Cash Flow & Profitability
This quote by
Guy Kawasaki will put it all into perspective for a bootstrapped entrepreneur who's learning on the fly in the school of hard knocks:
Focus on cash flow. I understand the difference between cash flow and profitability, and I'm not recommending that you strive for a lack of profitability. But cash is what keeps the doors open and pays the bills. Paper profits on an accrual accounting basis is of no more than secondary or tertiary importance for a startup. As my mother used to say, "Sales fixes everything."
Indeed, sales does fix everything. But high revenues also cover-up a great deal of inefficiencies. But who really cares about inefficiencies when sales are up? That is until they are down.
In times of revenue-feast, if you don't pay attention to where your money is going, and you don't hunker down and follow a meticulous budget then when times of revenue-famine occur you won't have any idea how to pull your company out of a death spiral which will bring an organization to insolvency very quickly.
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Paul Hill, Ph.D.
I design, plan, and evaluate economic development programs for Utah State University.
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