Hi! It's a bit like what they tell you on the airplane: "make sure you put the oxygen mask on yourself, before helping others". You obviously need to pay for services that you have ordered and have had delivered. But I think your supplier would also agree that your chances of paying your debt increases if you can feed yourself first. Otherwise you will be no good to anyone if you don't look after your personal cash-flow. So here's the thing: never get yourself into a situation where you rack up debt that you can't pay for. Plan for the worst case, and create enough buffer to deal with that case. Make sure you pay your personal bills and look after your family as #1. Otherwise you will never be able to run a business responsibly. Hope that helps anyone who is making the decision on who needs the oxygen mask first ;) Happy cash flow planning! Thorgeir
Something I have been thinking about from the podcast.
You say "pay yourself first?" (if I remember correctly)
My question, how does one pay ones self first when you know that you are withholding money from a service provider who has already provided a satisfactory service and you could potentially be preventing that person from paying themselves?
Thanx Thorgeir. I actually wrote quite a long comment here, but when trying to save it said Comment Too long - even though it said I had 15 symbols left!
Meshal! Sorry about that - we will look into it. Thanks a lot for your comments and contributions! thorgeir :)
How does one convince an investor to invest more money into ones business than what is actually needed?
It is already difficult enough to convince and investor to invest in the first place as they are looking to limit their exposure in the investment....
Mesha,
Most sophisticated investors in my experience do not want their investments to run short on cash all of the time. They rather that the entrepreneur and CEO focuses on growing the business than chasing money most of the time. So it's really in the investor's interest to make sure that the business is well funded. In order to reduce exposure its quite common to bring a co-investor in on the deal too.
The balance for the entrepreneur is of course to hold on to as much equity as possible, whilst having the cash to execute a growth plan. More on this to come in future podcasts :) thorgeir
1. Know the status of your accounts (and bank account) at all times!
2. When the screws start tightening - try to alleviate pressure a.s.a.p. Don't wait till it is too late.
3. I wound't recommend bank credit - it is all to easy to feel safe and comfortable after getting the cash injection from a bank. The you miss payments and banks are ruthless to recover their money!
4. Don't offer credit. If you must - Force the client to establish a history with you first. Even with a credit check.
5. If offering credit - monitor your clients payment history - often it becomes noticable when clients are starting to struggle.
6. If offerin credit - maybe look into controlled payment methods like debit orders. Beats having to wait for a client to payment even after the credit period has expired.
7. Communicate your terms clearly and make sure clients acknowldge them.
Thanx Thorgeir. I actually wrote quite a long comment here, but when trying to save it said Comment Too long - even though it said I had 15 symbols left!
Synopsis: This podcast discusses practical cash-flow tips so that you never ever run out of money as you start up and grow your business.
Comments
It's a bit like what they tell you on the airplane: "make sure you put the oxygen mask on yourself, before helping others". You obviously need to pay for services that you have ordered and have had delivered. But I think your supplier would also agree that your chances of paying your debt increases if you can feed yourself first. Otherwise you will be no good to anyone if you don't look after your personal cash-flow. So here's the thing: never get yourself into a situation where you rack up debt that you can't pay for. Plan for the worst case, and create enough buffer to deal with that case. Make sure you pay your personal bills and look after your family as #1. Otherwise you will never be able to run a business responsibly. Hope that helps anyone who is making the decision on who needs the oxygen mask first ;)
Happy cash flow planning!
Thorgeir
You say "pay yourself first?" (if I remember correctly)
My question, how does one pay ones self first when you know that you are withholding money from a service provider who has already provided a satisfactory service and you could potentially be preventing that person from paying themselves?
- don't just focus on being a sales shark, what's your social investment?
be honest! Integrity is so important, you will get back in abundance if you operate honestly.Meshal!
Sorry about that - we will look into it. Thanks a lot for your comments and contributions!
thorgeir :)
Mesha,
Most sophisticated investors in my experience do not want their investments to run short on cash all of the time. They rather that the entrepreneur and CEO focuses on growing the business than chasing money most of the time. So it's really in the investor's interest to make sure that the business is well funded. In order to reduce exposure its quite common to bring a co-investor in on the deal too.
The balance for the entrepreneur is of course to hold on to as much equity as possible, whilst having the cash to execute a growth plan. More on this to come in future podcasts :)
thorgeir
How does one convince an investor to invest more money into ones business than what is actually needed?
It is already difficult enough to convince and investor to invest in the first place as they are looking to limit their exposure in the investment....
1. Know the status of your accounts (and bank account) at all times!
2. When the screws start tightening - try to alleviate pressure a.s.a.p. Don't wait till it is too late.
3. I wound't recommend bank credit - it is all to easy to feel safe and comfortable after getting the cash injection from a bank. The you miss payments and banks are ruthless to recover their money!
4. Don't offer credit. If you must - Force the client to establish a history with you first. Even with a credit check.
5. If offering credit - monitor your clients payment history - often it becomes noticable when clients are starting to struggle.
6. If offerin credit - maybe look into controlled payment methods like debit orders. Beats having to wait for a client to payment even after the credit period has expired.
7. Communicate your terms clearly and make sure clients acknowldge them.
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