Why Cash Flow Matters In Growing Your Business

Do you need sustainable monthly cash flow to scale your business?

Do you worry about cash in your business each month? Most CEOs and entrepreneurs do. They want to make money that allows them to pay their team, expenses, and pay themselves - all while being able to save to scale. But if the monthly cash flow can’t keep up with expenses, a business owner can quickly find themselves hurting.

Unfortunately, as COOs and business consultants, we see too many CEOs cutting their own paycheck because they’ve made mistakes over the years that impact their cash flow today.

Take the following scenario as an example.

What Happens If You Don’t Have Cash Flow?

An entrepreneur has an idea for a business - and it quickly gains traction. The idea turns into a six-figure business complete with a team. To everyone on the team and outside the business, everything seems to be going great!

But there’s an underlying problem only the founder sees: the business is hemorrhaging cash.

While growing the business, the founder signed up for dozens of different services and softwares. They had brought on team members they needed at that moment without truly accounting for their need in the future or creative solutions. As they made purchases and subscribed to services, they didn’t properly account for or track the recurring expenses.

Now, a few years in and ready to scale, the monthly cash flow is less than the monthly expenses.

While they are still managing to pay team members and keep the issue under wraps, there’s not enough cash flow to scale their business - and they don’t even know where it’s all going. They are stuck at their current level, but, unfortunately, that level means they can’t pay themselves.

What Was The Ultimate Problem?

From a practical standpoint, the issue is very straightforward: there’s not enough cash flow. Thus, there either needs to be an increase in cash or a decrease in expenses.

But there are other underlying issues, as well, in terms of management.

In this situation, the entrepreneur needs to re-evaluate their mindset around spending and decision making. They need to be aware of their operating cash flow and work within their means. They are also showing signs of a mindset problem.

The founder is working in the short-term, which is having long-term consequences.

How Would We Resolve The Problem?

First, we would work with the entrepreneur and their CPA or bookkeeper to identify where the cash is going each month. From there, we would tackle what each expense is practically doing in the business and determine what needs to stay. We can then make cuts or adjustments as necessary to balance the cash flow with expenses.

Next, we would need to adjust the management practices. When we set up methods and processes, we need to set them up with the future in mind. We also need to capitalize on resources and assets we already have access to before purchasing new ones.

Finally, we need to tackle their mindset. If they continue to come up with solutions that are only based on the current moment then they will always encounter problems in the future.

This three-layered approach to practical and mindset roadblocks would help the founder to find the growth they want in their company.

What Is The Ultimate Take Away?

Entrepreneurs, founders, and CEOs wear a lot of hats in a business. They are marketers, product developers, bookkeepers, and more. To get started, they have to be all that and more! But at some point, it is really important to admit that they cannot do everything themselves.

Many people don’t have the financial skills to run a business - and that’s okay. There are professionals out there who can give you the tools, resources, strategies, and plans to help you optimize your cash flow so you can grow your business.

If a CEO operates with poor financial skills and a short-term mindset, they are setting themselves up for bankruptcy in the future. They might need something in the moment, but if they don’t stop to ask themselves what that expense means tomorrow, their future self will hurt.

A solution in the moment is not necessarily a solution forever. Whenever you make a decision in your business, ask yourself the following questions:

How deep is this problem?
Am I putting a band-aid on a bullet hole?
If I am coming up with a temporary solution, when do I need to re-evaluate it?

Why Your Cash Flow Is Suffering

What decisions have you made in the past few years that you are still feeling the repercussions of in your business? Many times, we cannot name the exact decisions, but we can feel the symptoms of those decisions.

Yesterday’s decisions can make you feel frustrated, annoyed, and anxious today. They leave you with less cash flow than you should have and frustrated because you don’t understand why you’re not making as much money as you should. Those decisions can make you feel anxious about what happens tomorrow in your business because you don’t really understand what happened yesterday. They can also make you annoyed at your business because you don’t have the confidence in it that you should.

These are the long-term repercussions of decisions you make in a moment - and then forget about.

Beyond the emotions, though, these decisions continue to impact your cash flow. Whether through expenses you have forgotten that you’re still paying or through the inability to start something new, the lasting impacts on your business will remain.

So how do you solve it?

Bring in someone who can work with you to give you the strategy and plan you need to make your business financially sound. A hemorrhaging business cannot scale, so don’t let that be your reality. We would highly encourage you to work with someone today to sort out your finances to allow for growth tomorrow.

As business consultants and COOs, we work with entrepreneurs every day to set them up for success by identifying where their business is suffering. We help them pinpoint which processes to re-evaluate and adjust to grow their business. And best yet… We offer hassle-free, no obligation 30 minute discovery calls with our founder to see how we could help you. Just email us today.