I used to have a secret fear of accounting.
I was embarrassed that I didn’t understand it because I thought other successful business owners did.
I would avoid it as much as possible and abdicate it to “the experts.”
This mindset held me back for YEARS in my first business.
I watched the top line (revenue) and the bottom line (profit).
But I didn’t pay attention to cash flow.
It was a blind spot. Not only did it prevent me from growing faster, but it made a big difference when it came to selling my business.
Like most professional services companies, we billed for services AFTER they were delivered.
During one high growth period, we literally ran out of money because we had to hire, train, and pay new staff 3 months before we could bill for the work.
This forced me to take a hard look at our business model.
The answer was to stop doing custom services and systematize our services, turning them into solutions we marketed as products.
Clients buy services.
Customers purchase products.
With this business model, customers paid in ADVANCE instead of clients paying net 30.
In other words, our customers were funding our growth!
And they were happy to do it because we were able to offer the productized solution at a lower price point than custom work.
Best of all, when I was ready to exit, the acquiring company did not have to bring working capital to the table.
This meant my company was worth much more because it was cash flow positive.
It pays to make friends with “accounting.”