Cash flow is one of the most misunderstood aspects of business, yet it’s one of the things you need to get right if you want to run a successful business.
If a business is like the human body, cash flow is its blood. What’s cash flow? It’s the amount of cash coming in and out of your business. Whenever your business transacts, it brings in money or incurs expenses that remove money from it.
If your business brings in more cash than it takes out, then you are cash flow positive. If your business brings in less money than it takes out, then you are cash flow negative.
Ideally, you want to be cash flow positive. Seems complicated? It’s really not.
Let’s get back to the human body analogy. Making great deals that bring cash into your business is like eating healthy food that increases your blood supply. Having enough blood in your body is good and so is having enough cash in your business.
However, when you start bleeding and lose blood, it will be harder for you to function well. The same applies to a business without cash.
If your body continues to lose blood, it doesn’t matter how fit or muscular you are, you’ll die. Likewise, it doesn’t matter if your business model is interesting and unique, without cash flow it will die.