Why Money Matters When Growing Your Business

Posted by Chuck Kocher
On June 20, 2016

Why-Money-Matters-When-Growing-Your-BusinessThese days you hear a lot of talk about doing business for more than the money. Most of us are familiar with the quote (sometimes contributed to Confucius and sometimes to Marc Anthony), “Choose a job you love and you will never work a day in your life.”

There are plenty of stories out there about individuals foregoing the “sure thing” of a great career that promises fantastic financial rewards to pursue a lifetime dream. There are also plenty of examples of entrepreneurs who eschew personal profits in exchange for the opportunity to give back to their community or to society.

Frankly, all of those things are admirable. They are noble, worthy goals. But they tend to overlook one hard, cold fact: Growing a business takes cash. And if you want to keep doing what you love and giving back to the community, you need to pay attention to your cash. That doesn’t mean that cash becomes your goal. But if you run out of cash, you’ll be out of business—and then your dreams can disappear with your business.

One of the big factors to consider when you’re trying to control your cash is your cash flow. How fast are you spending money and how fast are you bringing it in? Here’s a real life example of why it matters.

When Michael Dell was growing his computer company in the mid 1990s the company was experiencing explosive growth. Unfortunately, they were going broke in the midst of all that growth. How could that be?

It came down to cash flow. Essentially, every time the company spent one dollar it took 63 days until it cycled back through the company. They were constantly behind the 8-ball. They owed money, but weren’t collecting it fast enough to stay ahead. They brought in a CFO (Tom Meredith) who made some significant adjustments and over a period of time (about 10 years, actually), Dell completely reversed that situation. They were actually receiving a dollar 21 days before they had to spend it!

You may not run a company the size of Dell. And you may not be in a position to hire a wonder-working CFO, but that’s not really the point. I share the illustration simply to demonstrate how taking care of how you handle your cash can make a huge difference in the profitability of your company.

If you want to grow your company (even if your end goal is to give back to the community or do fulfill a lifelong dream) you have to pay attention to how you use your cash. It’s not about cash for cash’s sake—it’s about growing a healthy, sustainable company that can allow you to fulfill your dreams.

There are some great tools out there that can help you with that. I’d love to share some of them with you and help you get control over your cash so that your business thrives. That’s why money matters when you’re growing your business.