What are the Three Most Crucial Ingredients to Startup Survival?

WHAT ARE THE THREE MOST CRUCIAL INGREDIENTS TO STARTUP SURVIVAL? - MichaelMaloof.com
WHAT ARE THE THREE MOST CRUCIAL INGREDIENTS TO STARTUP SURVIVAL? – MichaelMaloof.com

As a future entrepreneur, even if I didn’t know it at the time, I would frequently listen to Bruce Williams’ nationally syndicated radio talk show. He would take questions from callers on a variety of personal finance and business topics. Many of those questions and his answers planted seeds that would bear fruit many years later as I struggled with my own business challenges.

One call he answered still resonates with me to this day. The caller, a business owner, described his receivables problem. He explained that many of his customers take up to ninety days to pay their bills, and he wasn’t sure his business could survive. Bruce asked a few questions about the business, and then explained, “You don’t have a receivables problem. You have a sales problem.”

Bruce went on to explain that he “should” be able to wait ninety days for his money, and that he needed to focus on filling his sales pipeline. He pointed out that there were things he could and should do to improve collections, but that wouldn’t solve the real problem. If he couldn’t wait ninety days for his money, he wasn’t making enough money to support the business.

This was my first lesson in cash flow, and the answer to the question.

What are the three most crucial ingredients to startup survival?

  1. Cash Flow
  2. Cash Flow
  3. Cash Flow

We all know people that are living “paycheck to paycheck.” It’s an unfortunate fact that most people in this country don’t even have a $1,000 emergency fund (no, your credit cards don’t count). These people, and businesses just like them, are a single, unexpected, event away from disaster.

It’s heartbreaking to see entrepreneurs pour everything they have into a new venture, but fail to anticipate the cash flow needs of the business. Their enthusiasm for the venture encourages them to see only the upside – the facility, team, and product will all be ready on time and customer orders will flow in to fill the financial demands. Whatever you imagine will happen, understand that it’s probably wishful thinking, and plan for serious setbacks. Picture the “Titanic,” and don’t assume your business is unsinkable.

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