Cash flow is the life blood of any business, but many small business owner don’t understand the concept. They believe it’s a financial problem and avoid it like the plague!
Merriam-Webster defines cash flow as “ the cash expected to be generated by an investment, asset or business.” This is a good technical definition, but it doesn’t help you understand how it works. How do you manage something when you don’t understand how it happens?
An Operational View of Cash Flow
Cash flow is actually an operational concept. So, I designed a simple model called Tuning Your Revenue Engine which helps business owner understand this critical concept like successful entrepreneurs do. The diagram below visually depicts the process:
Four major business functions comprise the Revenue Engine defined as follows:
- Marketing which generates leads.
- Sales works leads turning them into contracts.
- Delivery fulfills the contracts.
- Collections bills and collects payment for the product or service.
The revenue engine represents your cash flow cycle. Most business people find this concept much easier to understand than, “the movement of money in and out of a business.” Or, “the cash expected to be generated by an investment, asset or business.” What makes it easier to understand? You and your employees do it all day, every day!
Now, take a step back and think about your revenue engine. Slow it down and what happens? How about if it slows down too much, then what happens ? Use Tuning Your Revenue Engine to remove obstacles and challenges so you can speed up the flow of dollars into your business. Watch the following concept video and get a better idea of how Tuning Your Revenue Engine provides you with better results.
Tuning Your Revenue Engine
Apply this powerful management method to fix cash flow problems in your business. Find out the solutions available by clicking the button below.
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Great article, thank you again for wirintg.
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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.
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