.
To keep your cash flowing, keep expenses as low as possible and revenue as high as possible. Sounds simple. But it can be difficult to live. Keep in mind these concepts:

How to improve cashflow.
The very basics of cashflow is to increase sales. But, at start-up, this is not easy. So you have to do other things like slowing cash out and getting what sales revenue you do have to come in faster. You may have noticed that most companies are playing this game these days.

Create a cashflow projection.
I searched the Net for about 20 minutes looking for a cashflow template to pass on but found nothing that I thought really easy to use. So… I give you the very basics. You can automate it if you want with Excel or maintain it manually, it’s up to you. Here’s what to include in your grid:

Accentuate the positive.
If you’ve completed your projections and discovered that you are in a negative cashflow position, you need to go back and see how you can either get more cash in or limit the cash going out. Your cashflow total, month after month, has to be positive.

Knowing your cashflow position in advance will help reduce moments of panic and give your business a chance to build, step-by-step, to profitability.

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