In February, I wrote about how our new business venture, selling on Amazon, was put on hold. The fact that I ran out of cash – to keep the business running – bothered me a lot. I did all the upfront work diligently, only to end up hitting the wall, unable to give it an initial boost needed through advertisements. I was “this close” to making it happen.
After cancelling all non-essential items and stabilizing our cash flow, I reflected on the mistakes I must have made. As an MBA, I always thought that I was good about money management but, clearly, not good enough. Swallowing my pride, I decided that I needed a refresher course on cash-flow management.
As it turns out, Oakland County, Michigan, where I reside, offers One Stop Shop Business Center. (It is open only to Oakland County residents who pay taxes here.) The Center provides basic courses, helping start-up small businesses; some for free, others for a nominal fee. They also work with a small-business lender, who provides orientation to potential borrowers.
Having taken some of the courses, I now know how I can minimize the mistakes I made the first time with our e-commerce business. (By the way, this lender does not lend on real-estate business or book publishing.)
As mentioned in the February blog, I am intent on saving enough money to not run out of funds when I resume selling our product on Amazon. I learned through the Small Business Loan Orientation class that the lender expects to see a two-year cash-flow projection as part of loan application. The “Understanding Cash Flow” class, also offered by One Stop Shop Business Center, teaches you the how.
I learned in the cash-flow class that (1) it is a good idea to have a firm grasp of your cash flow such that you’re not likely to run out of funds but that (2) rather than wait until the last minute when you do run out, it is best to know, up front, how and when cash shortage may occur. This is where the cash-flow projection comes in handy.
If you’re already talking to a lender who understands your business, armed with a solid two-year cash-flow projection, you’re likely to be able to have a ready lender in place, and/or have a line of credit established, thereby avoiding cash shortage.
My cardinal mistake was that I NEVER imagined I would run out of money – because I was very careful about how I was managing funds. Of course, I recognized instantly when I reached a line where I could not cross. Running out of cash was one of the most humbling experiences I’ve encountered as a business owner.
Happy investing!
