Cash Flow is King(and Queen!)...or how to start & grow a business debt-free

Cash Flow is King(and Queen!) for small businesses.  We all know that having regular net profits is essential for a business to keep running. However many small business owners overlook the dangers of debt until it is too late!  Debt creates personal and business risk.  I know this firsthand, as the business debt I carried for many years kept me from investing in business growth, and destabilized my household.  When there are economic downturns, personal transitions, or challenges in your business,  debt payments can take over your cash flow and reduce it to a trickle.  It is very painful to have to keep making payments when your income is down and you have no cash in the bank.  And all businesses experience cycles of ups and downs in gross income.  So what can we do?

Having a pro-active strategy to use cash to start and grow your business is the answer.  Even large businesses such as Apple, Amazon, and Bed Bath & Beyond all grew and operate debt-free!  The key is to start small, with a product or service that you know will be profitable.  You then grow the income from that product or service as fast as the market will allow, or "organically".  Keeping business expenses low and putting some money from the business aside for taxes & retained earnings ensures you have stability for any fluctuations in the market.  Then you also have the ability to invest in business expansions with cash.  Cash in the bank will make you feel like a King or Queen in your business, empowered and wealthy!

Here are some basic tips if you are starting a business, or have a successful business and want to create better cash flow.

1.  SAVE UP FIRST.  To get your business started or to make improvements in a current business, save up cash first.   60% of small businesses start with less than $5000 cash. Whether you are investing in a prototype product, or getting your first business cards & office supplies, use the leverage of your day job, or current source of income, to get things up and running.  This step requires patience, and resourcefulness, but it sets you up for a lifetime of wealth in your business.

2.  PAY YOURSELF FIRST.  Use the "Baby Steps" of Wealth-Building** to begin to build some retained earnings for emergencies, market fluctuations, and business expansion.  Set aside a percentage of your net profits for:  1)Baby Step 1, $1000 in business savings, 2)Baby Step 2, paying off all business debt using the debt snowball, and 3)Baby Step 3, 3-6 months operating expenses in savings. Once you complete Baby Steps 1-3, you can move on to Baby Steps 4-6, serious wealth-building for household & business.  **For more info on the Baby Steps, see the blog posts below.

3.  GROW PROFIT FIRST.  Look at your business and determine which products/services are profitable, and which are not.  Remember, net profit is gross income minus business expenses.  Spend most of your energy growing those aspects that are profitable.  Profit will feed your family, grow your retained earnings, and fund investments.  A hobby will not.  Decide if you want to continue the "non-profitable" aspects as a hobby/ministry or if you want to cut them out completely.  

Now you are the Queen or King of Cash Flow!  You should have regular income coming in from your business, money in business savings, and no business debt whatsoever!  Your cash flow is regular, and you have reserves.  When an emergency comes you are prepared.  When the market fluctuates, you are prepared.  When your personal life requires attention you are prepared.  Your business is funding personal and business investments.  You are becoming wealthy.  Congratulations!  How does it feel?  I can bet you've got incredible peace of mind.  When you reach this point in your business let us know!  We'd love to celebrate with you!