New Kabbage Study Shows The Harsh Reality Of Cash Flow Management On Owners
All of us that wear the badge of honor—and sometimes horrifying weight—of entrepreneurship know that managing cash is a challenge.
As one of America’s growing sources of capital for entrepreneurs—Kabbage sees first-hand the struggles and opportunities that entrepreneurs balance when looking for and using money.
In full disclosure, I have used Kabbage’s funding platform, and I’ve gotten wiser—thanks in large part to writing this column—about the intricacies of capital. After years of bootstrapping and proudly proclaiming myself to be a debt-free business, I learned certain kinds of growth require significant money—and yes sometimes that means other people’s money.
Is your use of capital healthy?
Forecasting the future and unlocking your future potential is hard work. When growth is on your horizon, it is critical to have a grasp on profitability and a skilled financial expert on your staff, or available to you, before you start exploring other people’s money.
That’s not to say that most entrepreneurs don’t get off the ground with a starter boost from self, friends, and family. But sadly, many people don’t stay off the ground because they don’t learn quickly enough how to build a profitable business model and begin building reserves.
The reserves are critical because they can get you through a small cash flow pinch, but more importantly, they can be used to show liquidity and prowess when you need a more substantial sum of money for growth.
Is your business healthy?
Kabbage recently surveyed 500 entrepreneurs, on their use of capital, their mindset, and all around health. A few statistics from the survey are very telling about the stresses and challenges of seeking and using other people’s money effectively.
One aspect of business health is how well your founders and managers are able to focus on the core competency of the business. When operational challenges arise and financial struggles occur they have a considerable draining effect on the focus of company leaders.
According to the survey, 91 percent of small business owners “spend as much as 20 hours per week on cash flow management from handling payroll to invoicing and purchasing inventory.” Perhaps this is why entrepreneurs clock 60 to 80-hour weeks because when you focus half your time on getting money in and out of your company, you’ve got to have some time left to sell, perform, service and grow your actual business.
Read the full article on Forbes here.