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Small business cash flow management


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Over my 50+ year visit to this planet I have managed to drive 5 small businesses I have started into the ground due to a complete lack of cash flow management. This time I'm trying to take a different approach by actually trying to learn about cash flow management in a small business start up from the beginning and set it up right from the start and stay on top of it. I'm watching the cashflowkungfu videos on youtube to get a general overview of the process. What's your method of managing your small business cash flow ? Do you have any ideas or resources that may help me to better manage my cash flow on my latest business adventure ?


As always, Thank you all for your insight !!!

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Dave McReynolds

I don't know what kind of small business you're contemplating, but most small business are fairly volitile in the amount of cash they generate. Some months can be high and other months can be low. It is important to have adequate cash reserves, maybe 3-4 months of operating expenses, in the bank, when you start the business, and build the reserve back up if you have to dip into it for any reason. For the same reason, your personal finances should be in order before you start a new business, so that if the business goes through a lean period, you're able to cut back on personal expenditures without missing a mortgage or car payment.


The actual process of cash flow budgeting is fairly mechanical, and can be done using any of a number of software programs, or just making your own on an Excel spreadsheet. The secret is in having the cash to budget.

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Look into SCORE, and find out if they have anything near you. It's a program that is funded by the Small Business Administration, with mentors/counselors to help new (and existing) small business owners stay on track, and stay afloat. It's free, and I've heard a lot of good thing about them.


If there isn't one nearby, they even have ways to meet with a mentor online!



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It's a very small part time business. I have the personal finances sent up to cover my shop rent. The business will be extra income. I have a plan and a small niche market for the product and a good marketing company, a solid business friend advisor so I can call in the cavalry if it goes nuts. Growing too fast killed one of my businesses. I've secured a low interest loan for 10k for some start up capital. I'm finalizing my logo design. I have a good product I have been testing for some time, still testing. I'm planning on about 3k a month in sales at this point so it is really small. Product release is scheduled for sometime in May at this point so I can't release many details. Trying to keep my cost at the 25% of retail mark is the part I'm working on now.

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3K a month isn't bad for a small business starting up.


I wish you the very best and look forwarding to seeing what you end up marketing.


Please keep us posted.

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I don't know what your plan/product is, but a lot of great startups get funded through Kickstarter LINKY (discussed previously, HERE) or Indiegogo LINKY.

(Indiegogo even has an option where you can keep the funds (and fulfill the orders) even if you don't meet your goal - although they take a larger percentage in such a case.)

OTOH - Kickstarter has a lot more public awareness, and traffic.


Either way, you get some startup funding before you have to ship product, there isn't any onerous interest to pay back, and you get a motivated and helpful customer base right at the start of your business.


Kickstarter fees are 5%, plus credit card processing fees (~3%) - but you only get the funds if you reach your goal.

Source: http://www.kickstarter.com/start


Indiegogo charges 4% if you reach your goal, plus CC fees (3%) or (optionally) 9% plus CC fees, if you don't meet the goal, but still want the funds.

Source: http://www.indiegogo.com/how-pricing-works-on-indiegogo


(EDIT - Added info)

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Figure out you actual/real world costs to produce your widget.


Too many folks don't have a clue and wonder why they lose money.


Account for all expenses: overhead/rent, insurance, TAXES (city/state/federal) come in all shapes and sizes, value of your time, advertising, costs of materials and accounting for those costs to rise, employees?, product design protection, training, TAXES,

travel, food/hotel/rentalcar(trucks), transportation, uniforms?

these are just a few that come to mind.


Good luck, look forward to the reveal but have an idea based on earlier threads.

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Start with a realistic budget. Know to the penny what your fixed costs are, guesstimate realistically what your variable costs are, then add 15% to everything for the errors in projections and unanticiapated expenses. Then take your revenue estimate, be very real as it will be on a curve. The first month will probably and better be weaker than the 3rd month etc. reduce this by 30%. After you have done both estimates and the adjustments, see if you could still afford to be in business. Then have, and we recommend this for everyone in today's world, have 6 months worth of expenses set up in a reserve fund.

After all that manage you business for pennies, not dollars, always be trying to reduce overhead, always be trying to create a want for your product or service and create an expereince that is memorable for your customers to keep them wanting to talk about you favorabily and recommend you.

Other than that it is easy! :dopeslap:

Good Luck

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Yep, I have to nail down my total cost on my widgets. Estimated direct cost of labor and materials only is about 25% of retail. I was told that is a good target. Bookeeping and accounting is one of my weak points for some reason, it's not rocket science just a task I tend to avoid or sub out. I'm revising my business plan a bit to conserve cash flow. As in what do I absolutely have to have to sell a couple of these vs what I want. Then do a teired approach by doing the minimum sell a couple then do something else on my list , sell a couple more then do something else instead of blowing through all my cash to get everything set up just right before I start selling my widgets.


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Back when I was a working stiff, I probably ran several thousand cash flow analysis, primarily for rental apartment projects but the basics are the same for any type of business.


Get a copy of EXCELL, or any spreadsheet program,Construct a profit/loss format and start entering numbers. At the bottoms put in some cash carry forward cells. If you get proficient, you can put in all kinds of automatic calculations and play "What-if" till the cows come home.


If you don't do spreadsheets, there are shared formats on the Internet.


Quicken and other financial software also have some very good planning formats in them.

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I do kinda remember how to use excell, I think that is a good plan. I want to start off on the right foot while it is still small before it gets unruly. I had one company with 25 employees and 26 jobs going at once ranging from 10k to 389k the accounting got completely out of control due to very rapid growth that we had not planned on. The success killed the company, very gun shy this time around.

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Peter Parts

+1 for conscientiously minding your cashflow spreadsheet. Been evolving my Excel cashflow for more than 20 yrs, starting prolly in VisiCalc. Can't manage my financial life without it.


There are simpler spreadsheets than Excel - like "Numbers" on the Mac. Nothing fancy in a cashflow.


Growth can be a killer. One way to incorporate growth into a cashflow is by including a "cost of sales" cost which adds a proportional amount according to your sales each month.


Funny thing, I created a retirement predictive cashflow 13 yrs ago to see when you "die broke" - what year your nest egg goes to zero (hopefully, after 95). Just sold the concept to the Ontario Securities Commission for their investor education website. They've set up a DIY version and it should work OK for US investments:


Retirement cashflow calculator


They may also plan to issue a downloadable template too. That'll be better. (I use a geometric mean hidden in my cashflow to ensure my past investment performance is averaged correctly.)



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Interesting calculator. You have your retirement plans plus a social security, in my "cash Flow plans" we utilize a lot more detail and future projections. IE: new cars every "X" years, Travel every "X" years, appliances, roofs, etc. additionally we inject inflation and project health care costs above inflation. Our models utilize both Monte Carlo and lineal back testing in 5 year rolling periods.

You have done a nice job on the work you did to give everyone a feel for retirement. You can look at my web site for some additional concepts.

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