Most of the time, business people find it difficult to know how much cash flow one would need in business.
It has been proven over time that the number one ‘killer’ of businesses is cash flow . Therefore even if your business might be profitable it can still collapse if you cannot provide for its day to day running .This affects both small big and small in businesses.
Most of our businesses are started on credit therefore, you are in debt right from the word go .So the cash flow requires that you know how much you will need to get your stuff running. In simpler terms it’s planning, planning planning. You plan for every gadget, power and water bills, salaries. This requires a lot of discipline and focus, which a lot of us lack. The question on my head every time I look at my project is how long it is going to take before the money starts coming in. We all do.
Prospects of profits or success alone can fire you up. Now, because entrepreneurs are optimistic in nature, we tend to miss the timing factor. We often miscalculate the total amount of money that it will cost the business daily until break even. This is always a nightmare. We tend to be too optimistic and this clouds our judgement.
The capital injected into your small business will not always be sufficient because at some point, the business must be stable enough to sustain itself and give you a bit of money. So if you don’t plan to the last thebe, you might just be setting yourself up for challenges.
As 2011 progress, take a 360 degree look at your small business and have a long term plan for it. If you fail this step or take it for granted, you might find yourself in cash flow problems.
The challenge with SME’s is that we tend to want short cuts and this renders us ‘unreliable’ with big corporates who are supposed to support us.
We become fly-by nights, here today and gone tomorrow simply because we did not plan right from the onset to be around for a long time.
So we must get it right from the start. There is no short cut around this.