When I was in college (the first time!) I had this line in the play A Thurber Carnival: “How can I be overdrawn when I have all these checks left?”
The corollary in business is: How can my checking account be overdrawn when I’m making a profit?
The answer is: profitability and positive cash flow are NOT the same thing.
It’s possible to have positive cash flow, but not be profitable.
And it’s possible to be profitable, but have negative cash flow.
Profitability means to charge more for your product or service than it costs you to provide.
Positive cash flow means that you have cash in your checking account to pay all of your expenses.
And both are essential to your business being financially viable.
Financial viability is a key concept in business and it’s an essential metric to asses the health and resilience of your company. If you don’t look at any other numbers, these two are the ones you need to be looking at on a regular and frequent basis.
No matter how big or how small your business is, no matter what legal form it takes, the same principle applies: A business has to be able to achieve its operating objectives in order to fulfill its mission over the long term.
I got my MBA at one of the first Green MBA schools in the country and we all had ideas of birthing companies driven by social and environmental justice. Our goal was to help heal the planet through business.
The notion of financial viability was hammered home again and again: it doesn’t matter how environmentally sustainable your mission, if you’re not making money, you’re not in business. Even non-profits have to be viable.
My job is to get you to there.
I help business owners like you to know what relevant financial information you should be tracking, then how to interpret and use that data so that you can run a profitable business and have positive cash flow.
Working together, you get clear about every facet of your business finances so that nothing surprises you.
Financial viability = peace of mind.
What’s your current challenge around your business finances? Post your comment or question below..