It’s all about the cash flow

September 27, 2006

Making sure that you have enough money when running your business is always a struggle. I’m not talking about the money you pay yourself with, buy kids toys and groceries with. I’m talking about the money you need to effectively compete, sell, promote and grow your business. My partner and I are always at odds about this because he’s obsessed with running the company as close to the black as possible. Doing this makes it very hard to pay yourself and pull money from the pot when you need materials to make money. For us, the old saying “It takes money to make money” really holds true.

So, what to do? During our first year we just used a credit card. At one point our credit card bill was over $17,000. Fortunately we have been blessed to pay ourselves and pay that down completely. So, we’re debt free again. Now, at this point we’re regrouping and planning for the next 12 months and 2007. We need money.

So what are our options? My partner wants to go after investors. Personally, I don’t think we need investors because I don’t want to lose control and second, I think with the same amount of effort in sales we can come out better in the end. Neither of us has the experience, connections or personality to woo investors into bed on top of it all, so I’m suggesting that we look at other avenues. I just firmly believe that going after investors is going to be a serious time suck and we need to move forward and ramp for 2007 ASAP.

So, here’s whats left. 1) rob a bank 2) take out a loan 3) charge it and agree on a 6-12 month payback schedule 4) borrow the money from friends or family 5) Kick in a personal investment by the partners and we agree on interest and a 12 month payback. that might be another option to keep all money in our pockets but I don’t believe that I’ll have the money and my partner is obsessed with his own money and I don’t think he’ll be willing to go this route. If at all possible I’ve read that you should NEVER use your own money to run your business. NEVER. So this will probably be our last option.

I think we need a MINIMUM ($4-5k) to have a decent sales effort and go to one trade show convention.

1) A nice tradeshow display ($600-$1000)
2) Tradeshow, travel, food, hotel, etc. ($500-$1000)
3) Kick ass brochures ($1200)
7) Demo Equipment ($2000?)

To have the ultimate presence for 2007 I think we need about ($10-$12k) to have an impact.

1) A nice tradeshow display ($600-$1000)
2) Money to go to multiple tradeshows, travel, food, hotel, etc. ($3000?)
3) Kick ass brochures ($1200)
4) DVD’s ($2200)
5) Biz cards ($200)
6) Misc Travel ($1000?)
7) Demo equipment ($2000?)

So, what do we do? Since we’re debt free I like the idea of just charging what we need for the year. Our prospects and potential for this year are going to return a lot more than what it’s going to take to pay this debt down and we had no problem paying down our debt this year. I firmly believe that every dollar you invest in marketing is easily returned 10 fold if you play your cards right. So I have no problem just getting what we need ASAP with a credit card and moving forward to kick some ass as soon as possible. The good thing about our business model is that once we make a sale, the money comes back every year. So we’re in a good position. (More on good business models in the future)

Having a partner complicates things though. I’ll go into this more in the future too. In the end, we both have to agree on a plan and how we spend our money and it’s never an easy battle.

At this point I’m ready to get my sales materials and start making sales. But I feel a battle coming on with my partner. We’ll be addressing our plan over the next couple weeks and I’ll be sure to document all the fireworks right here.

Have a good one!

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