A friend of mine who is a business owner had a death in his family so he took a week off of work to travel to the funeral, perform the eulogy, and spend time with family. These are important, unavoidable events in people’s lives and they impact business.
In my friend’s case, when he returned to his business, he had work scheduled but the work he didn’t get done while he was away created a sort of “dip” in his cash flow. He tells me that he gets paid about three weeks after a project and in most weeks he receives some cash from projects completed three weeks earlier. However, he watched as this appeared on his horizon: First it was 3 weeks away, then two, then one, and we actually spoke in the week of his cash flow dip.
Fortunately, he earns enough, and his revenue is generally consistent, that he was just fine. But it perfectly highlights the real problem that entrepreneurs face with cash flow.
This reminded me of really early in my entrepreneurial career when I had been working on several small assignments and landed my very first big assignment with a big company. What I didn’t realize is that I was in for a serious cash flow crunch! My small assignments usually paid fairly quickly, even if they weren’t very much. (Collectively, they amounted to a decent income). But the large project took months and I was contracted to only bill a certain amount at the end of each month. And the company, a BIG company, received my invoice in one month then paid 60 days later.
So imagine what that did to my cash flow! I went from many small invoices which paid the bills in a “just-in-time” cash flow, to 90 days of no cash (the first 30 days of work, then an invoice, then 60 more days of waiting). Ouch! It was a shock to the system. Obviously, years later, I’ve figured it out but it was a harsh lesson at the time.
I’m not saying that one is better for you than another; I’m just giving some food for thought.
Have a great weekend!
Jessica Routier, IAC-EZ
IAC-EZ is a transactional-based bookkeeping system. This means that the income and expenses you track are by the transaction, not by the account. This makes it super easy to separate business and personal transactions for an accurate profit and loss statement. We also offer tax estimates to help prevent any big surprises!
Each month, we highlight a particular cause and a portion of the proceeds collected from people who sign up in that month are donated to that cause. It’s a great way to give back!
This month, we honor veterans by sending donations to the Disabled American Veterans Charitable Service Trust. Our military veterans are putting their lives on the line for our freedom, and have done so faithfully since America first became a nation. In both wartime and peacetime, military personnel run toward danger to protect us. Some survive. Some lay down their lives. And some are wounded in duty.
For those who are wounded, many face an up-hill battle to find support and healing. The Disabled American Veterans Charitable Service Trust (or, the DAV Charitable Service Trust for short), funds physical and psychological healing of veterans who are disabled and shelters homeless veterans.
Their programs include making sure that disabled veterans get the care they need; they provide assistance to veterans who are experiencing post-traumatic stress disorder and substance abuse, and they help blind or amputee veterans to get the help they need to regain their independence.
You can click here to visit their website.
DAV Charitable Service Trust’s brochure says it perfectly: “Freedom isn’t Free”… which is why we’re supporting them. If you are thinking of signing up for IAC-EZ, this month’s sign-ups will be contributing to a worthy cause. And be sure to take a moment to thank the veterans in your life and to remember those who have given their lives for our freedom.
Jessica Routier, IAC-EZ
If your business needs cash, experts say that a DIY approach may be the best option. No, I’m NOT talking about robbing a bank!
Let’s start at the beginning: Before a business does really well and can sustain itself through its revenues, the founder/ owner/ entrepreneur needs to invest some money into creating the business to be able to generate revenue. It’s a classic Catch-22 situation: You need money to start and you need to start to make money.
Entrepreneurs have a number of options to choose from: They can go to investors (either institutional investors or family and friends or local venture capital companies). They can also fund the growth themselves – the DIY approach.
Frequently, the knee-jerk reaction to DIY is to think “credit cards”. This isn’t advisable since credit card interest is so usuriously high. But there are other ways.
In a recent article in the New York Times, which was later followed up in a blog at Alltop.com, two writers talk about the importance of funding growth without an investor.
From moonlighting to grants to simply working without a salary – these are among the options presented in the New York Times article. Although those don’t sound like fun times, I believe that they might put a small business on better footing than if they borrowed money. Sure, growth is slower but it is not funded by someone you have to pay back later.
The blog that followed (it was written by none other than Guy Kawasaki) reinforced the importance of DIY funding.
The idea of slower growth while moonlighting may not appeal to everyone but if you peer through your crystal ball into the future you should see your own business that much stronger and profitable because you didn’t spend your early years paying someone back.
(Disclaimer: I realize that this is not possible for every business… my recommendation is for everyone to try and fund as much as you can before you have to borrow. By doing this, you’ll need to borrow less and you might get better terms.)
This isn’t the first time I’ve written about this! Check out some of my other blogs on the subject of funding your own business here:
Jessica Routier, IAC-EZ
