Friday, June 20, 2008

The Most Important Thing

What would you say is the most important thing in any business? Scott Allen offers this insightful article:

The Single Most Important Thing in Any Business

From Scott Allen’s Entrepreneurs blog

Friday was a tough day for me. A friend of mine - an entrepreneur - hit rock bottom, and did so very publicly. After three years of trying to build his dream business, he still isn't even managing a survival-level livelihood. The thing is, he's had income opportunities, but turned them down, ostensibly because they didn't fit with his vision for his business.

I believe that entrepreneurs should pursue their passion and be true to their vision of their business. But the idea of "do what you love and the money will follow" can be extremely dangerous. There's more to it than that. You also have to offer a product or service that people are willing to buy at a price that can provide you an acceptable profit margin. And you have to sufficiently promote it to attract enough paying customers to make you a living.

But most importantly, you have to survive. You have to be able to cover not only basic living expenses, but basic business expenses, e.g., office supplies, maintaining your computer and other office equipment, phone and internet access, etc.

The single most important thing in any business is cash flow.

As Philip Cambell says in his article, "The 10 Rules of Cash Flow 101":

Never Run Out of Cash. Running out of cash is the definition of failure in business. Make the commitment to do what it takes so it doesn't happen to you. [...] It's important to recognize that the basics of cash flow 101 are what keeps your business alive. Manage it with the care and attention it deserves. It's very unforgiving if you don't. Remember, cash is king, because no cash means no business.

Without cash flow, nothing else matters. Without cash flow, it all ends, and you go back to a j-o-b. Without cash flow, your stress level goes through the roof. And lack of cash flow will destroy your relationships -- with employees and suppliers when you can't pay them, and with family as it takes its toll on your personal finances as well.

When your business has cash flow, you can talk about things like being more selective about the customers and projects you take, or even dropping non-performing clients. But when you're in survival mode, you do whatever it takes, even if that means taking work you don't really want or even taking a part-time job. Don't let pride, stubbornness or misplaced faith blind you to this reality.

Have a great weekend.

Moving forward,

Jeff Roach

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