Factual Friday: Will Your Business Survive the First Two Years?
Starting a business is exciting, but staying in business is the real challenge. While 80% of small businesses make it past their first year, only 70% survive beyond year two. One of the biggest reasons businesses fail? Poor cash flow management.
Many new business owners focus on getting sales but forget that cash flow is king. Without enough cash to cover expenses, even a profitable business can struggle to survive.
Why Cash Flow is a Major Problem for New Businesses
Cash flow issues happen when a business doesn’t have enough cash on hand to pay for operating costs like rent, payroll, or supplies. Even if sales are strong, delayed payments, unexpected expenses, or poor budgeting can quickly drain a business’s cash reserves.
🚨 Common Mistake: Spending revenue before it clears. Many entrepreneurs see money coming in and immediately reinvest or make large purchases—only to find out later that client payments are delayed or expenses were higher than expected.
Tip for New Business Owners: Create a Cash Flow Forecast
One of the best ways to improve cash flow is to set up a cash flow forecast. This helps you track when money is coming in and when expenses are due, so you can plan ahead and avoid shortages.
💡 How to Create a Simple Cash Flow Forecast:
1️⃣ List all expected income (client payments, sales, recurring revenue).
2️⃣ List all fixed expenses (rent, utilities, subscriptions).
3️⃣ List variable expenses (supplies, marketing, unexpected costs).
4️⃣ Compare cash inflows and outflows to ensure you always have enough to cover costs.
Pro Tip: Always wait until revenue has cleared in your account before making large purchases or hiring new employees.
Want Help Managing Your Cash Flow?
Join the DBR Bookkeeping Online Community HERE to learn financial strategies that will help you build a profitable and sustainable business.
📅 Need expert guidance? Schedule a free call with Dr. Bryan Raya to improve your cash flow and financial management.
Let’s start Doing Business Right!