IS MY BUSINESS READY FOR FUNDING?
Before you answer any other question about your business, its finances, or your plans for world domination, you first have to ask yourself if your business—as it currently sits—is ready for funding. A business ready for funding will put new cash to work quickly, efficiently, and profitably. A business not ready for funding will find itself on the wrong end of a denial, or worse, on the wrong end of a catastrophic and quick-ending future.
We’ve all heard the idiom Cash is King. That’s an incomplete statement. In truth, cashFLOW is king. The flow of cash—actual money—going in and out of your business is what your lenders and investors are going to focus on when they look at your presentation and listen to your pitch. You can have the best idea in the world, the snazziest marketing, the biggest sales projections, but if you don’t have a grip on how much cash is coming in and how much cash is going out every month, quarter, and year, the conversation will end before you get to ask them for an investment or loan.
Why is this? Because the minute you take money from another person or organization, you are now responsible for giving all that money back to them PLUS some. Well, probably plus a lot. The best predictor of your success is the cash you generate through business operations.
So, before you start asking for money, ask yourself Can I pay this back?
The only way to know the answer to that question is to do a cash flow analysis. You’ll need to project every penny of revenue and cash inflow and every cent of expense and cash outflow. In addition to this analysis, you’ll need to know what it will take for your business to be profitable. (This isn’t the easiest thing in the world to do, so I’ve created a course that can walk you through your profitability and what level of sales you’ll need to breakeven.)
Please note, there is a difference between positive cash flow and profitability.
More on that next time.
Tidrow Capital Group, LLC is a privately held business advisory firm that specializes in helping businesses strategize their funding needs and gain access to the capital they can use to grow with confidence.
