Why you’ve got plenty of clients, yet you keep running out of cash

Something I hear again and again from clients, is that at every new stage in their business, they still don’t feel like they are flush with cash. I’ve said it once and I’ll say it again, sales don’t always equal profit, and profit doesn’t always equal positive cashflow.

In today’s episode, I’ll dive into a few reasons why when your business is growing and you are getting new clients, yet you still feel broke.

In this Episode:

01.38: How you can find yourself with not enough cashflow

03.55: Is your business not-profitable? 

04.18: Is your income ‘lumpy’?

06.02: Is your money mindset holding you back?

Links:

Transcript

Something I hear again and again from clients is that at every new stage in their business they still don’t feel like they are flushed with cash. I’ve said it once and I’ll say it again, sales don’t always equal profit and even profit doesn’t always equal a positive cash flow. In today’s episode, I’ll dive into a few reasons of why your business is growing, you are getting plenty of new clients and yet you still feel broke.

 

Hello and welcome to The Clare Wood Podcast. This is your weekly dose of all things money to help you intentionally create a profitable business and a life you love. I have the difficult conversations about money so you can make more money with ease. Each week I share how you can use mindset and the practical foundations of finance to elevate your earnings without sacrificing the things that are important to you, because you can and should be making more money.

 

If the topic of today’s episode resonates with you, make sure you check out my upcoming course, The Profit Academy Foundations. Inside this course I’ll be sharing how you can be right across your profit and your cash flow so that you don’t run out of cash. To find out more, make sure you click on the link in the show notes for today’s episode and you can jump on the wait list to be the first to hear about it when it launches.

 

How you can find yourself with not enough cashflow

 

Often business owners place the next level on a pedestal. They think, “When I’m making $5,000 a month or a hundred thousand dollars a year or a million dollars a year, I’ll finally feel flush.” And yet you might reach the allosaurus income level you dreamed of and still feel like you are struggling to pay your bills. So why is that the case? Well, firstly, sales don’t equal profit. Something that really gets my goat in the online world at the moment is business owners sharing about their six, multi six, and seven figure businesses and yet not sharing the context of the profitability.

So why is profit so important? Because profit is the money you actually get to keep after you’ve paid your expenses. Think about it. You might earn say a hundred thousand dollars of revenue a year, but if you have a full time assistant that you are paying $60,000 to and your other business expenses are $20,000 a year, there is actually only $20,000 of profit, which, depending on your situation, you will likely have to pay tax on. In another scenario, if you earn a hundred thousand dollars a year and your only expense is your online subscriptions at $5,000 per annum, then you’ll have a profit of $95,000. And even after tax, you’ll be making well over $50,000 a year that actually stays in your back pocket.

I don’t want to put one scenario as better or worse than the other because sometimes businesses intentionally forgo short term profitability with a focus on long term growth. However, I do want to highlight that two businesses earning a hundred thousand dollars a year in revenue can be in vastly different financial positions.

 

Is your business not-profitable? 

 

So the first reason that you could be running a thriving six figure business and still feel broke is that your business is fundamentally not profitable. There can be a whole range of reasons for this, which I’m not going to dive into today. But for today, I just wanted to highlight this as the first possibility of why you feel strapped for cash.

 

Is your income ‘lumpy’?

 

The second reason you might feel broke or run out of cash regularly is due to lumpy payments and cash inflows. Your business may well be profitable, but if you are running a business where either your income is lumpy or people do not pay their invoices on time, you will really struggle with cash flow.

An example of this is a business that does project work or one that launches courses. Let’s say for example that you build websites, you’re a designer, and you take a 50% upfront payment. And then you don’t receive the rest of the payment until the very end of the project, which might be weeks or even months between those cash payments coming in. And yet that whole time you will still have cash outgoings. Or if you’re a course launcher, you might spend months and months gearing up for a course launch, spending, investing money into the launch. And then you have one big month where the course launch happens and the revenue all comes in and you’ll suddenly feel flush.

Sometimes with businesses that have highly variable levels of income or cash inflows, it can help to create regular income streams. But this isn’t always practical or something that you might desire to do. For example, my husband runs a recruitment firm, which as you can imagine is quite lumpy income, but the idea of doing consulting work or putting people on client retainers doesn’t light him up at all so he doesn’t do that and just plans for lumpy cash flow.

 

Is your money mindset holding you back?

 

The third reason you might feel like you are running out of cash is just a mindset issue. Sometimes clients I work with do have plenty of cash and yet they still feel broke. Everyone’s definition of cash being tight is different. I’ve had multiple clients of mine over the years who have literally hundreds of thousands of dollars in savings and yet they still don’t feel like they have enough. For some people to feel comfortable from a cash position, they might need to have $10,000 in an account. Well, for others, they might need 50 to feel comfortable. The point I’m trying to make is that everyone’s definition of cash flow struggles is also different. And sometimes it does come down to mindset. In my opinion, lumpy cash flow or making a choice to forgo short term profit while investing in long term growth isn’t necessarily a bad thing.

 

If one of these scenarios is relevant to you, the most likely reason why you might feel like you are running out of cash is because you don’t feel confident about your cash or profit projections. The best way to step from feeling fear about cash or profit into a place of confidence is having clarity and confidence around your projections, knowing what is coming in and going out and when, having the confidence that your business will be profitable even if it isn’t in the short term. It’s about being intentional about your business finances, being intentional about your cash and profitability. That is how you feel like you were in the driver’s seat when it comes to your money.

 

So to sum up today’s episode, you might have a growing business and yet still struggle with cash flow in your business. And this is quite normal. There are a number of reasons that this might be the case.

  1. Your business might not actually be profitable.
  2. Your business might have a lumpy cash flow. That’s not necessarily a bad thing, but it’s important to understand that and to be planning for it when it comes to your cash.
  3. You actually aren’t struggling from a cash position, but you just feel like you are. And it is a mindset situation.

 

As I shared at the start of today’s episode, if any of this is resonating with you and you would like to step into a place of confidence and clarity with your business financials, please make sure you check out my course that’s coming up, The Profit Academy Foundations. This program is designed to teach you all about sales, profitability, and cash flow forecasting so you can feel complete confidence when it comes to your business finances.

 

Thank you so much for tuning in to today’s episode of The Clare Wood Podcast. And I look forward to chatting to you again next week.

 

I hope you are feeling inspired and excited about what is possible for you when it comes to money. It takes a lot of time and energy to create a podcast so I’d be very grateful if you could take the time to hit subscribe, write me a review and share any of your favorite episodes with your audience on social media. The more people that we can reach, the more people we can empower to earn more in their business, because you can and should be earning more money.

 

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