Cashflow is king

Business is essentially pretty simple. Do you have something the client wants? Can you deliver it on time? Do they think it’s worth what you want them to pay? Business is not a mystery: It’s about trade.

A crucial part of being in business is staying in business and a basic requirement of staying in business is the ability to pay your bills. This is not about profit; this is about getting paid. That means cashflow.

Cashflow isn’t complicated either. If you want something, you need cash, or the ability to get some. You may decide to borrow the cash, but sooner or later you have to have the cash. It has to flow into your hands in order to flow out again.

Methods to manage cashflow are very straightforward. There are some simple software tools that help you evaluate and manage your cashflow. But more important than methods or tools is the motivation to spend sufficient time attending to this stuff. And if you lack the motivation, remember this:

“No matter how much profit you’re making, if you aren’t getting paid, you aren’t going to stay in business.”

People who start-up and run their own businesses using their own resources are often called bootstrappers, from the old saying about pulling yourself up by your own bootstraps, meaning grafting to build something big from something very small – to find leverage where there is almost none. (That’s also why we ‘boot’ a computer.)

“Cash is not only king, it’s queen and prince too for a bootstrapper.” ~ Guy Kawasaki

Read Guy Kawasaki’s article about bootstrapping on his informative and entertaining website to get the opinion of someone who works with start-up businesses seeking venture capital. If you are a freelancer or running a small creative business, you may feel his perspective is a world apart from your everyday trials, but the truth is that every business has to manage its cashflow to stay afloat. You manage cashflow effectively by doing one very simple thing: turning on the light.

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