As an entrepreneur who faces the effects of an economic downturn, initial cash flow is extremely important.
Why? Because money cost money.
Let’s put it in perspective:
Depending on the role you play , you pay for the cost of money not circulating in your business when it has no where to go. Because money, in it’s very nature, should always be moving – never sitting still. Like a child on a sugar rush, it must keep going to move your business forward – faster. That’s why the root word for money is “currency”. The ocean works because of it’s currents.
So, what does the money flowing into your business immediately have to do with generating cash flow?
It guarantees employees, suppliers, vendors and the government are paid on time. And being on time with your payments develops goodwill and reduces the odds of paying additional fee’s in terms of interest or penalties.
Goodwill is a rare commodity – more so in business. It’ll help expand and grow yours over several lifetimes and could be developed into a full-fledged corporation based on the trust you develop keeping your financial promises.
Respect is gained fast in the marketplace and will have vendors and suppliers fighting to work with you because of your reliability. It’s a sign of professionalism and a strong working foundation.
Let’s take a quick look at an example that vendors love and favor:
Cash-and-Carry stores offer big discounts to its customers over retail.
How so? Because goods are purchased cheaper since they make payments instantly or in a short period of time. The result being deep discounts offered to it’s customers. This is what often creates the edge over big box retail competition.
You don’t have to beat yourself up over not generating initial cash flow at the start (although for obvious reasons it’s a huge plus) because most businesses won’t produce for some time. Odds are, the money invested is locked up into the business until it’ starts selling as soon as possible.
Keep this in mind: It’s never a good idea to stretch your credit or defer payments in the initial few weeks of your business with your vendors and suppliers. You need to build enough trust and faith on your reliability before they allow you to extend credit for a period of time.
It’s pretty clear why cash flow is important to growing your business and the sooner you can sell your products or services to generate the cash, the faster you can use it grow your business quicker. After all, cash flow will make or break your business, and the sooner you work to get your employees and partners to generate money for you, the longer you’ll stay in business to enjoy the fruits of your labor.