Master your business cash flow - Determine how you live NOW and the future you want. - Al Zdenek

Nobody opens a business with thoughts of failure. We do it for the challenge, independence, earning potential, or love of sharing our products, services, or ideas with others. We want to impact the world!

And yet, only 66 percent of businesses with employees will survive their second year. That’s far too many people enduring the pain of a major financial setback, not to mention a broken dream. And it doesn’t have to be that way.

So why do so many businesses fail? After 30 years in finance, and a nearly failed business of my own, I believe the primary reason businesses go broke is that they fail to master their cash flow.

In the 80s, when my business was close to going under, we were grossing $2 million! Yet when things got rocky, I had to lay off half of my workforce. The simple truth is, we didn’t have a real budget in place. We didn’t track or plan our cash flow needs. Any “planning” I did was by keeping an eye on my checkbook, which is never sufficient (for business or personal  accounting). I changed. I had to for my family and me  to live the way we wanted now and in the future.

It wasn’t until my own business almost failed that I began to learn how to run it, become a great CEO.  Learn from my mistakes.

Since then, my life’s mission has been helping other business owners avoid these mistakes, master their cash flow, and secure the lifestyle they want to live now and in the future. This makes it all worthwhile.

Here are just a few ways to run a tighter cash-flow ship so you can weather the storms that will inevitably come your way.

Have a plan!

It sounds ridiculously simple, yet it’s still missing from the lives of many business owners I counsel. It’s also why I ran into trouble with my own business decades ago.

By plan I mean getting extremely clear about what you want out of your business and, ultimately, your life, in real dollars. What do you need per month, per year to pay bills, taxes and put aside for retirement. Typically, entrepreneurs have some understanding of the cash flow needed to cover bills, but little idea of what they need in terms of personal wealth — to live the lifestyle they desire, pay taxes an grow their wealth.

It wasn’t until my own business was on the brink that I began to look at what I needed and what my business had to produce for me.

  • First, sit down and calculate how much you need to earn to live the life you want now, pay your income taxes and the amount you must put aside monthly or annually to have the option to stop working someday. This is your personal financial plan.
  • Next, plan your company around it providing this cash flow to your, or more (if you want to work less in life and achieve your goals sooner. This is your company financial plan.
  • Next, and this is where most businesses fail, monitor it, track it. You know how much your company has to earn for you. This means reports like having a budget and comparing it monthly to results. Make sure it does that amount for you.  It may mean you have to “pivot” your business, maybe expand it, or find others ways for it to produce what you need.
  • Finally, make sure you’re always placing your cash (after your lifestyle and taxes) in a place (pension, investments) that will grow your wealth for financial independence.

Unlike a lot of variables in life, your budget is an exact science and will not lie. You can calculate what comes in and out down the penny, and you should at least monthly. So when you do encounter bumps in the road you’ll be prepared to take action, maybe pivot and continue producing the cash flow you need to forge ahead.

I’ve had countless clients, and even good friends, who’ve started businesses without a plan. They rarely consider their own financial needs and wants. They go full steam ahead measuring only revenue and little else. Many run into cash flow problems down the road; some have lost millions despite their hard work. Having a solid plan, a roadmap to direct your decisions, will help you avoid these pitfalls. Hey, I did it. You can too.

Face your obstacles — fearlessly

Into every business venture challenges, I call them obstacles, shall fall. It’s just part of life. However, practical obstacles can be dealt with — if you’re aware of what they are and how to resolve them so they’re not holding you back.

In my experience, I see four major obstacles that keep business owners from making the decisions that lead to financial independence:

  • No specific bottom line target: Only when you get crystal clear on the exact cash flow needed to achieve the lifestyle you want, pay your taxes and the amount to save for retirement, will you reach your goal. If you need $400,000 per year of after-tax cash flow, then you know exactly how much cash flow profit your business must produce. Have a personal financial plan first.
  • No specific business plan: These are not numbers floating around in your head. You have the amount of profit you need from your personal plan. Now, write down how the business will achieve it, written in stone, or at least put down on paper. This essential road map should guide your decisions for the next two to five years and beyond. Without it, you’re flying blind and most likely not achieve your personal plan.
  • No execution: Execution means knowing exactly how you will produce your product or service, how you’ll get it to your customers and collect money. It’s up to you to set the processes and culture in your company, so employees can get on board.
  • No benchmarks: All well-run businesses measure progress as they go, not just at year’s end. Your key performance indicators (KPIs) are your company’s vital signs and they should be checked regularly. Did you meet this month’s new customer sales goals? Did you fill key staffing fulfill their monthly goals? This will show you where you are on the road map and where you may need to pivot to make year-end targets way ahead of the end of the year.

There are emotional obstacles that can cloud our vision, too. Just like in personal relationships, it takes real self awareness to see when we’re being ruled by fear, trust issues, frugality, and other shortcomings.

Don’t be afraid to ask for feedback, from your colleagues, employees, and friends. We all have blind spots that others can help us see. Being vulnerable, humble and open to change are traits that all great leaders share.

Never go it alone

Sure, your brilliant business idea may have started in a basement, but as soon as it sees the light of day you’ll want to start gathering a team of great people around you: You know you need a great Team inside the company but you also need a super team of outside the company: Your Team of Advisors.

As you grow, and operations become more complex, having outside experts to support you becomes more important than ever. From your CPA to your lawyer, from your banker to your insurance agent, and many others, your business deserves proactive professionals who are always looking out for your best interests. And make you money. Accept nothing less.

Ask yourself, when was the last time my insurance agent called me to review my policies? Are they actively trying to save me money or at least offer the very best protection? If you rarely hear from them, shop around. The same goes for tax advisors who should be in touch year-round, not just in April. Has your banker called you recently with a way to make your lending cheaper, or give you more capital to expand?  Business law changes all of the time. I am sure your attorney reaches out during the year to update you. If not, why not?

Businesses are dynamic environments that are always in flux. You need a team of experts who are exceptional at what they do. In the long run, you’ll end up saving money, avoiding expensive missteps, and just feeling good that competent professionals have your back.

The same is true when it comes to hiring your company Team:  employees. They are the face, voice, and movers inside your business. Take your time when making a selection and do everything you can to hold onto top performers. As an engaged CEO who’s good at sharing your mission, you’ll attract people who can help drive success.

Remember, no top athlete or award-winning artist gets where they’re going alone. Your business deserves the support and expertise necessary to propel it forward. Plus, with the right team on your side, you’ll never stop learning and improving.

Mastering your cash flow in business is all about awareness and specificity: awareness of the lifestyle you wish to live along with the specific numbers, plans, and people that can help you get there. It’s my life’s calling to help other owners “wake up” to what really matters when it comes to achieving their dreams.

If you’d like to learn more about raising capital, saving on taxes, creating contingency plans, and more, check out my book Master Your Business Cash Flow.