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Episode 2: The Two Fundamentals of Business
Welcome to Episode 2 of the Treehouse Metrics Podcast.
You would have heard the saying “Work ON your business not IN your business”
This podcast is going to give you the skills, knowledge tools and business know how to work ON your Amazon business.
We are going to show you how to be the CEO of your business – the person who leads, develops the vision and navigates through the troubles that every business will encounter.
As the CEO, you need to look above the Jungle and map out your path to success, avoiding the quicksands that your competitors are going to walk straight into.
Today, I am going to introduce you to the two most important fundamentals of business – these apply to every business not just Amazon businesses. If we think about your business as a pyramid, then these 2 fundamentals are at the very tip of that pyramid.
Every business theory, idea, strategy, tactic, book or course – everything comes back to one basic fundamental- the one ring that binds and controls all – that basic fundamental is cashflow.
Everything that you learn about business, every activity that you undertake will lead back to increasing the cashflow from your business.
Some of you might say isnt profit the object – yes – profit is important especially how those profits convert into cash and in particular free cash – free cash being cash that does not have to be reivensted into the business.
Profit is just a measure – a concept – a standardised method of measuring how the activities of the business contribute to an increase the value of the assets of the business.
Cash is real – you can buy food for your family with cash, buy a new house, invest in another business with cash – you cannot buy any of those things with profits.
Profit is a measurement tool – cash is real.
So why is Cashflow so important.
Cashflow determines the winner – the business with the best cashflow wins. If what you are doing does not convert to cash at some stage then what is the point of doing it.
Businesses with a strong cashflow
– they can find and can advantage of more opportunities
– they can engage in activities that have less risk
– they have no restraints on growth.
– they can pay more to owners via dividends or salary
– they are able to Retain better employees
– the business is worth more
– they can resist change or react to change better or even enforce change
– they are more innovative
– they are Proactive – looking towards future – mainly because not trying to keep business open today.
– they have access to debt and capital markets – they can get money from banks and investors.
– they are less risky.
Businesses with poor cashflow:
– they are reactive – too busy just trying to operate from day to day, jumping from one crisis to next because the poor cashflow means that everything is a crisis that can wipe out their business.
– they cannot take advantage of new opportunities when they arise.
– they tend to take on risky projects – bet big on ventures to get them out of mess. or just left with the scraps.
– they are unable to grow because of cashflow constraints – cannot afford to launch new products or enter new marketplaces
– they will struggle to get money from banks and if they do get a loan then have to pay higher interest.
– they cannot find investors
– they cannot afford to pay owners because cash always has to be reinvested.
– the business is worth less or nothing at all.
– they are vulnerable to changes in the market.
– they are very risky.
In later episo
View all episodes
By Arnold ShieldsWelcome to Episode 2 of the Treehouse Metrics Podcast.
You would have heard the saying “Work ON your business not IN your business”
This podcast is going to give you the skills, knowledge tools and business know how to work ON your Amazon business.
We are going to show you how to be the CEO of your business – the person who leads, develops the vision and navigates through the troubles that every business will encounter.
As the CEO, you need to look above the Jungle and map out your path to success, avoiding the quicksands that your competitors are going to walk straight into.
Today, I am going to introduce you to the two most important fundamentals of business – these apply to every business not just Amazon businesses. If we think about your business as a pyramid, then these 2 fundamentals are at the very tip of that pyramid.
Every business theory, idea, strategy, tactic, book or course – everything comes back to one basic fundamental- the one ring that binds and controls all – that basic fundamental is cashflow.
Everything that you learn about business, every activity that you undertake will lead back to increasing the cashflow from your business.
Some of you might say isnt profit the object – yes – profit is important especially how those profits convert into cash and in particular free cash – free cash being cash that does not have to be reivensted into the business.
Profit is just a measure – a concept – a standardised method of measuring how the activities of the business contribute to an increase the value of the assets of the business.
Cash is real – you can buy food for your family with cash, buy a new house, invest in another business with cash – you cannot buy any of those things with profits.
Profit is a measurement tool – cash is real.
So why is Cashflow so important.
Cashflow determines the winner – the business with the best cashflow wins. If what you are doing does not convert to cash at some stage then what is the point of doing it.
Businesses with a strong cashflow
– they can find and can advantage of more opportunities
– they can engage in activities that have less risk
– they have no restraints on growth.
– they can pay more to owners via dividends or salary
– they are able to Retain better employees
– the business is worth more
– they can resist change or react to change better or even enforce change
– they are more innovative
– they are Proactive – looking towards future – mainly because not trying to keep business open today.
– they have access to debt and capital markets – they can get money from banks and investors.
– they are less risky.
Businesses with poor cashflow:
– they are reactive – too busy just trying to operate from day to day, jumping from one crisis to next because the poor cashflow means that everything is a crisis that can wipe out their business.
– they cannot take advantage of new opportunities when they arise.
– they tend to take on risky projects – bet big on ventures to get them out of mess. or just left with the scraps.
– they are unable to grow because of cashflow constraints – cannot afford to launch new products or enter new marketplaces
– they will struggle to get money from banks and if they do get a loan then have to pay higher interest.
– they cannot find investors
– they cannot afford to pay owners because cash always has to be reinvested.
– the business is worth less or nothing at all.
– they are vulnerable to changes in the market.
– they are very risky.
In later episo