008- The Importance of Cash Flow in Your Business

This year only half of all businesses that started five years ago will still be in operation by the end of this year. Let me repeat that. 50% of all startups fail within their first five years of launching. Of those that fail, 82% fail due to cashflow issues, they run out of money. Today we're going to talk about cash flow and how to protect yourself and your business from becoming a negative statistic.

Welcome to episode #8. My name is Jeremy Epp and I am here to help you set up, launch and grow a profitable business. Today I want to talk to you about a very important topic that will be at the core of your business success or at your business failure, and that is the subject of cash flow. Cash flow is often referred to as cash management. It's how you handle your funds in your business as you start your business and work toward building an ongoing stream of revenue coming into the business.

Cash flow doesn't stop once you have built a revenue stream, but it will continue to be vital to the business throughout the life of the business. I want you to think of cash flow as the lifeblood that flows throughout your business. If you run out of cash or don't have enough, your business will eventually struggle and fail.

I want to cover 4 mistakes that business owners make when they're first starting out regarding cash flow. The 1st mistake that business owners make is not properly funding the business to start. I've seen this time and time again in the businesses that I've been involved with in the industries, but an example of this is when I started out in the real estate industry many years ago, the recommendation at that time was to have a minimum of six months worth of savings in the bank. Now, for me, at that time that wasn't possible. I was where I was at. I was making a transition from my first company and I was actually looking at how to generate cash flow immediately so that I could basically stay in a self employment world and not go back to a corporate environment.

The fact that I did not have six months worth of savings in the bank, in fact I think I had closer to two weeks of savings in the bank. What I was able to do was, it really got me focused on what I needed to focus on and really get in there and hustle hard, and so that was a motivation for me. I did continue to have a little bit of income source from another business to kind of help offset that, but it was not an ideal situation and if the people that were mentoring me in starting in the real estate business knew that my cash flow was that low, they probably would've steered me away from that in a hurry and recommended I go get a traditional job. But bottom line is I hustled. I was motivated, I survived. I kind of beat the odds, but it's not the ideal situation.

According to an article written by Small Business Trends, in March of 2019, one third of small businesses get started with less than $5,000, and 58% get started with less than 25,000. Now that may sound, wow, that's great, I can get started for less than $5,000, but keep in mind the statistic I mentioned at the very beginning of the show, which is that 50% of all business fails within the first five years of launching. And of those that fail, 82% fail due to cashflow issues. So it can be done. We've all heard the success stories of the companies that started out on credit cards or with $100 bucks or $500 bucks and have built something amazing, that is not the norm. So just be aware of that. It can happen, but it is not the norm.