Cash Flow is King for any Startup Business!

Turnover is Vanity, Profit is Sanity and CASH FLOW is REALITY

This was a message that I grew up with. It was posted over my dads desk at his office. My dad is an accountant by training and a business owner by choice. He drummed into me from a young age that Cash Flow is King.

So what is Cash Flow? Cash flow is the timing of actual flow of cash into and out of your bank account. It is an art to balance the cash flow of a business. Lets break it down with an example. Lets say that you buy some stock from your local cash and carry. You pay before you walk out the door with your stock. This is a cash outflow. You take the stock back to your warehouse and the next day a customer places an order for the stock. This is the sale. You deliver the stock the next day and the sale is complete! But is it really complete.

The Sale is only complete when the money is in your bank. Lets say that you have credit terms with your customers of 30 days. That means that they will pay you after 30 days. 30 days later you give them a call and ask for them to pay and they tell you they put the cheque in the post yesterday. The cheque arrives a few days later and off you go to the bank to deposit the cheque. 7 days later the cheque is cleared into your account. Now if we ad that all up we can se the cash flows of this transaction.

Day 1 You buys some stock
Day 2 You receive an order
Day 3 you deliver
Day 33 You call to ask for Payment on your 30 day terms
Day 34 you receive a cheque
Day 41 The cheque clears into you account

Thats a total of 41 days after you paid for the goods that you got paid. So the cash has been out of your bank for 41 days. Lets look at this in a different scenario.

You receive an order from your customer and you immediately take payment for that order maybe its over the phone by credit card or online payment. The same day you place an order with your supplier and he delivers directly to your customer the next day. You have 30 days credit with your supplier and so you will only pay 30 days later. Because you want to have a good relationship with your supplier you make sure that the money is paid into his account 30 days later and because you have already been paid upfront then you have the cash available and you dont have to wait to pay him at all.

You can see through these two examples that they have different outcomes for cash flow but the same transaction took place. You will need to build a business model that fits with your cash requirements.

Its an art but you need to understand Cash Flow to ensure that your business survives

Systems, The cornerstone of any Startup Business!

If you look at any great business, big or small you will find systems. Systems are quite simple the way things operate. Like driving down the road there is a system or rather multiple systems that make it work. You drive on the right or left hand side of the road, you stop at traffic lights that are red and you go when they are green. You also have a system for driving the vehicle. You put your foot on the gas and you go, you put it on the brake and you stop. To turn right you turn the wheel and you get the picture. OK things can go wrong and accidents happen but then there are systems for that too. Somebody calls the authorities and an ambulance and police and fire department are dispatched to the scene. They evaluate and take actions base on the systems they are taught.

So maybe you start to see that systems are there to give guidelines to how to do something or even strict operating procedures. Systems can be the biggest part of your work and once you have got them right then your business can operate almost on autopilot. I say almost because you still need to work the systems and it will be a lot of work. So lets look at who has systems that work well.

McDonalds is a great system and very well known. It took almost four years to develop McDonalds systems but now they work so well that the company can operate on autopilot without the boss having to be on the floor every day because he can simply train people to use the system and the system tells them how to handle every aspect of the business. Another great system is Microsoft. Microsoft operating systems are integral to most small businesses. When you switched on your computer you most likely used Windows or Office to get something done.

Most systems dont need to b complex, in fact the simplest systems are the ones that work best. Lets take a look at where you could let systems make your life easier.

1 Marketing
2 Finance
3 Operations

These three broad categories will form the basis of any business. You could look at an overview of these and have system for how they integrate. Because they are interdependent, they need to work together. You will need to have a system to help them work together. In a small business this system can be simple but it should help the information that each one generates to flow into the others. Maybe a simple meeting once a week to look at how these are fitting together is all you need. The important thing to do is define how they relate to eachother.

I will go into more on systems on Each of these in future blogs. For now you can start to think of what types of systems you need and write them down so that anyone else could follow them.

Brainstorming your startup business idea!

So you have taken the all important decision to start your won business and own you need to find the right idea. I find the best place to start is to sit and brainstorm. When you do this, set some time aside and let your mind go. Write down all the ideas that you have and keep thinking about the possibilities. This is not the time to eliminate any of your ideas, this is the time to get them down on paper. At a later stage you can eliminate ideas or join some together but now is the time to think up all the weird and wonderful ideas you can possibly think of.

