These scenarios require slight finessing and tweaking of your strategies to get the balance between cash in and cash out working to your advantage. But what if, after plugging in all the cash in/cash out numbers, you notice a bigger problem – the business does not turn profitable any time soon. Obviously, unless you’ve got a lot of startup capital to carry you through a long period of money-losing months, you’re in a predicament. Most likely, you’re going to have to take a totally different approach to how you spend or how you generate income.
One last point on being conservative: in spite of your best efforts to forecast cash flow, unexpected events always seem to creep up on you. That could mean a slowdown in revenues, for example, in which case it’s very important to have a contingency plan in place. This contingency plan would outline the key steps you need to take to cut costs quickly in order to stay afloat. Yes, those cuts will likely be painful, but the ability to act quickly on tough calls as a business owner is crucial.
Don’t go getting all scared and depressed about your business as you conduct this downside planning. The fact is, the more you’re ready for any negative turns or circumstances, the more likely you are to avoid them. With the right plans in place, you’ll always be best prepared to respond quickly and effectively and put your business on the best path forward.
Here in Step 1, we’ve tried to simplify the process and make clear the value of creating a cash flow forecast. To truly cash in, you have to understand and take control of cash in and cash out. By becoming intimately familiar with your cash flow forecast, you’ll make consistently smarter decisions about your business, giving you the best chances for success.