We all have heard the phrase “Cash is King”, but is that true? If we take the story of the Wright Brothers, they were the first ones to make it into the skies. They had little cash but a desire and a dream. On the other hand, Samuel Pierpont Langley had all the money but did not succeed.

We can look at some great corporations today, that started out of a garage or shed.

• Amazon
• Apple
• Disney
• Google
• Harley Davidson
• Hewlett-Packard
• Lotus Cars
• Maglight
• Mattel
• Yankee Candle Company
• And lots more.

You get the point. These companies did not start off with lots of cash.

Cash often produces laziness. Think about a person that is hungry; he does what it takes to eat. When you have money, this usually does not initiate a hunger response, therefore pushing out the success of your business or running out of cash. Running out of cash requires you to raise more cash to feed your business. You become a beggar in the streets so you can feed your companies belly. We all know that a business can be a cash vampire. But if you have Cash Flow, cash going out is a lot easier.

Think about a monarchy, the “crown” requires money to survive. In the past, money was obtained through love, war, and taxation. If they focused strictly on taxation, you could get a revolt from the subjects. The treasury was only as strong as the funds coming in. Rome was able to build a war chest by attacking other neighbors. We are not in those times, but the rules still apply today, that cash flow is a requirement for a business to survive. Without cash flow, treasury gets low, and soon you have to put a “going out of business sale” across your business.

So my argument is businesses don’t go out of business for the lack of cash, but the lack of cash flow.

You may be saying alright, you have made your point, what needs to be done.

Cash Flow is King, and Cash is Queen

Simply put, you need sales for cash flow.

The second thing you need is skills, and I am talking about some mad skills. Skills that blow your customer away by solving their problems. In return, you receive repeat and referral business. Thus, feeding your sales machine. You can sell without skills, but soon you will be found out as a fraud if you can’t deliver. A portion of your business is dependent on repeat and referral business. Especially in this age of the social internet, your weaknesses are staged to the world in star reviews.

Some businesses turn to cutting staff or services because of cash issues. Reducing costs is often a systemic problem that has nothing to do with cash. It all has to do with a lack of cash flow. Lack of a pipeline.

I read about a successful businessman that wrote that to survive and thrive in your business, and you must keep your sales pipeline full of qualified leads. You can fill up your sales pipeline with people that don’t have the money or will not purchase from you.

Cash flow can come in several streams.

• Online sales
• Offline sales
• Referrals
• Repeat business
• Influencers
• Partnerships
• Affiliates

Having several streams of sales flow keep your business afloat should a channel not produce.

So is cash relevant? Definitely! Cash is an excellent tool for expansion, investments, buyouts, research, and product development. But cash is not number one. The ability to generate cash is number one. If you look at a show like Shark Tank, one of the leading questions they ask is “What are your sales?” My argument is that the ability to generate cash is King and the ability to have cash is Queen.

Marginal Cash Flow

I have put forth my argument regarding the importance of cash flow.

I would like to add another level to the requirement of cash flow.

You must understand cash flow vs. profits. You can have sales and no money left for your business. You need to have a profit on the sale after expenses are paid.

Say you have a business as an Amazon, product seller. You sell widget A for $50.

Your product costs you $35 to buy and ship.

You know have 15 dollars to pay for overhead, marketing, sales, etc. That also needs to include taxes and cash to reinvest to grow the business.

Having margins on your cash flow is just as important as selling. If you don’t know what it costs you to sell a product, then you may be going negative every month and slowly bleed your business dry.

After you discover your margins on your product or service, you then need to know how much you need to make to pay yourself, pay others, taxes, etc.

What can you do for cash flow?

Listed are five things you can start doing now to help your business.

1. Know your profit margins. Dial the numbers and determine how much you are putting in your pocket after each sale.
2. Count your money like a hawk. Know where your money is coming in and the money is coming out. Not counting it is like being overweight and never looking into a mirror, measuring your waist, or stepping on a scale. If you are financially illiterate, become savvy with at least reading financial statements and numbers that need your daily attention.
3. Track the quality of your pipeline. The people lining up to buy your product is good. But if they do not buy, this is a waste of time. Make sure your message is clear, and that you are noticed by the right audience. If you are doing Facebook marketing, you can target look-alike people to people that have bought from you in the past.
4. Make new connections with people that can help sell your product or service. Develop your influencer dream team 100. Example, I had a Water Spot and Window cleaning business. I worked on partnerships (not paid at the time) with window installation companies that would provide me with referrals. This was very lucrative and easy sells because they already trusted the person doing the referring. My job was just to WOW the customer. Who is in your line of business online and offline that you can make connections with to help you sell your product.
5. Get some mad skills. If you are not excellent at doing something, get help. Only hire people better than you.

If you are interested in a live masterclass training coming up on Thursday, January 11th, click the link below to register. Spaces will be limited, and you can ask whatever questions you wish about cash flow.