So what kind of ideas are there out there. Its probably best to start with the things you are interested in. Look around at home and think about the things in your life that get you excited. Maybe its food, maybe its clothes, maybe its computers and for me its business. I am passionate about business and so I am writing a blog about my progress. I am also building a product that is in the adventure gear industry (more on that in other posts in the future). he point is that you need to think of something that excites you and that you are happy to spend time doing and are willing to learn more about.

Write down all your ideas. You may find that a particular theme starts to appear. It might be food and cooking and eating and so you may expand on that. Now you need to brainstorm a way to make money out of this. So lets stick with the theme of food. One important thing to see here is that in order to make money and profit, you need to continually build on one area. There is no point in starting over and over again. So sticking with food start to brainstorm what is going to make money. In food, you can sell food, recipes and add by adding value. So how do you add value? In food you add value by improving the offering. Maybe its through delivery of raw materials or by cooking raw materials or ingredients. Again you need to decide on what you feel is important and exciting to you. Maybe you feel that you enjoy cooking food and so that is how you can ad value.

Now that you are heading in the right direction you need to brainstorm your system. Systems are important because they allow you to train others and also kick into autopilot. Some systems you might be able to implement are to start a blog on cooking and teach others to cook the recipes that you know. Then the system might be to make a test a new recipe on Monday, Write the recipe down on Tuesday, Video tape the recipe actually being cooked on Wednesday and publishing the video clip on Thursday, getting feedback on Friday and taking the weekend off.

The important thing with Brainstorming is to generate plenty of ideas and write them all down. When you have lots of ideas then you can pick the ones that you like and you feel will work.

More on Systems in a future Blog

Some of the businesses I have started!

I guess its only fair for me to tell you about my history. I started out in life in South Africa and I remember my first entrepreneurial début was making pancakes and selling them on the street corner. I only remember one paying customer a well dressed man walking to work who probably thought it quite amusing that some kids were selling something on the street corner.

Much later in my career I started a small one on one diving school. My first clients were my friends and family. Then I started training with a school of disabled divers. I really jut taught anyone who I could find and it seemed that discount was the name of the game. I was not getting rich but I was doing something I loved and getting closer to the end game. Over time I made contacts in the industry and got slightly better deals on equipment and started to invest in more equipment. I got to know the skippers and shop owners and then started getting referrals. It was after about two years that I got the referral that changed the game for me. I was asked to train a consultant who was in the city for a long term project. He and his colleagues were willing and ready to pay for individual training.

My sales went up and so did my price. Overnight I went from charging local rates to international rates. I was effectively doing the same amount of work for four times the price. This training and the trips that followed were what saw me through college. Again not making millions but somehow getting by and growing all the time. When I finished college I took a job in the dive industry at a magazine which seemed like a good move to learn more. I sold up and bought a flat.

I rented the flat out and made a small income from this but not major money. In the mean time I moved overseas and started working for small companies owned by entrepreneurs, people I could learn from. After three years I sold that flat for three times what I paid for it. The mortgage was paid for by my tenant and so I did not spend a thing. Now I had a small amount of capital.

At the moment I am working on building a business that will be more than just me, a business that I can grow into a £multimillion business and retire young. My greatest challenge now is just keeping going until I succeed. Working through product development is taking its toll and I am trying to find the right people to work with but its exciting and I love what I am doing.

This blog is for all the people out there who dare to try and make a start, grit their teeth and persevere.

Persevere until you are successful in building your startup business!

Have you ever wondered what the formula for success is? There is no straight answer because there are many different formulas for building a business. You could go down the franchise route or build a home business or maybe an internet startup. The key to making a success of it is perseverance.

Perseverance is not a mystical thing but a very real not so easy to achieve strategy. Not so Easy because it requires work and commitment and plenty of drive. You need to be passionate enough to carry on going even when everything is stacked against you.

There are some fantastic books to read and you should read them all. Not because you will always be learning something new but because you will always be reaffirming the reason for your commitment. You may need to change direction at time and even stop to think about your direction and what to do next but as long as you keep taking steps forward then you will at some point succeed. Of course there are certainly some shortcuts but they do not make things as easy as falling into a bucket of money, they just make your journey take the path of least resistance. You will find these out normally by asking for help from the right people. The people who have done it before you.

So just carry on going and try to fin the help you need