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Ep.224: Managing Cashflow as a Startup Entrepreneur
Sean: Next question from LJ, how can a start up entrepreneur manage his or her cash flow?
Cash flow is all about awareness. If you're aware that you're making more than you're spending, you have a positive cash flow. If you're aware that you're spending more than what you're making, you have a negative cash flow and we call that bleeding out. A business is likened to the human body. The managers or leaders, the C level executives, CEO, COO CFO, we call them the head. They are the heads of the company. The arms and legs are usually, these are the grassroots, team players. The heart would be the sales people. The mind would be the R&D or research and development. They're the brains.
Why do we call the salespeople the heart? Because it's the one that pumps blood. Blood is cash flow. Whenever sales people make a sale, they inject positive cash flow in the business. And that's why we say if the cash flow is negative, meaning expenses are going to be greater than revenue, we say that the business is bleeding out. That's the term we use. And then we write it in the ledger with a red ballpen to, I don't know, make it look like blood or whatever. Right? So that's the analogy that we have for a business. You have to stop the bleeding because if it goes on, then what happens? It would die.
The most important thing is having awareness. Are you positive or negative this month? If you're negative, how can you turn that to become positive? And I think the most important thing about managing a business is making sure you have positive cash flow month on month.
JM: It's important that you really see it. So I think with someone who's just starting it, have an Excel sheet about everything. Right? The coming in and out of expenses. And you were saying awareness. So you won't be able to be aware of things unless you write them down or you record them.
Sean: That is a very good answer. As simple as an Excel sheet, track it. Up to today, I actually use an Excel sheet. So that is one of the best answers about managing cash flow. Just use an Excel sheet, that works.
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By Sean Si
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Sean: Next question from LJ, how can a start up entrepreneur manage his or her cash flow?
Cash flow is all about awareness. If you're aware that you're making more than you're spending, you have a positive cash flow. If you're aware that you're spending more than what you're making, you have a negative cash flow and we call that bleeding out. A business is likened to the human body. The managers or leaders, the C level executives, CEO, COO CFO, we call them the head. They are the heads of the company. The arms and legs are usually, these are the grassroots, team players. The heart would be the sales people. The mind would be the R&D or research and development. They're the brains.
Why do we call the salespeople the heart? Because it's the one that pumps blood. Blood is cash flow. Whenever sales people make a sale, they inject positive cash flow in the business. And that's why we say if the cash flow is negative, meaning expenses are going to be greater than revenue, we say that the business is bleeding out. That's the term we use. And then we write it in the ledger with a red ballpen to, I don't know, make it look like blood or whatever. Right? So that's the analogy that we have for a business. You have to stop the bleeding because if it goes on, then what happens? It would die.
The most important thing is having awareness. Are you positive or negative this month? If you're negative, how can you turn that to become positive? And I think the most important thing about managing a business is making sure you have positive cash flow month on month.
JM: It's important that you really see it. So I think with someone who's just starting it, have an Excel sheet about everything. Right? The coming in and out of expenses. And you were saying awareness. So you won't be able to be aware of things unless you write them down or you record them.
Sean: That is a very good answer. As simple as an Excel sheet, track it. Up to today, I actually use an Excel sheet. So that is one of the best answers about managing cash flow. Just use an Excel sheet, that works.
Youtube: https://www.youtube.com/leadershipstack
Join our community and ask questions here: from.sean.si/discord
Facebook: https://www.facebook.com/leadershipstack