I have the most crucial question for you that will directly affect your business success! What is the most critical number in your business?
Most Business Owners either don't know it, or they look for profits.
The problem is profits are only fiction, and most business owners don't realize that.
As one of my mentors Keith Cunningham (Original Rich Dad, from the Book Rich Dad Poor Dad By Robert Kiyosaki), said, "Business Owners look at the profits, and if it's positive, they will have a drink. If it's negative, they will have two drinks."
And that is why most businesses fail. Businesses don't go bust from the lack of profits; they go bust from lack of cash!
That is why I believe every business should be run based on cash-flow metrics!
You have cash-flow levers in your P&L and balance sheet.
To have a great business with excellent cash flow, you need to maximize profitability. So the very important number is your profit margin number (Profits/Revenues = Profit Margin in %). Unfortunately, most businesses don't have enough profit margin to survive and thrive long term.
So please don't take me wrong, profits are essential. That's why we are so obsessed with measuring every aspect that drives profitability. We measure every expense, looking for trends & measuring how we are doing every month compared to others. I am totally obsessed with this, so it is crucial!
But you can't stop there! There are places where your cash is hidden in your balance sheet, and when you measure it monthly or even weekly (we often do it daily), you will have complete control over the cash flow and make the right decisions.
To manage cash-flow in your business look at things like:
Accounts Receivables
Accounts Payable
Inventory
Fixed Assets
Most businesses are leaving hundreds of thousands and millions on the table just because they don't know about it. Or they know about it, but they don't pay attention because owners are busy handling day-to-day stuff.
Yes! This is my obsession. That is why I am talking about financial intelligence, reporting, managing cash-flow in basically every content, every course I have, and it's one of the first steps when I consult, investing in, or buying any business. And if the company is struggling and needs to be turned around? This is the place where you can turn a failing business into a valuable and profitable asset.
