Cash is King: Don't Kill Your Business

Every entrepreneur, good entrepreneur, must manage their cash flow. You must know how much cash have I got in the bank and how long will it last for. And you must never go below it, no matter how tempting the opportunity is. Oh, this big contract. You look at your cash reserves and if it can't cover you for three months, don't do it. Say no. There's no shame in no. There's absolutely no shame in saying, I'm sorry, I can't take advantage of this opportunity, especially if it's a we'll pay you later opportunity. So the third big killer in cash flow is taking too much money out of the business. And that's usually a function of actually not knowing your numbers. Because if you don't know your numbers, you wouldn't know at what point should I stop pulling money out of the business, or how much should I really afford to pay myself. Because often people are not tracking their numbers. So it's whatever I need, you take it out of the business. Then when the business needs that cash, the cash is not available. Suddenly you're out of business. Or suddenly your customers are complaining. Maybe if you're cooking food, you start, oh, don't use two Maggi cubes, use one. The food stops tasting good, the customers go away. And it's almost like cancer eats at the business. You will cut back, cut back, cut back until the business dies. So managing your cash flow is very important. Knowing, having three months cover is recommended. Three months that if no business comes in at all, I can cover all my costs. That's got to be your cash reserve and you don't touch it. You don't touch it. And also, and this is very important, never get so excited about an opportunity that you throw away your business management principles. So this contract is big, it's big, but it may not be for you. It's big, but you may not be able to afford it. When you're selling on credit, what happens if there's a delay? What happens if they don't pay you in 30 days? What happens if they don't pay you in 60 days, in 90 days? That's the risk and that's what kills a lot of businesses. So the fourth number you must know in your business.