The cash flow of a business is its life blood.  When it stops, the business stops.  Suppliers stop shipping the materials you need.  Employees look for work elsewhere.  Landlords lock to door.  Utility companies turn off the power.  At that point, any on-going enterprise value you thought the business had is mostly gone.

It is possible for cash flow to run dry even when it otherwise appears that the company is profitable on its Income Statement.  To ensure the business has adequate cash, Balance Sheet items such as  Working Capital, Fixed Assets, Debt Service and Equity Distributions must also be managed properly.  A large accounts receivable may become uncollectible and seriously interrupt cash flow.  Inventory may become obsolete or damaged. Excessive additions to Fixed Assets may have too long of a pay back period.  Debt Service that is too large a portion of the company cash flow from operations could contribute to cash shortages when the unexpected occurs.  Owner’s may have personal reasons to pull equity distributions out of the business.  These are all balance sheet management examples that impact cash flow.

Obviously, businesses which are unprofitable, as measured on the Income Statement, are at risk of running out of cash.  They may be in startup or expansion mode in which case they must keep their eye on the remaining length of their capital runway.  That is, the financing they have raised for this purpose needs to last until the new venture starts generating profits on its own.  Or the company may be in a down-turn in sales volume and experiencing temporary losses which if not addressed in time may exhaust all cash flow reserves.

Over the past three decades I have accumulated many case studies of actual companies’ performance in cash flowing their business through multiple and diverse challenges.  There are many lessons learned in these stories, which I am leveraging to speed the learning curve of other business owners and leaders whom I coach.  I do enjoy telling a good story.  More importantly, I am passionate about helping others restore the life blood of their business; that is, it’s cash flow!