The 7 easy levers to improve cash flow
What’s more important, profit or cash? If you’re a growing business, it’s absolutely cash. This is why Amazon has continued to thrive at near break-even or frequent losses. It’s Amazon’s business model that generates significant cash – more than $ 3 billion in 2013 – that fuels its rapid growth.
You can get by with decent people, decent strategy, and decent execution, but not a day without cash. And cash becomes even more critical as the business scales up since “growth sucks cash.” The key is innovating your business model to internally generate sufficient profit and cash flow so you don’t have to turn to banks (or sharks!) to fuel your growth.
This video takes you through the case study of a seemingly healthy $42 million firm which is “growing broke.” Presented by Alan Miltz who created the leading software tool for banks to evaluate the financial health of businesses, Alan walks you through the seven financial levers every business leader has at their fingertips to scale up cash aided by his “Power of One” one-page cash tool.
What the following case study shows is how a healthy P&L statement can mask pending cash-flow issues that are only going to get worse as the business continues to scale. Gary doesn’t know it, but he’s “growing broke”, because he doesn’t understand the supreme importance of cash. In that situation, unless you can continue to raise emotional money – that is, cash from people who love you – the smart money will flee, which only speeds up the demise of the business.
It’s imperative that you understand your business from the perspective of bankers and investors, so you’re not frustrated by their apparent lack of appreciation for the company you’re scaling up. Miltz and his team built software that banks all over the world use to evaluate the creditworthiness of a business. They then decided to put these same tools and analysis in the hands of business leaders. Hang in there through this case study, and on the other end you’ll learn 7 levers you can tweak to improve cash flow dramatically and sleep better at night.
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