Why do I write this? How many of you have been working with businesses, or business units, that are constantly strapped for cash? Why is this? For mission-driven businesses some of this reason may lie in the fact that people are too focused on the mission and not on the margin. Remember this point “There is no mission without margin!”
Cash flow is the only thing that matters! This may sound overly simplistic, but it’s true, without positive cash-flow, no business is sustainable in the long-term. It will forever be constrained from making the impact it wants to because of a lack of cash.
All business owners and managers understand a profit and loss statement, and nobody intentionally budgets for a loss in a year, unless there are extenuating circumstances. However, the most overlooked aspect of any business is often its cash-flow. This is THE most critical aspect of effective business management.
One important way to tackle this challenge is to know your burn rate. That is, how much cash does your
business need to cover its operating expenses each month, not including one-time charges.