beware of averages

If we added up all the men, and all the women on our planet, we’d find that, on average, the typical adult human being had exactly one breast and one testicle. Yet how many people actually fit that description?

Statistics are used the create meaning. Yet, very often they create the opposite. In a world for of numbers, statistics and analytics (yes, even the Google kind) we are better off deciding what we want to find out, than we are looking at the available statistics and asking what they mean.

Startup Blog says: First decide what you want to find out, then devise a way to measure it.

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Why cash flow matters

Here’s a simple description of why cash flow is the most important financial measurement in business.

Cashflow positive means: More ‘actual’ cash money is coming in than is going out. It does not mean revenue exceeds expenditure.

Hence:

It’s impossible to go broke while your business is cash flow positive.

It’s possible to broke while your business is making a profit.

This is the most important financial fact startups must know and understand.

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Invoices

Today’s task is boring, even hateful. Doing invoices. As with all great ironies, this ought be a task we revere look forward to and basically enjoy. ‘Payment’.

Given we often forget the important stuff we all know. I sometimes write a reminder and stick it to my office wall.

Here’s my pic: (Art’s never been a strong point)

invoices

Yep, I’m reminding myeslf that this somewhat laborious task is actually a cause for celebration, the celebration of hard work as we collect our earnings.

Startups struggling with boring stuff – remind yourself why it’s important!

Steve – founder rentoid.com

Cash flow vs Profit

Cashflow positive means: More ‘actual’ cash money is coming in than is going out. It does not mean revenue exceeds expenditure. It means physical cash or bank desposts – not promises to pay.

So in order to break it down for the startup crew out there, here it is in simple language we can all understand, whether we are techies, designers, craftspeople or retailers.

Cash vs Profit:

It’s impossible to go broke while your business is cash flow positive.

It’s possible to broke while your business is making a profit.

This is why cashflow is King.

It’s also possible to be making a legal loss, while we are dripping in cash. So startups out there only need to focus on one thing. Are we collecting more cash than we are spending?. Do this, and it’s impossible to go out of business.