Cash Flow – the Nemesis for Entrepreneurs

As a Financial Advisor who specializes in Cash Flow, many of my clients are entrepreneurs who wear multiple hats: CEO, Book Keeper, Sales manager, and HR manager. When I ask what their Cash Flow looks like many say that they often feel like they are “robbing Peter to pay Paul” and want it to stop.

One of the first questions I ask: Do you know what the break-even point is for your business? It is important to know this for several reasons. The most important is so that you know how much revenue you need to generate for any given month, without throwing in any extraordinary expenses.  What is that number for your business (not industry standards)?  For example, if you are providing fee-for-service, you should know how many clients you need in a month to break-even.  It is surprising how many entrepreneurs I meet who do not calculate this number until the end of the year and, in many cases, it is too late to properly plan.

When we choose to become entrepreneurs we give up the concept of job security and steady paycheques. However, for many of my clients what we create is a set amount to pay yourself every month and no it is not based on your 3 best months of revenue. It is based on an average month for your business. This allows for you to plan for the months that are below average by allowing an accumulation of cash to build when your revenue is above average. Many financial plans go off the rails because of the lack of cash due to the slow time of their business. When there is a problem with cash then what was allocated for the financial goals are not met. If you can get the Cash Flow under control it will help stop the “roller coaster ride” effect, as some entrepreneurs describe their Cash Flow. It is not always easy but the proper financial planning it can work.


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