Why Is There Never Any Money?
I get a phone call from a business owner who starts the call by talking up what he’s built. The business is doing well over $1M and the sales keep coming in. Now, I’m all over the internet as a Profit Strategist who solves the issue of negative cash-flow. So why is he calling me?
So I ask some questions. What brings you to call me? How can I help you? Quite often there’s a pause, then a big sigh, and then it comes out. It goes something like this:
Him: “Well, the business is doing great — best year ever; record sales, we’ve hired new sales staff, launched a new product, BUT, I never have enough money.”
Me: “That’s more common than you’d think, you’re not alone”
Him: “Really?
Me: “Really, and as desperate as it seems right now, we can fix it.”
So now it’s time to lay it all out and show them what’s really going on.
There’s a hidden force that overtakes a business owner once they hit a certain level. Think about it — if you had a business that did over $1M in sales in a year you’d feel pretty great right? Here’s the thing; it’s not about the sales volume, it’s about the bottom line. Every business starts out as an idea. The idea catches on — maybe you’re really good at sales and business is just pouring in. But as your revenue grows, so do your expenses. You get a bigger, better office. You lease a fancy car. You hire a team member you can’t afford — but that’s ok, because the next big sale will make it all worthwhile. What if the next big sale doesn’t happen? What if your customers are late paying you? You still have to pay the rent, you still have to pay your staff, and you still have to pay for that fancy car. What do you do when the well runs dry? You borrow. Guess what that does? It adds even more to your operating expenses.
I’ve always told my kids “I don’t care if you run a multi-million dollar company or if you shine shoes on a corner — what matters is are you happy and what is your bottom line?”
Here’s a question for you: Who’s more successful? Someone who runs a $5M/year company or someone who runs a $200K/year company? How can you answer that without looking at the whole picture? So let’s look at it. If I run a $5M/year company but it costs me $4.9M to carry it PLUS the extra $200K in loan repayments how am I doing? Now, if I run a $200K/year company and it costs me $100K/year in expenses and I pocket the other $100K with no debt repayment, who’s more successful?
It’s NEVER about the top line, its ALWAYS about the bottom line.
Many times when I assess a business to determine where the cash struggle lies the business owner starts with “but we showed a profit of $40K last year!” Sure you did — on paper. And that, my friend, is also what you’re going to pay taxes on! Now let’s look at it from a cash-flow perspective.
Without going into accounting mumbo-jumbo I can simply say this: Your profit & loss statement (if you even look at it) has very little to do with how to manage your money. It’s a reference point, that a lot of business owners overlook and simply can’t be bothered to understand. Who can blame them? I’m a numbers lover and I can see how it would bore someone! The passion is in the creation of the brand, the business, the movement, not crunching numbers!
The key is NOT in the profit and loss statement. It’s in the flow. How does the money flow through your business? What determines what you can spend?
I don’t care if you turn over $50K/year or $50M/year — if you don’t have a solid, predictable, sustainable spending pattern and plan you WILL run into problems.
The good news is, whether you’re a start-up or in deep financial trouble, there’s a way to manage the money flow that eliminates debt, pays your taxes, and compensates you, without going into debt (or more debt!).
Whatever your situation, I can help. Just reach out. And remember, you started this business with a dream; live the life you love.
