How cash flow influences your business choices

I have a friend who is a freelance writer. He jumped into freelancing with both feet by quitting his job before he had any real clients. And in starting his work as a freelancer he realized he had two distinct choices:

1. He could do web writing, which tended not to pay so well (for people who were as new as he was)
2. He could write for magazines, which tended to pay considerably better.

The choice seemed easy, right? But consider this: Writing for the web meant getting paid the same week via Paypal while writing for magazines meant waiting up to 6 months before a check was mailed (because magazines pay after publishing and usually take a couple of months to publish an article).

That changed his thinking: A small amount of cash today versus a large amount of cash in the future. Given his circumstances – jumping right in with no safety net of alternate income – he started with web writing to pay the bills. Slowly he incorporated more and more magazine writing into his work but in the early days, he told me, it was nearly 100% web writing.

Although things might be different for whatever you do, the reality of cash flow opportunities is probably similar. You may have to accept smaller projects on an ongoing basis in order to keep the cash flow coming in, even if it’s not the gigantic windfall that you could have in months or years to come.

I’m a big believer in cash flow. Cash flow is huge and often under-appreciated by small business owners. In my opinion, cash flow with a little bit of profit margin is far superior to larger, slower, and irregular payments that have larger profit margins.

In thinking about increasing your cash flow, think of it like a hose. Let’s say you want to water your garden but when you turn on the hose, only a trickle comes out. You want to not only increase the amount of water coming out of the hose but also the pressure with which it comes out.

With your cash flow, it’s the same thing: You want to increase the amount of cash coming into your business but also the amount of times it comes into your business (the “pressure”). You can do this by increasing the number of clients you have, increasing your prices, getting paid in installments, creating passive income opportunities like ebooks, creating membership sites that accept regular payments, keeping on top of your receivables, and accepting advanced payment for discounted service.

Your business will be healthier when you turn up the faucet and increase the amount of cash and pressure which with it shoots out of your sales pipeline and into your business.

(And as an added tip, do what my freelancing friend did: While you may have to accept those smaller, faster-paying jobs early on, slowly try to increase the number of higher-paying, slower projects so that you’ll eventually replace your cash flow entirely with those higher payments).

Jessica Routier, IAC-EZ