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Cashflows: Why Small Businesses Fail and How to Not Become a Statistic
Manage episode 502363328 series 3527542
In this episode, host Molly Beyer defines what a small business is and just how many small businesses exist, in order to illustrate how many fail and why. When statistics say that one in three small businesses won’t make it past the two-year mark, what is the common denominator there? Molly explains that 82% of failures come down to one root problem: cash flow. So, what is cash flow, and how can it be managed successfully? Molly answers these questions and more.
Cash flow, simply put, is the movement of money in and out of a business over a period of time. It’s not the same as profit. Profit is what remains after a business’s expenses are factored in. Cash flow is what is available in the bank and when. Molly explains three types of cash flow that a business will have and how it can be either positive or negative. Cash flow matters because when what’s expected to come in doesn’t happen and what’s going out stays the same, a business will run out of money and fail.
How do business owners avoid having their businesses become a failure statistic? Molly offers up several ways to manage cash flow that will assist a business in staying afloat: building a budget, protecting credit, paying bills on time, and maintaining complete and accurate financial records, tended to regularly by a bookkeeper or tax professional are some of those practices. Cash flow is an indicator of business health, and Molly’s insight will prevent a business from falling ill and into negative cash flow.
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16 episodes
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