Pivot Into Profit- Episode 1 Three Critical Mandates for Cash Flow
As business owners and entrepreneurs, we are constantly searching for the optimal cash flow and business advice. Numbers can be tricky– especially if you don’t love them. Oftentimes it can be overwhelming and many of our clients come to us feeling like a fish out of water. Here at Pivot Business Group, we’ve seen it all– and helped our customers reach their financial goals. This is why we have created a mini series called Pivot into Profit–designed to help small business owners quite literally pivot into profit. These small business advice posts will focus on: critical mandates for cash flow, important requirements to run a successful business and everything in between.
Did we mention there will be a new post each week?
This week's blog post is focused on the Three Critical Mandates For Cash Flow.
Three critical mandates for cash flow
The first critical mandate is that cash flow is literally the blood in your company’s veins. - so think cash, cash, cash. This is exactly how you survive in the short term and thrive in the long run. Let's say you want to hire a new employee or buy new equipment. What if you want to take on bigger clients? It’s going to be a lot easier to do so with $50,000 in the bank, instead of $500.
The second critical mandate is that you need to manage profits, not just pocket them. That’s how you survive as a business in the long term– you start with a 5-year plan and then manage your profits to ensure you achieve your goals. Many clients come to us thinking that the number in their bank account is how much money they have. We often have to remind them that that money is not entirely theirs and nine times out of ten belong to different parts of their business.
We recommend to all our clients the book Profit First and the profit first methodology. Profit first is essentially having multiple bank accounts for your business. The benefit of this is it lets you know how much money you have, but also what it is for. A lot of times we spend whatever is in front of us, but with this method, you put it in smaller categories so you can see how much money is allocated for each.
The third and final critical mandate is understanding truly successful businesses consistently generate cash and consistently keep cash. This is how you create a business with value. And when it’s time to sell your company, this kind of consistency is what buyers are looking for.