Do you know exactly what each dollar in your business is spent on?
Do you know each month what money you have coming in and when?
And what money has to be paid out?
Do you have a system setup that brings in a predicable cash flow to
cover your operating costs?
If you answered “NO” to any of these questions, you need to go
below now and start managing your cash flow. You will get a clear picture
of what is happening in your business and allow you to better manage your
funds and grow your business.
Most people run their business in terms of profit and loss. The problem
with that is it is possible to make a profit and run out of cash. This
occurs when the profit margins are not significantly higher than expenses;
or when revenues are not consistent (yet your expenses are).
Your business may incur expenses every month, but revenues may dip for
a few months then soar for a month or two. A Profit & Loss (P&L) statement
for that time period may show a profit – in other words the revenue finally
exceeded the expenses, but Without sufficient cash reserves the business
may not survive long enough to reach the high revenue months!
You also have fixed costs and variable costs. Fixed costs are those that occur
every month regardless of your volume. Variable costs are those that vary
according to your volume.
As you look at your different sources of income structure your portfolio
so that your regular recurring revenue components cover your
monthly fixed expenses.
In our business, we periodically review a list of our monthly expenses
to see what can be eliminated. Just last month, we realized we were spending
$1,147 on things we no longer needed or used.
It’s a small percentage of our total expenses, but that cash can now be spent on
marketing to generate more business without adding anything to our bottom line!
We kept our expenses flat, but increased our revenue!
However, as we told a couple of our private mentoring clients just this week,
the one expense that should never be reduced or eliminated is marketing.
Without marketing you have no business. You can manage your marketing costs
for effectiveness, but never stop marketing!
By increasing your revenue sources and managing your expenses you will not
only have a more profitable business, but you will improve your cash flow.
In our business we practice multiple streams of profits. We don’t rely
on any source of profits, but rather set up multiple methods. And we keep all of it
within the same business model so we achieve maximum leverage between the
various streams. YOu could separate business models running, but then you
achieve no synergy between the businesses.
Most importantly, we have a system that generates enough revenue every
month to cover our base fixed operating costs. Just one aspect of our revenue
funnel takes care of rent, utilities, marketing, payroll, etc. Any additional
revenue throughout the month is gravy (less any variable costs)!
Managing cash flow is simple and easy and can make a BIG difference to your
business! Once you master this concept, watch your business grow!
Expect abundance,
Angelina Brown
Chief Financial Officer
Investor Riches
