You’ve got the product, sorted the distribution, and even got a sweet deal on your packaging. Awesome! But… Ron Shah, CEO of Obvi wants to know if you have your cashflow management skills locked down? 👀
Ron’s Twitter thread outlined what he calls “the 7 Deadly Sins of Cash Flow Management.” Keep reading to see if your finances are in order.
💰 Focusing too much on interest rate
When looking into business loans for your brand, interest isn’t the only important factor.
Yes, a lower interest rate is nice, but here’s three other factors to consider:
- What’s the term of the loan?
- Is the loan secured?
- Is there any flexibility built into the repayment plan?
🏠 Keep your financial house in order
If record-keeping and other finance-based tasks are on the bottom of your to-do list, it’s time to prioritize them.
Ron suggests being diligent about keeping your financial records in order and shell out for a great accountant.
☔️ No rainy day reserves
Don’t pocket every nickel and dime you make, and don’t put 100% of it back into the business either!
Take some of your hard-earned operating cash and toss it into a savings fund. You never know when you might need it.
The Obvi team puts $5K per month away just in case.
😎 Invoices =/= chill
How big is your accounts receivable number right now? It’s exciting to see it grow, but the money isn't actually yours until it hits your account and your AR sheet is $0.
Ron suggests following up, putting pressure, and being desperate when collecting the money you’re owed.
📈 Unrealistic sales projections
Your sales goals can be big, but make sure that number is actually achievable! If you have it, use historical evidence to make objective and realistic sales projections.
At Obvi, they create best case, worst case, and most probable scenarios in their modeling.
💸 Overspending on sales and general expenses
When starting out, brands need to spend more to get the resources they need for product creation, marketing, selling, and delivering. No surprise here!
However, once your business is past the start-up stage, you should be looking to lower that number. Obvi’s SG&A expenses are now less than 10% of their profit and loss sheet.
🥸 Not knowing your numbers
As a founder, it’s mission critical to know your numbers! When someone asks what your:
- Conversion rate
- Lifetime value and retention rates
- Customer acquisition cost
- $ amount on hand
You should know! You’ve gotta know your numbers to have a handle on your cash flow.
Any tips you’d add to managing your cashflow? Reply to this email and let us know!