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I know you’ve heard this saying, “Cash is King.”  And the truth is, it is.

Having enough cash in your business isn’t just about paying your bills.  It’s about having enough to live a life that will protect you now and in the future.

If you’re interested in learning a little about what we think is important for you and have a life that’s protected read on.

Start with understanding profit isn’t cash you can spend.

Too many times I talk with business owners and they tell me about all of the money they’re making and then they start telling me about some new toy they’re going to buy.  It might be an expensive car, a bigger house or even a second home. 

This might be an OK thing for you to do.  I’ll bet that most of you don’t want to take your profits and blow them.  You’re going to find that there are other things you need to do first.  Taking care of these items will help you sleep better at night.  Isn’t this something you want to do?

You know there’s always a disaster around the corner.

This is the first thing you need to think about.  If your business is doing well, that’s great.  And if you’ve been in business for any period of time you know that good times don’t always last.

You need a disaster fund.  You need as disaster fund for both your personal expenses as well as business ones.  It’s not if the economy turns south, it’s only a question of when.  It’s during these times that you’ll be glad you put away some extra cash.

If you ever want to stop working you have to save.

I can’t tell you how many times business owners tell me they’re going to use the proceeds from their business to retire.  Every time I hear this I want to just scream, “Are you crazy?  Do you have any idea how many business owners get to sell their business and retire on the proceeds?”

I can tell you that less than 10% of all business owners in this country will sell their business and retire on the proceeds. The rest of us are going to have to make sure we save on a regular basis. 

Take some of your profits and put it away so you can afford to retire.  This gives you the choice on when it’s time to leave.  Isn’t that something you want?

If you get really sick you’re going to need a plan.

I know this one from first hand experience.  When I went through my cancer treatments I was lucky I had a cash cushion.  As much as I wanted to work it took me over two years before I was even close to being able to come back to work and be productive.

I was really glad I had a cash cushion to help me get through my cancer treatments.  I’m not wishing you get cancer and at the same time I’ll be willing to bet that you’re going to have at least one major cash flow hiccup in your life.

If you want to grow you’ll need cash.

If you think you’re bank is going to provide all the cash you need for growth, think again.  Your bank is going to want you to come up with a significant amount of cash to grow your business from alternate sources. 

Your bank is probably willing to be your partner.  They won’t be the only ones providing the money.  You’re going to have to take a piece of those profits you want to spend and save it for growth, that is if you want to grow your business.

All of these extra cash needs add up.

In most cases, if your business isn’t creating a lot of extra cash you’re going to have hard times in your business.  In some cases a 5% profit margin is OK.  In most you’re going to need 10% or more.  The smaller your business, the larger the percentage has to be.

Do yourself a favor.  Take a few minutes and write down all the extra cash needs your family and business have.  You’ll be taking a giant step in understanding what you need for financial success.

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Topics: retirement planning, Cash Flow, savings

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