Cash Flow: An Entrepreneur’s View

 

Cash FlowCash flow is the life blood of any company.  But many entrepreneurs don’t understand the concept.  Most people believe it’s a financial term so they avoid it like the plague!

What is cash flow?  About.com defines cash flow as “The movement of money in and out of a business and the resulting availability of cash.”  This is a good technical definition, but it does nothing to help someone understand how it works.  If you don’t understand how it happens how do you manager it?

To me cash flow is an operational concept I have designed a simple concept to help entrepreneurs understand it.  I call it Tuning Your Revenue Engine.  The diagram below visually describes the process:

The Revenue Engine is comprised of four major business functions:

  • Marketing whose responsibility is to generate leads.
  • Sales which takes those leads and turns them into contracts to exchange money for products or services.
  • Delivery where the contracts are fulfilled so that…
  • Collections can bill and collect payment for the product or service.

In a nutshell this is your cash flow cycle! For most business people this is much easier to understand than, “the movement of money in and out of a business.”  Probably, because it’s what you do all day, every day as a business owner.

Now, take a step back and think about your revenue engine.  What happens when you slow it down?  How about if it slows down too much?  What if you could speed up your Revenue Engine?  This is what Tuning Your Revenue Engine is all about, taking the obstacles and challenges out your way so you can speed up your cash flow cycle.  You can get a better idea of how you do this by watching our short concept video titled Tuning Your Revenue Engine.

I am interested in knowing if viewing your cash flow cycle this way is helpful for you so please comment.  If you want to see where you need to Tune Your Revenue Engine in your business, take a look at our Revenue Engine Performance Checkup.

 

About Dino Eliadis

Dino Eliadis has over 25 years experience in creating and leading high performance teams and organizations. His talents spans many different industries where he focuses on assisting small business owners to make measurable improvements in overall business performance thus increasing their “book value” by Tuning the Revenue Engine. The result: increased productivity and improved revenue growth, leading to maximized profits.

Comments

  1. Great article, thank you again for wirintg.

  2. You can point to most places in the Midwest and pborably assure yourself that home prices will not drop. I lived in Wisconsin for 30 years and you definitely get a sense that their spending habits are dramatically different than those in Washington DC, which is close to where I live now…and it’s not all about the difference in incomes between these two locales.I generally have found that in the Midwest, people are quite risk-averse. They do not trust get-rich-quick schemes and anything that sounds too good to be true. Even if an investment is legitimate, most people shy away from it because they tend to look at the risks rather than the benefits.Part of this mentality may be that they can live the way they want to, and still be conservative in their investments. It is quite affordable to buy a house with a good-sized yard. And sure, there is not much to do in the evenings or on the weekend, but most of them are not looking for that anyway. That’s why they live there already. And if you’re not looking for entertainment, you’re not going to be spending much money either, and possibly….you may want to sit down for this part….some of them actually save money for a rainy day! What a concept!Their risk-averse nature also leads them to often want nothing for something. It is very common for houses to sit for several months without being sold. Nobody is in a big rush to get another place because they know it will always sit there for a while.There may be a few large cities in the Midwest that could be vulnerable, but I am thinking more about the smaller cities and towns. They never joined the real estate boom….it’s just business as usual for real estate.

Trackbacks

  1. [...] Survival: In this scenario, the company’s cash flow is so tight that they must have the cash now to fund payroll, pay taxes, and meet expenses. They [...]

  2. [...] the post “Cash Flow – An Entrepreneurs View” I explain the concept of the revenue engine and how it relates to cash flow.  Finding your [...]

  3. [...] revenue engine is a concept DE, Inc created to explain how to evaluate the operational cash flow cycle of the business to small business owners.  If you don’t understand when your revenue engine hits [...]

  4. [...] business performance and your growth potential.  To better understand the concept read the article Cash Flow: An Entrepreneurs View or watch our video Tuning Your Revenue [...]

  5. [...] Generating cash flow is about more than just making money.  It’s about maximizing the efficiency through which an order moves through the operational cycle – tuning your revenue engine.  If this isn’t your understanding of cash flow I would highly recommend reading the post “Cash Flow: An Entrepreneur’s View.” [...]

  6. [...] the post “Cash Flow – An Entrepreneurs View” I explain the concept of the revenue engine and how it relates to cash flow.  Finding [...]

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